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Residence nil-rate band (RNRB) calculator

Everyone has currently £325,000 of their total estate free of inheritance tax (the nil-rate band – NRB), provided this allowance hasn’t been used when making gifts, for example, or settling assets into trust. Your estate is the sum of your savings, investments, the market value of the house you live in and other assets. Usually pensions are ignored.

But there is a new inheritance tax allowance – the residential nil-rate band (RNRB) – which can be claimed by the estates of people who die after 6 April 2017.

Please note that inheritance tax is a complicated topic and this information has been prepared in good faith and is based on the understanding and interpretation of current law. If in doubt seek advice.

Residence Nil Rate Band – RNRB

Additional main Residence NRB (RNRB) applies if deceased’s interest in a residential property, which has been their main home at some point, is left to direct descendants on death.

Direct descendant of the deceased will be;

  • A child
  • Includes step, adopted or foster child and
  • Their direct descendants

Note – If no children RNRB does not apply

RNRB is also available where the residential property is inherited by someone who is:

  • A spouse or civil partner of a direct descendant at the time of the deceased’s death
  • A surviving spouse or civil partner of a direct descendant who has not remarried at the time of the deceased’s death.

Main Points of RNRB

  • Value of RNRB will be lower of net value of a qualifying interest in the property or maximum amount of the band.
  • It would appear that a qualifying interest is the net amount after an outstanding mortgage has been deducted.
  • Maximum amount will be phased in over 4 years;
  • £100,000 for 2017/8
    £125,000 for 2018/9
    £150,000 for 2019/20
    £175,000 for 2020/21

  • Will then increase by CPI from 2021
  • Limited to one property but PR’s (Personal representatives) will be able to nominate which one should qualify if there is more than one in the estate
  • Unused amount cannot be carried across to another qualifying property
  • Property which has never been a residence of the deceased will not qualify
  • Unused proportion of RNRB will be transferable to surviving spouse or civil partner where survivor dies on or after 6 April 2017 regardless when the first spouse died.
  • Where first death occurred before 6 April 2017 the RNRB is deemed to be £100,000
  • Proposed legislation means that irrespective of what actually happened no part of this RNRB will be deemed to have been used.
  • This means the surviving spouse’s estate will always have a 100% uplift
  • This is unless the estate of the first to die exceeded the taper threshold of £2m when the deemed £100,000 RNRB would be reduced on a 2:1 basis over £2m
  • Claim made as per current transferable nil rate band
  • The RNRB will always be used before the standard NRB
  • If “net” value of the estate is above £2m the RNRB will be reduced by £1 for every £2 above that amount.
  • Finance Act 2016 introduced legislation that where all or part of the RNRB might have been lost because the deceased had downsized to own a residence on or after 8 July 2015, the RNRB will still be available provided the deceased left that smaller residence or equivalent assets to direct descendants.


  • James dies in July 2019 – the NRB is £325,000 and RNRB is £150,000
  • His share in property of £175,000 is left to his wife, Joan, as is the rest of his estate valued at £325,000

  • Joan dies in March 2021 with estate valued at £1 million, including property worth £350,000
  • Her estate is left to their daughters and so will benefit from NRB of £650,000 plus RNRB’s of £350,000 (Joan’s £1275,000 plus 100% uplift to be claimed on behalf of James)
  • No IHT due

As previously mentioned if in doubt seek advice.

Rossmore news: February 2017

A week in the news

  • One in seven businesses is failing to auto-enrol its employees in a workplace pension before the new deadline, new figures from Aviva reveal.
  • An index fund that tracks companies in the FTSE 250 but excludes investment trusts has been launched by Legal & General Investment Management.
  • Coventry for intermediaries has launched new offset mortgages and reduced the rates on some of its buy-to-let products.
  • Scots Widows has scrapped exit fees on all personal pension products.

Thousands of over 55’s lose out from pension freedoms

Hundreds of thousands of vulnerable over-55’s could be left worse off this year if they take advantage of pension freedoms to access cash lump sums, Just has warned. Just Retirement and Partnership said that 2017 would see the highest ever number of people reaching 55, the age at which pension freedoms kick in.

Interest-only ‘prison’ to spur equity release

A flood of interest-only mortgage maturities in 2017 is set to ‘turbo-charge’ the equity release market, with one provider predicting demand will more than double over the year. The FCA has highlighted 2017 to 2018 as the first year in which a large number of interest-only mortgages sold would reach maturity and it estimates that almost half those with such a mortgage will be unable to pay the loan.

