The Good News:
I have been slugging away on getting garden chores completed as I get ready for the removal of the council garden collection service at the end of the month. I know – not really an FI thing as such – but it is a frugal living thing! Why pay £40 pa when you don’t need to? It’s free therapy too.
I am nearly there now and ticking off the items on the to-do list quite swiftly. Its been good for my sanity too as the workplace is a real bind at the moment. Basically office politics is flying around big time with anger, frustration and back-stabbing going on. This just spurs me on to achieve FI and be able to walk away from all this stupid nonsense once and for all. I was on the receiving end of anger and frustrations last week just because I was given the short straw of delivering bad news, I was presented to the firing squad and bombarded with barbed words and fury. I am alive and still with a job at the moment.
Ah,well back to the garden and watching the lovely robins that are currently residing in the trees. I have planted up the free seeds I have received from the Woodland trust and have planted up all the herbs and chillies to supply flavourings for my food creations this year. I have stored a load of chillies from last year’s plant so if this year’s crop is as big as last year I will be onto a winner.
The Bad News
The budget – I have avoided the news this week and have now just caught up by reading Monevator’s post on the budget. What I wasn’t aware of is the change in Dividend Allowance. I heard all the noise about self-employed NI but not this sneaking in. I am affected by this as I do generate £6k of dividend income outside a tax wrapper. Its basically, my old employer’s shares which I have kept. Up to now this hasn’t been much of a problem. I was accepting of the £5k limit for this tax year – but going down to £2k is not so good. I cannot sell down the shares fast enough without incurring CGT. I should have sold the shares and diversified earlier but have been nostalgically holding on to them as they have been providing a good return, 4%+ over the past 3 years as well as good double-digit growth and funding my 6 month job-free gap.
I just need to offset this with changes in other areas and sell some and move this into my SIPP. I was reluctant to do this as I cannot then access their value again unto I reach 55. That’s the government for you, they mess up the savings rates then as people move into shares, they increase the taxes on that too.
It’s like diesel vehicles – OK, ignoring the air pollution bit for a minute – years ago, diesel fuel was considerably cheaper than petrol to buy and the MPG gap was considerable so for those travelling high mileage each year, a diesel car was a no-brainer choice. Diesel cars held their value due to this too. Petrol cars were for the city types/short distance commutes and diesels for those who travelled longer distances. Move on a few years and diesels were promoted heavily to everyone and the volumes on the roads grew until every city is full of them – and being used or short distance trips. As promotion of diesel continued, the price of diesel spiralled upwards until it is now priced higher than petrol and the MPG gap has narrowed substantially. Thanks to all that recent news coverage on air pollution, anyone with a diesel car is now suffering a loss in resale value and being seen as a bad citizen. They have been stung by the hype. If you now look at buying a hybrid or electric car -watch out as that is the next spin and hype zone ready for reaping in a few years time when it has reached a good ‘market value’.
Enough of my ranting and off to do some more chores while the rain has stopped.
I have an accountant that sorts out my tax return for me and they send me a checklist that I need to fill in and documents that I need to provide.
It has taken me a while to get all the documents required with all my ex-employer sell-offs and re-sales, its not made things simple. It’s annoying when you have to chase up information from companies you have stopped working for. You cannot just go and find the department and camp out until you get the info in your hands.
I have never met my accountant face-to-face before but when I dropped off the documents, I had a chance to meet her. It was nearing the end of the office day and she was happy to chat. I told her I wasn’t working at the moment “a lady of leisure”, enjoying the summer debating what to do next.
We discussed the way the workplace is moving and how employers are now looking to move to flexible employment and how more people will be employed under fixed-term rather than permanent contracts so that employers can decide whether to renew or let you go when the contract reaches its term (without the need for redundancy or pay offs).
I said that I may be back soon to discuss setting up a company, she said that many people are moving to that working model especially in the engineering and IT sector. She could quote examples of local company ex-employees that are now working as one-person limited companies as it was the only way they could get employment. So much for the Government’s drive for decent wages….see the info on the City Link debate – “Were they employees or self-employed?” never mind the zero-hours contract discussions.
Well, sounds as though there are quite a few changes that will have an impact on my FI goals.
1) BTL – the taxation on this will be changing. I need to understand how this will affect the income generated. It may make this an unprofitable option, I need to understand the details and discuss this with someone more financially savvy. I may need to sell the property once the mortgage ‘redemption hook’ has expired so I can get my money back (minus costs) and invest that into something else. It mentions the mortgage interest relief being capped, this could make quite a difference to the overall return.
2) Share Dividends – I hold shares outside an ISA – basically because I have lots of shares from an old employer, gained through share save schemes. These earn quite a good income at the moment which is funding my current freedom, more than the £5,000 tax-free allowance proposed. Trying to sell them and move the money into tax free accounts will require me to look for a good account that allows me to hold both shares and funds in one place. My current active NISA account will only permit me to invest in funds, it does not let me buy individual shares and hold within the account. I could just sell the shares in chunks over the next few years to use the CGT & NISA annual limits and move this cash into income funds instead, better diversification.
Some things to ponder based on the announcements. I am sure there are more aspects to the budget which will impact me, including the changes to the tax thresholds which could work to my advantage. It sounds as though my Honey Pot will not earn the income returns that I require. Most of the FI calculators I have found all look at gross values and taxation is ignored. I try to factor in some of this by reducing the return rate inputs but this may not be good enough. Any good calculators out there I could use to crunch the numbers?
