Tips on Making A Will

Everyone over 18 should make a will even if they have little to leave. Failing to make a will can cause unforeseen problems and leads to a famous solicitors toast ‘ To the people who don’t write a will’.

If you die intestate (that is without leaving a valid will) your estate will be divided up according the rules of law not your wishes (or even logic). Sorting out an intestate’s estate can incur extra cost, time and effort for those left behind who have to sort it out.

DIY Wills

You can write your will on plain paper, sign it and get your signature witnessed by two people. Witnesses should have nothing left to them in the will and must record their name address and occupation but do not need to see the content of the will only witness the signature. A better alternative is to use a cheap pre printed will form available from most stationers. Such forms have sections that help guide you through the format.

In Scotland you can handwrite and sign your own will, known as a holograph, and whilst it doesn’t need witnessing most people get two non beneficiaries to witness their signature.

DIY wills are only successful in simple circumstance and there is a danger of getting it wrong and ending up with something you didn’t intend.

Professional Wills

There are solicitors, banks and professional will-writing firms who can guide you and produce a will designed to deliver what you want. They are also clued up on inheritance tax, the rights of wives and children etc and from previous experience be able to guide you.

Get a quote of the cost beforehand. Go to the meeting prepared with a clear idea of; what you own (your estate), what you want to leave to whom (your beneficiaries), what you want to happen if you die with other members of the family. You will also need to name an executor(s) often a close friend or relative and/or a solicitor or bank who will charge for their services.

If you have children you can outline your wishes as to guardians and where you want them to live but final decisions will be taken in the interests of the children. You cannot totally disinherit those who are financially dependant on you, if they challenge the will the courts will decide what they get.

Make Life Easy for Executors

  • If you marry, divorce or remarry write a new will as the old will will be invalid.
  • Leave a detailed note about what you own, where it is and note on how to find it.
  • You can leave a letter with your will to help guide your executors although instructions are not mandatory. If your assets have changed you can leave a codicil to your will that vary the terms without having to rewrite the whole will.
  • Make your will in the country where you live (the law is different in Scotland to England for example) but take care about foreign owned assets.

Letting Your Home to a Lodger

Broadly, someone who lets from a ‘resident landlord’ does not have a right to challenge the level of rent that he or she has agreed to pay. They can be given less notice to leave if the landlord wants to end the letting.

You can arrange the letting in a way that suits you and the tenants but examples of the most common arrangements are as follows:
  • Non-excluded tenancy: house divided into self-contained flats, occupier lives in one and landlord in another
  • Excluded tenancy: ‘houseshare’ arrangement, where landlord lets room(s) in his or her home and shares lounge etc with the occupier; bedsit arrangements where landlord is not servicing rooms
  • Excluded licence: ‘lodgers’, where the arrangement includes cleaning the room; stay by a friend on a casual basis; room is let as a ‘roomshare’ with existing occupant
Taxation Issues

  • You get a 25% discount off your council tax bill if you are the only adult living in a property. This is often called 'single person' discount but will be lost when taking a lodger.
  • If you are letting furnished rooms in your home, you can receive up to £4,250 a year tax-free. This is known as the Rent a Room scheme. The principal point to bear in mind is that if you are in the Rent a Room scheme you can't claim any expenses relating to the letting.
  • To work out whether you will be better off joining the scheme or declaring all of your letting income and claiming expenses on your tax return you need to compare the following:

  • how much income you are left with after your expenses
  • the amount of your receipts (rent plus any income from laundry services, meals, etc) over £4,250 (2009-2010 tax year)
If you opt out of the scheme (or simply do nothing) you will pay income tax on the first amount. If you opt into the scheme you will pay tax on the second amount.

The expenses you can deduct from letting income (unless it's under the Rent a Room scheme) include:

* letting agent's fees
* legal fees for lets of a year or less, or for renewing a lease for less than 50 years
* accountant's fees
* buildings and contents insurance
* interest on property loans
* maintenance and repairs to the property (but not improvements)
* utility bills (like gas, water, electricity)
* rent, ground rent, service charges
* Council Tax
* services you pay for, like cleaning or gardening
* other direct costs of letting the property, like phone calls, stationery, advertising

Bear in mind that you can only claim expenses that are solely for running your property letting business. If the expense is only partly for running your business (or if you use the property yourself) then you may only be able to claim part of it.