Scammers Pose as FSCS

The FSCS has warned consumers to “be on their guard” against an email scam promising a high-value payment. The compensation body said scammers were posing as the FSCS and attempting to entice consumers to provide personal information with the promise of a $5.7m (£4.5m) payment.

Scottish Widows unveils £30m workplace pension investment

Scottish Widows will invest £30m in its workplace pensions business to expand the range of products and services available to its workplace customers.

Cost of cyber crime to rise 40%

Financial services firms will be forced to spend millions more to guard against digital crime this year, as some industry professionals warn more needs to be done to educate businesses of the dangers.

For Financial planners the big risk is that you, or your staff, make an error that leads to a client falling victim to fraud.

What is your State Pension age

Key points from an Age UK document entitled “Later Life in the UK” published in 2016 serve to illustrate just how things have changed and are still changing. With a UK population of 65.3 million:-

  • 6 million people are aged 65 or over
  • Over 1.5 million are aged 85 or over
  • The number of centenarians living in the UK has risen by 72% over the last decade to 14,450 in 2014
  • UK life expectancies at age 65 are 85.9 years for women and 83.4 years for men
  • By 2040, nearly 1 in 4 people will be aged 65 or over
  • The proportion of the population aged over 75 is projected to double in the next 30 years
  • Nearly 1 in 5 people will live to 100, including 29% of people born in 2011.

Pension Contributions by age per £10,000 per annum of retirement income

Current Age State Pension Age Approximate monthly contribution required per £10,000 of income*
20 68 £110
30 68 £165
40 67 £275
50 67 £510

* Contribution assumptions – Level before 20% basic tax relief
* Growth assumptions – Capital growth of 6% net of charges
* Income assumptions – At-retirement gross income before tax: adjusted for 2% inflation; 6% annuity rate; no tax free lump sum taken.

Increasing life expectancy means the State Pension Age goalposts could move even further away in the future, with people working into their 70’s and 80’s to make ends meet.

Conditions re Pension Advice Allowance

Can be used a total of three times, only once in a tax year, allowing people to access retirement advice at different stages of their lives, for example when first choosing a pension or just prior to retirement.

  • Will be available at any age, allowing people of all ages to engage with retirement planning.
  • Can be redeemed against the cost of regulated financial advice, including robo-advice as well as the traditional face-to-face advice.
  • Will be available to holders of defined contribution pensions and hybrid pensions with a defined contribution element, but not defined benefit or final salary type schemes.

Auto enrolment – Review by Department for Work and Pensions

The DWP is conducting a review of auto-enrolment considering three themes, coverage, engagement and contributions.

Coverage – Consideration is being given to changes in the current earnings trigger of £10,000, age criteria and self-employed.

Engagement – Informing individuals that state pensions will not be sufficient in their retirement, employers matching contributions, people have a responsibility to fund their retirement.

Contributions – Rates need to rise above the 8% minimum planned for 2019, learn from the US experience of timing contribution increases with wage rises.

New FCA website: ScamSmart

It is estimated that £1.2bn is lost to Investment Fraud each year, so in response the FCA website has created a specific site giving details of scams with warnings: ScamSmart

Latest scams include emails appearing to be from companies such as Pay Pal and Apple indicating there is a problem with your account, or that a purchase has been made using your details. You are then directed to a site to confirm these details and are requested to enter your bank/card details.

This is a scam – no company will ask you to confirm your bank or card details in full online. If you’re suspicious, contact the payment provider or store and your bank immediately.

Budget 2016: Eight key announcements

As ever, the Chancellor’s Budget contained a raft of information that could affect our clients and their families. Here we take you through the most important updates:

1. Lifetime ISA: a new £4,000 ISA that you can use to save for retirement or to buy your first home

From April 2017, any adult under 40 will be able to open a new Lifetime ISA. Up to £4,000 can be saved each year and savers will receive a 25% bonus from the government on this money.

Money put into this account can be saved until you are over 60 and used as retirement income, or you can withdraw it to help buy your first home.
The total amount you can save each year into all ISAs will also be increased from £15,240 to £20,000 from April 2017.

2. The Personal Allowance will increase to £11,500, and the higher rate threshold will rise to £45,000 in April 2017

The Personal Allowance is the amount of income you can earn before you start paying Income Tax. This is currently £10,600 – it will already rise to £11,000 in 2016, and will now increase further to £11,500 in April 2017.

The point at which you pay the higher rate of Income Tax will increase from £42,385 to £43,000 in 2016 and to £45,000 in April 2017.