3) Insurance Premium Tax – well that’s a nice one. Everyone has to pay for insurance (house, car, travel, etc…). Just as premiums were starting to come down in some areas this tax hit will put them back up again. I will try and get as many of my insurance policies renewed before the increase date: Nov 2015.
4) Pension Tax relief – The government want you to pay into your pension but are capping the amount of tax relief so double taxation on pensions continues. They want to encourage people to save but are not giving the carrots that are needed to do so. It is unclear who is affected by this cap whether it is just high-earners or everyone.
Maybe going back to work will be necessary after all; to gain my full State Pension entitlement I will need to earn another 13 years of NI credits anyway – unless I can pay voluntary top-ups annually from the Honey Pot income stream.
I arrived home from work today to find a nice brown envelope from the HMRC waiting for me – oh no – what’s this?
On opening, its my new PAYE code for the next tax year – except it is WRONG!! big time wrong!!! They have decided that I am now a basic rate tax payer – which unless they have already made me semi-retired – I’m not.
My basic salary is over the higher rate tax threshold so I am quite obviously a high-rate tax payer. So I guess I am back on the phone to the HMRC for over 30mins to get them to correct the code! After the previous incident where they decided I had two salary incomes from the same employer! I dont want to underpay and then get a big bill at the end of the next tax year.
The new year has started and I have expenses on my rental property. January always seems to be an expensive month for me.
I am so glad I have this managed through an agency, I know it means I am paying more as I lose some of the income due to fees but they take all the calls and get repairs done quickly and at a good price (trade) – better than I can get privately. I have no intention of becoming a professional landlord with a portfolio of properties.
The tenant says the shower is playing up – so the agent is going to send someone round to check it out and see if its a repair or a replace. Just the typical wear and tear, I also have my tax bill to pay this month.
My accountant has sorted out the rental income/expenses and due to other issues with my tax code, I don’t have a big bill to pay for the last tax year – this one will be a different matter.
I am just hoping that the tenants are happy and renew the tenancy this year for another 12 months. That would help to stablise my income stream for the year.
I have had a good month with dividend payments this month so these expenses will be offset by dividend income to balance them out.
After last month’s ouch, things are looking at bit better this month. Just goes to show the roller coaster ride you get from investing in the stock market.
My recent share purchases (unilever and glaxo) are now showing in the black – up 5% and 3% respectively. I haven’t bought any shares this month so need to look at the market and select some to buy to add to my portfolio.
I have been concentrating on my new job and getting my old employer to pay my pension and my redundancy money.
My dividends this month have been pretty poor – i.e. 35p! It just shows that I have shares which don’t pay out every month. I did read an article once on Motley Fool about picking shares based on their dividend payment dates so that you can get a trickle of dividends every month. Not always the best policy for picking shares but possible if you want that kind of setup.
I get some dividends paid next month, December, then a good dividend payout in January – just in time to settle any Christmas spending on my credit cards.
My accountant has filled in my tax form, it is the first tax year for rental income so wanted to make sure that everything was declared correctly. So I need to just double check the numbers and get them to submit it to the HMRC.
My index trackers are just about in the black and showing a positive growth percentage, after two months of negative figures. My managed funds are still showing a better gain that the indexes but I will continue to invest in tracker funds and see what happens over the long term. My share NISA this year is showing a 16% gain at the moment. My ISAs/NISAs as a whole are showing over 7% gain so quite pleased with that as finisher for 2014.
As September begins I start to look at what shares to buy into with the remainder of the dividends I received in August. I have decided to buy some Glaxo, the price has dropped due to all that bad press coverage and they have also gone ex-dividend. It does mean that I will have to wait a while before I start getting any dividends from them but I am happy to wait as hopefully I am buying them while they are at a low price point (how do you ever know when the lowest point is reached).
Funnily enough, I had set a low threshold marker at the beginning of the year in my money app and that triggered today – so I have bought 100 shares in Glaxo today. The share has closed down – typical – but hopefully in a few months time they will have picked up and be in line for a dividend payment.
Now that I have a job offer, I can start to relax a bit and get my finances sorted and keep myself on track. I have another interview with another company this week so fingers-crossed I can get another offer.
I have contacted my accountant to start getting last year’s tax form sorted, I have my rental income to declare. Hopefully I have no additional tax to pay as I have been paying some silly values in my PAYE, so should not get a big shock tax demand.
I have a new code for this year, after my employer stuffed up the employment details, so I should receive a nice refund in next months pay. Based on my use of the HMRC PAYE calculator, I should get a tasty refund which I can utilise.
This refund will be very helpful as I am trying to sort out all those silly little jobs on the house – annual boiler service for one. I am currently painting the hall so I can look to get a new carpet fitted and finally get rid of the worn out, insipid coloured carpet.
I even won £25 on my premium bonds last month, RESULT! I have received £100 so far from my bonds this year, I know they are not the best form of investment but given the very low savings rates and the fact that any winnings are tax free, it all helps at the moment. They form part of my ‘money spread’ so that I can get to it if I need it. It’s not immediate access but I can use it to cover less immediate expenses.