You can't deduct 'capital' costs, like furniture or the property itself, personal expenses that aren't to do with your letting business, any loss you make when you sell the property. You may be able to claim some allowances instead for furniture and equipment provided with a furnished residential letting (excluding UK furnished holiday lettings) you can claim a 'wear and tear' allowance. The allowance is 10 per cent of the 'net rent' - this being the rent received less any costs you pay that a tenant would usually pay.

As an alternative to the wear and tear allowance, you can claim a 'renewals' allowance. This covers the cost of replacing furniture or equipment, including small items like cutlery. Whatever the type of letting, you can claim a capital allowance on the cost of things that you need for running your property letting business, like cleaning and gardening equipment. Check with the HMRC for details.

Tips on Letting Your Property

This note gives an overview of the issues when renting a property where the landlord is not resident or normally living in the property.

There are 3 main ways to earn a rent from letting or leasing your property.
  • Short lets tend to be for tenants moving in for less than six months for which you need a contract.
  • If you are letting your property for over 6 months this tends to be known as a long let and you need a proper tenancy agreement. This is necessary to be able to reclaim your property at the end of the lease period.
  • Holiday lets should be no problem getting tenants to move out at the end of the holiday but have a good agreement so everyone knows the rules.

Tips For Letting your Property

  • If letting your property for ‘sharing’ make sure all the people living in the property are joint tenants named on the lease.
  • Do not rent to people you do not trust. Check references. If you are concerned about getting paid ask for a guarantor in the rental agreement.
  • If taking in a lodger into the home where you currently live see Letting your home link.
  • You should always keep you insurance company, bank or mortgage company informed about your intention to rent. On some mortgages this may be prohibited or cost more
  • Landlords are generally responsible for the maintenance and major repairs to a property. This includes repairs to the structure and exterior of the property, heating and hot water installations, sinks, baths and other sanitary installations.
  • If the property is considered to be a House in Multiple Occupation (HMO) you will need a local council license.

Safety Issues

  • A property should be safe and healthy for occupiers, so responsibility should be taken to ensure that the dwelling is capable of providing adequate heating. The electricity and gas supplies must be connected, the drains, sinks, baths and WCs be in working order and there is a water heating facility. The property should be is free from damp and there should be no fall or trip hazards.
  • Landlords must ensure that all gas appliances and installations are maintained in good order. This involves gas boilers and fires getting an annual safety check, carried out by someone who is registered with Gas Safe Register. Keep a record of the safety checks, and issue it to your tenants within 28 days of each annual check.
  • (The occupier is responsible for maintaining gas appliances which they own, or are entitled to take with them at the end of the letting.)
  • By law, landlords must make sure that the electrical system and any electrical appliances supplied with the let, like washing machines and toasters, are safe to use. Electrical wiring and appliances must be maintained in a safe condition for the length of the tenancy.
  • The 2004 Housing Act requires an adequate means of escape for fire safety. Depending on the size of the property, smoke alarms and fire extinguishing equipment may be needed.
  • Make sure any furniture and furnishings provided meet the fire resistance regulations

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How To Collect Late Payments

  • Young businesses need cash and good credit control is an essential management tool. Try and get payments in advance, letters of credit or cash on delivery but if you must give credit to customers here is some advice.
  • Get your customers to pay on time by talking to the regularly and building a good relationship.
  • Make sure you have an agreement on how long the credit period will last and how payment will be made. The agreement can be verbal but it should preferably be in writing. Where there is neither an agreement in place nor industry custom and practice the law sets a default period of 30 days.
  • Use the method called BEBO this means bill early and bill often – do not let things drift.

Charging interest on late payments
  • If some customers still end up paying late you have rights under the late payment legislation to charge interest and debt recovery costs.
  • Purchasers cannot contract out of the late payment legislation - ie they cannot deny the supplier their statutory right to, for example, charge statutory interest.
  • If you indicate in your terms and conditions that you will charge interest on all late payments, it is up to you whether you actually do so or not. You should address each debt on a case-by-case basis.
  • With persistent offenders, you may need to start charging interest to act as a deterrent in the future.
  • Make sure invoices include an agreed payment date so customers know when interest will start being charged - let customers know if interest starts to accumulate.
  • Before charging interest, you could issue a letter stating that the payment is late and if it is not paid within, say, seven days, interest will be charged.
  • Present the customer with a final receipt once the interest and the original sum have been paid, outlining details of interest charged.
  • As well as charging interest you can also claim costs for the recovery of late payments.
The costs, which are fixed, are as follows:

Amount of the debt - Debt recovery cost you can charge
  • Up to £999.99 - £40
  • £1,000 - £9,999.99 - £70
  • £10,000 or more - £100
However, before applying the charge, you should consider the relationship with the customer find out the general industry practice.