3. New tax allowances for money earned from the sharing economy

From April 2017, there will be two new tax-free £1,000 allowances – one for selling goods or providing services, and one income from property you own.
People who make up to £1,000 from occasional jobs – such as sharing power tools, providing a lift share or selling goods they have made – will no longer need to pay tax on that income.

In the same way, the first £1,000 of income from property – such as renting a driveway or loft storage – will be tax free.

4. Cutting business rates for all rate payers

From April 2017, small businesses that occupy property with a rateable value of £12,000 or less will pay no business rates.

Currently, this 100% relief is available if you’re a business that occupies a property (e.g. a shop or office) with a value of £6,000 or less.

There will be a tapered rate of relief on properties worth up to £15,000. This means that 600,000 businesses will pay no rates.

5. Capital Gains Tax rates will be cut from 6 April 2016, but residential property will still be taxed at current rates

Capital Gains Tax is a tax on the gain you make when you sell something (an ‘asset’) that has gone up in value. It is paid at a basic or higher rate depending on the rate of Income Tax you pay.

From April 2016, the higher rate of Capital Gains Tax will be cut from 28% to 20% and the basic rate from 18% to 10%.
There will be an additional 8 percentage point surcharge to be paid on residential property and carried interest (the share of profits or gains that is paid to asset managers).

Capital Gains Tax on residential property does not apply to your main home, only to additional properties (for example a flat that you let out).

6. Employers will pay National Insurance on pay-offs above £30,000 from April 2018

From April 2018 employers will now need to pay National Insurance contributions on pay-offs (for example, termination payments) above £30,000 where Income Tax is also due.

For people who lose their job, payments up to £30,000 will remain tax-free and they will not need to pay National Insurance on any of the payment.

7. Corporation Tax will be cut again to 17% in 2020

The main rate of Corporation Tax has already been cut from 28% in 2010 to 20%, the lowest in the G20. It will now be cut again to 17% in 2020, benefitting over 1 million businesses.

8. Class 2 National Insurance contributions (NICs) for self-employed people will be scrapped from April 2018

Currently, self-employed people have to pay Class 2 NICs at £2.80 per week if they make a profit of £5,965 or over per year. They also pay Class 4 NICs if their profits are over £8,060 per year.

From April 2018, they will only need to pay one type of National Insurance on their profits, Class 4 NICs.

Paying Class 2 NICs currently enables self-employed people to build entitlement to the State Pension and other contributory benefits.

After April 2018, Class 4 NICs will also be reformed so self-employed people can continue to build benefit entitlement.

Fraudulent Activity

Information from investment providers indicates that fraudulent attacks which use spoofed or hacked customer e-mails to pass withdrawal instructions through investment advisers are continuing to occur.

The fraudulent instructions appear to be sent from a genuine customer’s email address, which may have been hacked or ‘spoofed’ by the fraudsters. If the initial request is successful, the suspects have been known to attempt additional transfers, often to a number of different accounts.

The potential for this to harm customers is significant and Rossmore Financial Services has instigated procedures to ensure that customers are protected from any fraudulent activity.

These procedures will require Rossmore clients to go through various processes should they wish to withdraw funds that are designed to protect both the client and Rossmore from any fraudulent activity, so as a client you are asked to consider this if your request for withdrawal of funds be questioned.

Spring 2015 newsletter

Welcome to the Spring 2015 edition of our newsletter. In this roundup of the latest financial news, you’ll find articles on:

  • The 2015 Budget
  • A new dawn for pensions
  • The benefits of regular savings
  • The most common investment mistakes
  • New flexibility on pension lump sums
  • Tax-efficient retirement planning options
  • The importance of making a Will

To download your own copy of this newsletter, click HERE.

If you have any questions about the issues raised in this edition, please do not hesitate to get in touch. The contents of this newsletter does not constitute advice and should not be taken as a recommendation to purchase or invest in any of the products mentioned. Before taking any decisions seek advice.

Pension & retirement benefits from April 2015

UPDATE: Pension & retirement options are changing – the date is getting closer, so here’s a reminder of some useful information.

Wondering how the new pension rules will affect you? Thanks to one of Rossmore’s trusted and respected partners, we have access to information for those considering a pension, or currently navigating their way through one. The guides present the changes in a straightforward and understandable format, so why not download this guide from Aviva to get to grips with the pension changes coming up in April 2015, or simply watch the video below.

Please note: This web content and post does NOT constitute advice or a recommendation, as it is for information purposes only – you should seek professional independent advice on your own personal circumstances. Please contact Rossmore Financial Services for further information.

