The 4 Years of section 24

Section 24 was introduced in April 2017 affecting tax relief for landlords. What this means is that landlords will no longer be able to claim mortgage interest, or any other property finance costs against net rental profit. Instead, rental profit will be taxed on the full rental income, not just the profit by 2021, affecting the pockets of the Uk’s landlords.

Year 1

From April 2017 – For the first 75% of your mortgage interest cost, the higher rate tax relief can still be claimed. The remaining 25% will have a basic rate of tax relief.

Year 2

From April 2018 – The first 50% of your mortgage interest cost, the higher rate tax relief can be claimed. The remaining 50% will have a basic rate of tax relief.

Year 3

From April 2019 – A higher rate tax relief can be applied to 25% of your mortgage interest costs. The remaining 75% will be at the basic rate.

Year 4

By April 2021 – Landlords will only be able to claim tax relief at the basic rate level of 20%.

These tax changes could tip some landlords into a higher rate tax bracket, and there could also be some landlords made to pay tax on properties that do not make a profit. For example a landlord making £10,000 of rental income but paying £10,000 in mortgage interest payments could find themselves paying £2,000 – £2,500 in tax (2020/21), as the tax no longer applies to the profit but the entire rental income.

Help to buy ISA

With UK properties out of reach to the average first time buyer, the UK government has stepped in with a rudimentary measure.

The ‘help to buy ISA’ offers first time home buyers the chance to save into a cash ISA. The government will then add 25% of the amount you have saved, when you buy a property.

You can start saving with £1200 in your first month, then £200 a month thereafter and the government will add a maximum of £3000 onto £12,000 of your savings.

The Halifax is currently offering 4% on help to buy ISA’s.

From PCP to logbook loans, car finance made clear

From PCP to logbook loans, there are a myriad of loans on offer attached to cars, although it can be daunting, we thought we should take a look at each one.

Personal loan

A personal loan is a much favoured way of buying a car, you own the car outright with no mileage restrictions. Unfortunately borrowing from a bank, building society or other lender on a personal loan also makes it an unsecured loan, meaning if you default on the loan, unlike dealer finance where only your car can be repossessed, any of your assets can be seized.

PCP (personal contract purchase)

With PCP, there is a deposit to pay, plus monthly repayments usually from 12 to 36 months. At the end of the repayment term, there are 3 choices-
1-Return the car to the dealer
2-Keep the car and pay the final balloon payment, this is a payment which will have been agreed upon and written into contract, when taking out the PCP. The GFV (guaranteed future value)
3-Use the value (GFV) in the car as a deposit for a new car.

PCH (personal contract hire)

PCH is similar to PCP with one notable difference, at the end of the contact period, you simply hand the keys back to the dealer, there is no option to purchase the vehicle as in effect you are simply renting it for the contract period.

HP (hire purchase)

A popular choice is hire purchase, under this agreement there is a deposit to pay and fixed monthly payments. The car officially belongs to the hire purchase company until the last payment has been made, when this has been done the car then belongs to you.

Logbook loans

This is completely different to the other choices as logbook loans can only be considered when you already own a vehicle with no outstanding finance. This is usually taken out by people whose credit record wont allow them a traditional loan, or need cash fast. As the risk to the lender is high, so are the interest rate repayments. Online lender elogbook loan allows you to view repayments via an online calculator.

With each of these loan choices we ask you to get professional advice or at least do your homework. Apart from your home, a car is likely to be your next biggest purchase.

– Shop around and negotiate where you can.
– Don’t just look at the rate and monthly repayments, look at the total amount repayable.
– Look at any additional fees, such as admin fees or early repayment fees.

Secured vs unsecured loans

In the ever growing options for loans, there is one thing you should familiarise yourself with, and that is, the difference between a secured loan and an unsecured loan.

Secured Loans

A secured loan is a loan backed by security of some kind, such as your home or car. Lenders are more willing to offer a loan if there is an asset backing the loan agreement. In the unfortunate event that you are unable to repay the loan, the lending company can take possession of the asset in order to satisfy the outstanding loan amount.

Secured loans sometimes have a lower interest rate charge on the loan, but are primarily taken out by people who have a low credit rating, whereby an unsecured loan is not available to them.

Unsecured Loans

An unsecured loan is more preferable as should you get into difficulty repaying the loan, the lending company cannot take possession of your assets, but they can still take you to court, adding additional charges and damaging your credit score.

To qualify for any type of unsecured loan, you will need a good credit rating.

Which Loan for You?

An unsecured loan is usually more preferable, but if you don’t have a great credit score, then you may have no choice but to obtain a secured loan, but always remember to do your due diligence and shop around, sometimes the best interest rate is not the best loan.

Is debt holding you back?

According to a government survey a large percentage of adults are delaying traditional life such as marriage or a car purchase due to personal debt.

The largest group hit were people still paying off their student loans, while the amount of adults either forced back to the family home or still living with their families has also grown, the average age of the first time buyer is now 31 compared to 28 in 1995.

One of the biggest reasons debt is problematic is due to the fact that it sucks away your financial and emotional resources. When debt is hanging over you, it makes it difficult to concentrate on anything else but debt. This can sometimes lead to what is referred to as a vicious cycle of debt, when instead of going forward, it feels as if you are actually sinking.

Managing your debt without it hindering upon your life choices can be as simple as consolidating into one low interest loan, or if possible a zero interest credit card (but keep your eye on any zero interest promotional period) That way, moving forward in life can start to feel like a very real and possible reality.