Taking further action to collect debts
  • Before you take court action, you should consider the alternative methods of recovering debt, negotiation, mediation, conciliation or arbitration.
  • You should continue trying to recover the debt using the usual methods, eg telephoning the debtor to remind them that the payment is now overdue. Another alternative is to use a debt collection agency or send a solicitors letter.
  • The advantages of using an agency are they have the time, expertise and resources needed for the job. It can be a fast method of recovering debts so will save you time.
  • The disadvantages are that an agency can be costly - the commission on the money recovered is typically 8 to 10 per cent for commercial debts, you may lose the customer and if the agency is heavy-handed, your reputation may be damaged
  • A further alternative is for you or your debt collection agency or solicitor to issue a statutory demand, promising an application to court for the formal winding up of the customer's business if payment is not made within 21 days.
Taking court action to collect debts
  • Taking legal action to recover your money should be a last resort.
  • If court action still seems the best solution, consider whether making a claim is cost-effective. It might be cheaper to write off small sums. If a customer is likely to place large orders in future, it may be better to let things lie if only a relatively minor amount is in dispute.
  • If you decide to take court action, make sure you have resolved any disputes over the goods or services you have provided. If you don't do this, the debt will be difficult to recover. You also need to make sure that customers have the means to settle. If they are bankrupt or in liquidation, your debt is probably irrecoverable.
  • Debts of up to £5,000
  • Debts of up to £5,000 are dealt with by the small claims track at your local county court. This offers a quick and inexpensive way of making claims for unpaid debts, as you don't have to employ a solicitor.
  • In Scotland, claims are dealt with by the Sheriff Court.
Debts over £5,000

Claims from £5,000 to £25,000 must be issued in a county court, while claims of more than £25,000 can be issued in the High Court. It's advisable to get legal advice about this.

First Time Buyer in 2010

If you are planning the purchase of your first home this year then you need to consider some key areas.

The Right Deposit - You need the best deposit you can arrange to get the best deal.

The minimum deposit is likely to remain at 10% for the rest of 2010 and the 100% mortgage is not likely to be offered by major lenders for sometime.

The bigger your deposit the better the interest rate and overall deal is going to be. 15%, 25% and 40% are threshold levels beyond which the rates get better so a 22% deposit is treated as a 15% deposit so try go the extra mile and save to the next threshold.

Your credit score is still important and just having 10% deposit is no guarantee of a mortgage if your score isn’t good enough.

Use a Broker - If you are uncertain it may pay you to consult a mortgage broker.

Brokers should survey the whole market and match your circumstances to an appropriate mortgage deal.

Brokers should ensure you don’t forget how costly a mortgage can be.

Costs of Property Purchase. - Stamp duty is now back to 1% on prices £125,000 - £250,000, 3% if the purchase price is above that and 4% for those paying over £500,000.

Legal fees, survey costs and arrangement fees all mount up. It is easier to forget a cost than to over budget so have some contingency available.

Look at the whole package of costs as arrangement fees now or after any initial ‘special offer’ can bump up the effective interest rate and take a lump of savings to sort.

Other Considerations

Not every bank will want to lend to you. Do not take it personally it is just business to them. If you are rejected try understand the reasons and where possible put them right for the next application. If it is the property value that is rejected may be someone is trying to tell you something.

Interest rates may vary, probably upwards at some stage this year and the longer you are fixed for the greater vision you will have about your outgoings.

The trend on rented property costs is not likely to be upward this year but supply and demand area by area may influence your buy or rent decision. In any case think things through as it is your home you are considering buying.

More Tips for first time buyers

Credit Rating and Ex Partners

Is Your Credit Damaged by Your Ex?

Your former spouse or partner can have an impact on your current finance and here we will give you some tips to cut your financial ties. Applying jointly for credit to buy a car, negotiate a mortgage or having a joint bank account means you are linked in the eyes of credit reference agencies. If the other person then has financial difficulties you can suffer long term.