These changes may seem simple and easy at first glance, however, if you do the wrong thing, it could affect your standard of retirement dramatically.

Contact us for advice

Average cost of raising a child in Britain rises to £230,000


The average cost of raising a child has risen by almost £2,000 over the last year to around £230,000, according to a think-tank.

The new figures, compiled by the Centre of Economic and Business Research (CEBR), show the cost of bringing up a child to 21 years old has increased by 63% since 2003, when the index was first calculated.

The increase means the price of having children has risen 50% faster than inflation over that period.

Parents on average spend £74,319 on education over the whole of a child’s upbringing – a figure which includes costs like uniforms, school lunches, and university fees. Private school fees were not included in the index.

Most families also faced a huge bill for childcare, with an average bill per child of £67,500 over the 21-year period.

Out of all the costs examined by the report, only clothing has become cheaper over the last decade or more. Other costs examined include pocket money, toys, and holidays.

The figures were compiled by the think-tank on behalf of the insurer LV=.

“Having children has never been more expensive and, with costs such as childcare and education continuing to rise, for many families across the UK this is set to remain a pressure point,” said Myles Rix, managing director at the insurance company.

Childcare is a major expense for parentsLondon-based families spent the most on childcare but paid a smaller proportion of their income overall because of higher salaries in the capital.

Last year research from the Child Poverty Action Group and the Joseph Rowntree Foundation found that the costs involved in raising children are increasing far faster than wages, leaving many parents struggling.

That report found the cost of raising a child was £164.19 a week, while lone parents had to pay more at £184.50 a week due to higher childcare costs.

At the time of that report’s release, Donald Hirsch, director of the Centre for Research in Social Policy at Loughborough University, said:

“This evidence shows unequivocally that families have found it progressively harder to make ends meet.

“The forecast increase in wages in the next few years should help, but may not reverse this trend for the worst-off working families. This is because the support they get from the state will continue to decline in real terms.”

Source: The Independent 

Average mortgage deposit from Bank of Mum and Dad is now £18,505

A new study suggests more parents are taking on debts in order to help their children step on to the property ladder

Woman and child look at properties advertised for sale in an Estate Agents window, London, UK. Photo:Jeff Gilbert

One in seven parents have found themselves in debt after dipping into their savings to help their children on to the property ladder, according to a new study.

Some were forced to remortgage or even downsize their own home the research found.

Spiralling housing costs meant the average sum being loaned or given to help adult children to buy their first home had risen to £18,505.

A third of parents questioned said their financial security had been affected. More than three quarters had dipped in to their savings while one in six had cut back on expenditure. More than one in 10 said they had cashed in their investments.

One in 40 has even gone as far as to downsize and sell their own home to raise the capital and nearly one in 20 has re–mortgaged their home.

The research also showed that, despite 16 per cent of parents calling the money a loan, less than half of this number expected to have the full sum returned.

Stephen Lintott, the head of property at Slater & Gordon, which commissioned the research, said: “There are a huge number of buyers who simply can’t afford to get on to the property ladder without the help of family members.”

But he added: “We have found that many relatives say that their act of generosity wasn’t well advised and resulted in financial hardship or anxiety.”

The research, for which more than 500 parents who had helped their children buy a home were polled, indicated that nearly half felt obliged or pressured to do so, with two thirds saying that their children could not have done it without them. Many reported feeling stressed or anxious about their financial situation but, despite this, just 6 per cent of parents regretted helping their children.

One in 20 stepped in after grandchildren were born because they believed a young family needed more space, while 43 per cent said they had concluded their children would not be able to raise a cash deposit, so loaned them sum to get them started.

However, just a fifth had sought legal advice before handing over the money and 14 per cent had any kind legal documentation or contract in place to protect the cash should their offspring’s relationship break down or if theirfinancial situation should change. Mr Lintott warned: “It’s so important that relatives don’t rush into any complex financial arrangements, if they want to help they should seek the right advice.”

Planning ahead and how to reduce risks

1. Consider your options You may be able to help in a number of different ways, gifts, loans, guarantees.

2. Don’t rush into a decision Try to think about this as if it was a commercial decision and not an emotional one.

3. Be realistic Don’t over stretch yourself financially.

4. Take legal advice Before entering into a significant deal.

5. Think long–term Will I be able to afford this if interest rates change, my child splits from his partner, I need to move or tap into my own home’s equity?

Source: The Telegraph 

How can the children ever buy a home of their own?

Is the Bank of Mum and Dad now the only way to get a foot on the property ladder?


