Q&A: ISAs, self-assessment, corporate bonds, NI, phone scams

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Q&A: ISAs, self-assessment, corporate bonds, NI, phone scams

Saga Magazine money expert John Husband answers your personal finance questions in his regular 'Money clinic' Q&As:

Q: I feel cheated because I'd like to put more of my savings into tax-free ISAs. I see the Government is raising the limits for everyone from the start of the next tax year in April but only for the over-50s immediately. I feel hard done by because my 50th birthday falls on April 5.

A: You've no need to. The new limit applies immediately to anyone whose birthday falls in this tax year, which ends at midnight on April 5, so you already qualify by the skin of your teeth.

Q: Do you have to fill in a self-assessment tax return if you receive interest from a building society bond account, as tax is already deducted from the interest?

A: No, only if you are asked to. As a general rule the taxman is only interested in finding out about any income you've received that has not already been taxed.

Q: I recently lost my job but I've just managed to get some part-time work on a self-employed basis. Do I have to pay National Insurance?

A: Yes, you should notify Revenue & Customs and you will have to pay flat-rate class 2 contributions of £2.40 a week. You can apply not to pay them if your profits this tax year are less than £5,075, but that could affect your right to state pension and other benefits. If your taxable profits exceed £5,715 this year you will also have to pay Class 4 contributions along with any income tax. The current rate is 8% on the next £38,160 and 1% on anything above £43,875. To find out more, contact HMRC's newly self-employed helpline, 0845 915 4515, or log on to www.hmrc.gov.uk/nic.

Q: My son and I have lost contact. Do I have to leave him money?

A: You can leave your money to whoever you like. But dependants who have not been provided for may make a claim against your estate, although that does not necessarily mean that it would be upheld. If you choose to leave out someone unexpected, such as a close relative, I suggest that you take advice from your solicitor on how best to minimise the risk that your wishes might be challenged or overruled.

Q: We invested in a Corporate Bond fund because we were told that it would provide a high income with no risk. The units have since fallen in value. What’s gone wrong?

A: Bond funds are safer than shares but their value does go up and down. Corporate Bond funds in particular have suffered because of fears that the recession could result in some companies issuing them going bust. They have started recovering, as the recession seems to be ending. But no bond funds are entirely risk-free. Even one investing only in Government Securities will rise and fall as interest rates fluctuate.

Q: I gave £1,500 to each of my children in October last year. Do I have to wait until October this year before I can give them any more? Or can I give them money at any time?

A: The £3,000 yearly gifts exemption for inheritance tax purposes relates to each tax year. So you can gift money any time within the tax year, which runs from April 6 to April 5 the following year.

Q: You recently stated that you could gift £3,000 a year without falling foul of inheritance tax. Our daughter's partner abandoned her shortly before she gave birth to their son and we have been helping her out financially by giving her £200 a month from my income. I also help her out with money for Christmas and holidays. Would this fall foul of inheritance tax?

A: No, because regular gifts that are normal expenditure out of income are exempt. Both your monthly payments and regular help with Christmas and holidays would fall into this category, as would gifts for birthdays. What the taxman would be on the lookout for would be substantial one-off payments intended to reduce your potentially taxable estate.

Q: Please warn readers about a phone scam to which I fell victim. I was rung by someone claiming to be a BT engineer who was about to cut off my landline if I didn't pay £50 allegedly still owing from my last bill. Foolishly I immediately paid it over the phone with my debit card. On checking with BT I found it had nothing to do with them and an unidentified telecom company had taken my money.

A: Never make a payment to anyone who calls you on the telephone. If you owe money to any company, check out their official number over which to arrange payments to them. And never use any numbers given to you by callers or in unsolicited emails.

Read John Husband's 'Money clinic' every month in Saga Magazine. John's opinions are his own and for general information only. Always seek independent, professional, financial advice. This article first appeared in the January 2010 edition of Saga Magazine.

Email John Husband your finance and money questions at web.editor@saga.co.uk