Credit references should be related to individuals not addresses but be wary.

Control Debts with your Ex

  • Talk openly about finance matters when you are together. Keep records
  • If you make any joint applications even if they are not taken up you will be linked to the other person. What is relevant is whose name is on the agreement, as this is the person who will be legally liable for the debt. If it is in joint names you both have 'joint and several liability' and both can be chased for the full amount.
  • Check your credit report with the main agencies, Experian, Equifax or CreditExpert, it costs a couple of pounds. Make a note of any details that are in joint names.
  • Settle any joint debts when you split. Then close the account and contact the lender to get them to update their records.
  • Tell utility providers, credit agencies and any other relationships with joint accounts that you have split up and that all joint accounts are now closed.
  • Notice of Disassociation can be placed on your credit file when for some reason a link ‘previously’ existed between you and another person but they do not cover previous debt issues, you need proof that the association has finished and thee ultimate decision is in the hands of the Credit Reference Agency.
  • Confirm for yourself that you have not given any guarantees on behalf of your partner or their debts. If you have you will need to negotiate an exit from the guarantee with your Ex and any lenders.
Other Potential Problems

  • Even well after the split keep monitoring your credit report to catch any lingering or resurfacing problems. Do this at least annually
  • Divorcees are not necessarily clear of former partner's debts. Any assets awarded as part of the divorce can be reviewed for up to 5 years after the divorce if one of them is declared bankrupt. So seek legal advice in these circumstances.
  • Whilst living together a partner may grow an equity value by contributing to the costs of a mortgage for example. In those circumstances a creditor could claim part of the asset you thought was yours.

Financial Scams To Be Careful Of

There are many ways companies can get us to part with our hard earned cash. Be wary of these following practices which can lose you money.

Loan Protection Payments.

Banks often sell very expensive loan insurance schemes. You can end up paying 50% of the cost in insurance premiums. Often banks give the impression these very profitable insurance schemes are essential to get the loan. Be very wary, if you really want loan payment protection, it may be better to get some from another company.
See: Misselling of loan insurance protection

Bank Details

Though oft repeated, always be wary of any email that tries to get your login details to your bank account. Scammers can give the impression they are your bank when actually they aren't

Internet payment of Subscriptions by card.

Recurring payments like magazine subscriptions, annual trip insurance, gym memberships etc are not covered by the save guards on debit cards or credit cards. even if you tell your bank to stop payment they wont! The supplier will have your full long security number and can take payment at will. It is then up to you to dispute or fight for refunds or cancellations.
The direct debit scheme has safe guards and you should try insisting that is the way you wish to pay.
An alternative is to use a prepaid credit card which won't pay out if there are no funds (but beware this may mean you are in breach of contract)

Door Stop Energy Salesmen

Paying monthly is a common way of getting energy bills settled. A guesstimate of consumption is made and converted into a monthly cost. When someone calls at the door with the sales patter offering £10 per month or more saving if doesn't mean they are cheaper.
Compare the unit costs - use a reputable web site for a guide to cost comparisons. If you do sign up you have 14 days to cancel so use the time to double check.
Once the deal is done unscrupulous suppliers are trying to increase the monthly payments immediately and by 30% in some instances! At best, this is to help their cash flow and at worst it is because they know you need to pay more.

A Good Time To Remortgage

There are three good reasons to look to remortgage your property.

1. If you want to take advantage of new interest rates or your old deal is coming to an end.
2. When you need to increase your loan to pay for improvements, extensiond or serious repairs.
3. When you want to change the terms of your mortgage by extending the repayment timeframe or adding another person to the mortgage for example.

Watch out for these issues when Remortgaging

• Costs of exiting your old deal plus the one off costs of the remortgage can be very expensive.
• Can you get the same benefits from your current mortgage by negotiated variations. Try and talk to the company you are with
• Beware hidden conditions that come into play in 2-4 years time such as nnew interest rates.
• Do not do anything you are uncomfortable with, chew over the offer and look gift horses in the mouth.

Is a second mortgage the same as remortgaging?

• No they vary so ask your provider to explain all the issues – they are paid to be experts so use their knowhow for your purposes.

Is a remortgage a special kind of mortgage?