Property ownership is the bête noir of our times. Over Christmas, families have gathered, feasted and given, but beneath the surface lay tensions that this country has never before seen. The older generation has truffled through decades of prosperity, piling up the value of their property. Their grown-up children now face a housing market as inhospitable as the north face of the Eiger.

The over-65s own a trillion pounds of equity. They have lived through repeated property booms, each of which has spun gold. House prices in the Thatcher years went up by 187.9 per cent, then by 6.5 per cent in the Major years and by 211.3 per cent under Blair. They dropped by 7.2 per cent in the Brown years and have so far risen by 11.9 per cent under Cameron. As they toast the year ahead, will they be delighting in their good fortune or feeling sorry for their offspring? Is there anything they can do to help? The answer is yes.

“This divide between the generations is being offset by downsizing,” says Lucian Cook, head of Savills Research. “Existing housing wealth will be recycled through the generations. The Bank of Mum & Dad is going to become much more important over the next decade.” Like salmon beating upstream to spawn, first-time buyers have to make monumental leaps to achieve their aim. Lenders are insisting on deposits as high as 130 per cent of their incomes. In London a deposit of £70,000 is common.

“The plight of the under-35s is now affecting the higher age groups,” says Cook. “People take stock of their lives over Christmas and New Year and we usually see the biggest spike in online property searches as a result.” The Prudential Downsizing Index says that 41 per cent of home owners over 55 are planning to sell soon, and as 65 per cent of first-time buyers now have help from their parents, it is easy to see where some of the money will go.

“The big thing is the affordability squeeze,” says Cook. “Clearly there has been a real structural change in the market.” What will happen when current renters reach 40 and they are still shut out from buying? “Interest rates are only going to go up, so it will become more attractive for them to stay in rented property.” Savills Research estimates the number of renters in the country is expected to rise by 1.2 million in the next five years, when they will constitute nearly a quarter of all households. By the 2020 general election they may be a significant electoral force.

James Nash, 29, works in the finance department of a large London retail store and rents a one-bedroom flat in Battersea with his girlfriend. “We both earn above-average salaries so we are not underprivileged,” he says. “I would have hoped by now to be buying, but it isn’t even on the horizon.”

The average rental on a one-bedroom flat in Battersea is £1,550 per month, while according to Hamptons International the cost of buying a two-bedroom flat is £889,000. “This is a different world from what my parents had when they were young,” says Nash. “I know they would help if they could. It is very frustrating paying a large amount to pay the mortgage of a landlord who is also benefiting from capital gains.”

People are prepared to put a toe on the ladder, if not a whole foot. Paul Beverley was 39 last year and felt if he didn’t buy now he never would. He had been renting in Ash Vale, Hampshire. “I’d never been able to afford to get on the property ladder,” he says. “Approaching 40 made me really stop and think. I realised I’d paid £100,000 in rent over 10 years and had no equity to show for it.”

But, like many, he couldn’t afford the prices. So he compromised and bought a two-bedroom house from Thames Valley Housing (020 8607 0550; in Church Crookham, where he grew up. He bought a 50 per cent share at £102,500 with a £10,250 deposit and a mortgage of £92,250. His mortgage repayments are £568 per month and rent and service charges are £356. “In total I’m paying £924 each month, only £149 more than I was paying in rent. It’s my own home and I’m building equity.” He feels that the purchase has changed his life.

Meanwhile, in order to make ends meet, a lot of families have several generations living together. Letting agents Finders Keepers in Oxford says that owners are extending their houses in order to accommodate the Boomerang Generation and that a lot of first-time tenants have spent all or part of their 20s living in the parental home. Frank Webster, vice-chairman of Finders Keepers, has two daughters, Emily, 24, and Hannah, 22, who are both in work but still “nesting” at home.

“Oxford is such a strong market that I help a lot of people to buy for investment and quite a lot are buying for their young,” he says. “I have just helped a man buy a flat for his seven-year-old son. He knows he has been lucky and life has been good, but it may be a nightmare for his son in the future so he is doing what he can.

“My children won’t buy until they are 40. People working for me are clubbing together to buy or moving quite far out of the city to find lower prices and travelling in. I meet a lot of parents who are equity-rich and feel a bit guilty, and who want to help their children because they know prices will just keep going up.”

Perhaps we should remember that in most of the rest of Europe renting is what people do. Meanwhile, what does the year ahead promise? Savills reckons that prices will rise by two per cent in the regions and flatline in London, then start rising slowly. It predicts that by 2019 prices will have risen by 19.3 per cent in the country and by 10.4 per cent in London. The haves and have-nots are here to stay.

Source: Telegraph

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