• Not really you are getting a new mortgage if you swap providers and they will go through the normal issues and paperwork.
• If you are staying with the same provider then technically you are remortgaging ie swapping the terms of one mortgage for the terms of a new mortgage.

How Long WIll Interest Rates stay at 0%?

source: BBC

Interest rates could stay close to 0% for a long time, if the recession continues to worse and unemployment rises. The latest inflation forecast suggested CPI inflation will fall below the government's target and stay around 1%. Since this rate is below the governments target this will keep interest rates low.

However, despite the magnitude of the recession, government policies mean inflation could return in a couple of months. If it did interest rates would rise.

Inflationary policies include
  • Large depreciation in the Pound
  • QUantitative easing (increasing money supply)
  • Budget deficit of 12% of GDP
See also: Interest Rate predictions

95% Mortgages

Nationwide are the first major building society to bring back a 95% mortgage. This may be helpful for first time buyers who are struggling to get a deposit. However, the rate at 7.19% is far above the base rate of 2%. Also there are still expectations of falling house prices so that many who take a 95% mortgage could be left with negative equity - where the value of the house is less than the value of the outstanding mortgage.

Tesco Mortgage Deals

Tesco's have announced an entry into the mortgage sector. Previously they have avoided entering the market because they felt it was too competitive and profit margins too low. However, with the increased concentration of the mortgage sector. (the Government is effectively the second biggest mortgage lender now) and merger of Lloyds TSB / HBOS.

At the moment, Tesco's offer just a mortgage comparison service (link). But, now they feel that selling mortgages to be a good business plan. The new mortgage provider will help prevent the market get too monopolistic.

Tesco's current financial sector - Tesco Personal Finance specialises in loans, and credit cards. Tesco is one of the UK's most profitable companies.

Credit Crunch News

The credit crunch continues to cause problems for finance markets and the wider economy.
Losses from mortgage defaults caused big insurance firm AIG to require a bailout. Lehman Brothers went bankrupt, after the Fed decided they weren't important enough to bail out.

The Credit Crunch continues to cause problems for the beleaguered housing market. House price transactions have fallen to their lowest level since 1959 (link). See: Effect of credit crunch on housing market

The deteriorating housing market at least increases the hope for an interest rate cut

Because of continuing problems with the mortgage market and the economic slowdown, house prices are likely to continue to fall in 2009. However, house prices could rebound in the late 2009 - When Will house prices recover

The Fed is proposing a $700bn bailout for bad debt in America. It is being intensely scrutinised with many questioning the nature and scope of the deal. - Questions about Bailout

Banks at Risk from Collapse

Another frentic day on the stockmarket saw more banks lined up as potential victims of the credit crunch.

After the collapse of Lehmanh Brothers and rescue of HBOS by Lloyds TSB, share prices in investment banks plummeted on fears that the credit crunch could soon be hitting them.

Amongst the big losers were Goldman Sachs and Morgan Stanley.

They lost 25% and 37% respectively. The FTSE closed at its lowest level for 3 years. at 4,900.

The US government, who bailed out Freddie Mac and Fannie Mae, pumped over $80billion of money into insurance firm AIG. They didn't rescue Lehman Brothers, but, are looking closely at the financial state of Morgan Stanley. They will not want to let Morgan Stanley go under, but, are aware of the acute crisis occuring in the financial sector. With confidence on a knife edge, they will be reluctant to see another bank go under.

UK Bank Profits Rise

Banks Make Profit Despite Credit Crunch.

Despite having to write off bad debts in an unprecedented large scale, British banks have proved adept at maintaining what they do best - making profit. British banks made £3.8billion profits in last 12 months.

The Banks have used the credit crunch as an opportunity to increase bank charges on credit cards, mortgages. The result is that underlying profitability has continued to rise.

For example, HSBC, posted a 28% drop in global profits in its latest results, yet its UK personal-banking division was up 85% to £605m. For example, Over the past 12 months HSBC has increased the cost of its two-year fix for borrowers with 25% equity in their home by half a percentage point, from 6.34% in July 2007 to 6.84% . This amounts to an extra £62 a month on a £200,000 loan, or £1,505 over the two-year period.

The Royal Bank of Scotland also increased its operating profits by 9% and said it found the UK mortgage industry increasingly attractive and was trying to increase its market share here.

Times article
Top 10 British Banks
Top British Banks and Building Societies