FinLowe Finance

Buying Property in Abu Dhabi Six Months update

2008-04-29T06:56:00.000-07:00

Finally something to see for our money!!!! Our apartment is located on the ninth floor.

Six months ago we posted an article citing top ten reasons to buy property in Abu Dhabi. We have decided to provide an update to let you all know how things are going. All the points we made then are still valid, but considering turbulent international financial markets, I felt a new post was required.

News Flash:

Well it's hardly news but the dollar has continued its steady trend downward against the euro. The UAE dirham is pegged to the dollar so any downturn in the dollar will affect the UAE/EUR rate. Since we began paying for our apartment in May 2006, the dirham has fallen by 33% against the euro. This means our property has cost us far less than we initially anticipated.

Obviously, were we to sell or rent out the apartment, the income or profit converted back to euro would suffer the adverse exchange rate. We are hoping to hold on to the apartment for a number of years and would expect either the dollar to begin some sort of a recovery, or failing this, the GCC ( Gulf Cooperation Council) or the UAE government may be forced to depeg from the dollar as inflation soars in the region.

Our experience so far has been in the most part positive. We purchased through First Gulf Bank and as such have some degree of additional security through the bank's reputation. However, problems still exist, and while we have received receipts and confirmation for all our payments and a purchase agreement, as yet no final contract is available. The reason we are being given is due to the new freehold law which has delayed the issue of contracts. While this would seem incredibly unusual in western property markets it's par for the course in the UAE. Again if it's high reward you are after (as we are) there will always be considerable risks associated.

The worst stories emerging from the Dubai market concern properties that have not been built, as rising construction costs make them unprofitable for the construction companies. In these situations investors were given back their money plus a modest return on investment (6%-8%), and while far from ideal this does give some degree of security on investment. The majority of people appear to have a positive experience of investing in Dubai and one would expect the same reaction from Abu Dhabi.

The demand for rental property in Abu Dhabi has increased at an alarming rate, so much so the government has had to introduce rental caps as the market struggles to cope with shortage of supply. Rental yield in 2007 exceeded 20% in some cases, and are expected to grow further in 2008.

Capital growth has steadily increased with a secondary market beginning to become more relevant.

For further information Arabian Business news has produced an excellent survey of property in the area.

March 2008

2008-04-27T07:36:00.000-07:00

Evaluate your habitual spending patterns. A lot of our spending is a daily, often unnecessary habit and could be easily reduced.

If you buy a takeaway coffee everyday, why not invest in a coffee machine?Try taking your own lunch to work - if a shop bought lunch costs on average £7 (EUR10), by making lunch at home you could save around £25 (EUR35) a week!

This could buy you a nice meal out at the weekend or, if you're feeling really virtuous, you could have £1,250 (EUR1,750) in your savings by the end of the year.

Great Business Show

2008-04-03T00:54:00.000-07:00

The link below is for the Sunday Business show which is on today fm every Sunday. The show comments on the latest news from the world of finance in an intelligient humourous manner. Dolmen stockbrokers also give some investment advice which is quite useful, although it must be remembered that their clients are some of Ireland's largest listed companies so their advice is not 100% impartial!

Enjoy the Sunday Business show.

Brits get hit on the Continent!

2008-03-20T05:43:00.000-07:00

It wasn't until we reviewed our bank statement after a recent wedding in the UK that we realised just how weak the British Pound is against the Euro. Great for us living in Luxembourg with debts in the UK, but for any of the 5 million Britons planning to escape the never ending winter in Blighty they can expect a bit of a shock if they venture to Euroland this Easter.

One Euro will now cost 81p compared to just 70p this time last year. That means your holiday will be nearly 16% more expensive than in 2007, assuming Euro prices have stayed the same.

Don't be put off

To keep costs down, try and avoid paying any commission when buying your currency.

Lloyds TSB, the Post Office and Marks & Spencer are among the high street options that don't charge, but it's worth checking and comparing their exchange rates to make sure you get the best deal. You may find that the rates offered by 'Commission free' deals are so bad you might be better off paying the commission for a better rate!

Travelex promises to offer the best rate to those buying online or refund the difference, and there's no commission charged http://www.travelex.co.uk/uk/.

Consider buying online. Most online companies do not charge commission and will deliver to your home, your work, or you can collect your currency at the airport.

Buy high/Sell low

This is a catchy phrase that's useful when determining which of the prices quoted by an exchange dealer is the one you will get. The general rule is that you will get the worst option!

Take for instance the following rates that you might expect to be quoted when buying currency:

"We sell: GBPEUR 0.80"
"We buy: GBPEUR 0.75"

From your point of view however:

If you are buying Euro you will have to buy at the highest price ie you'll pay 80p per Euro

If you are selling Euro you will have to sell at the lowest price ie you'll get 75p per Euro

Thus, if you bought EUR 1,000 it would cost you GBP 800, and if you sold them straight back again you would only get GBP 750.

Commission

Commission may be charged in addition at a flat rate of a graded rate. This is worth considering, because if you are exchanging large sums of money a flat rate may be a better option.

Also, if you're travelling with a group, consider making one combined currency purchase to minimise the additional charges.

Come prepared

Don't leave buying your currency until you get to the airport, you won't get the best rate and you will pay commission. Not only that, but they may not have the amount (or even any) or the currency you want.

Mix and match

It's best to take a mixture of cash, debit and credit cards when going on holiday. Most cards add on 2.75% for use abroad and you may find yourself paying as much as £4.75 for every £100 withdrawn, so limit the number of times you take cash out and don't withdraw small amounts as flat rates may apply.

Cards are of course a smart option to limit the risk of losing cash - make sure you get travel insurance to soften the blow of this unpleasant situation.

Bon voyage

You just have to look at the headlines to know how fluid and unpredictable the exchange markets can be. There's nothing we can do about it, so I say pack your bags and get away from it all, just bear in mind the above tips to help keep costs down as much as possible.

Enjoy.........

Rules of work; How to get that pay rise

2008-03-12T07:33:00.000-07:00

While not strictly a finance issue, many people often wonder why they are not getting their just rewards at work. The following points are taken from a book called ‘The Rules of Work’ by Richard Templar.

1. Walk the talk, get your work noticed.

2. Know that you're being judged at all times.

3. Set objectives.

4. If you can’t say anything nice, shut up.

5. Look after yourself, never lie, keep records.

6. Blend in, know the company culture.

7. Act one step ahead. Talk using the ‘we’ word and not the ‘I’ word.

8. Cultivate diplomacy.

9. Know the system and milk it.

10. Handle the opposition

February 2008

2008-03-10T13:19:00.000-07:00

Check the interest rate you are paying on your mortgage. Be certain you are getting the lowest rate from your bank and if not shop around. Faced with increased competition many banks now have business continuity departments which aim to retain customers, often when faced with losing a customer they will offer a better rate. CHECK YOUR RATE!

Risk Averse?? Pigs or Parrots

2008-02-20T08:32:00.000-08:00

Greetings Blogger,

At the moment we are just getting our house in order for a prosperous new year. This is the time of the year when accountants are faced with auditors with the inevitable increase in workload. This time every year I have a good think about my career and future and try and get things in perspective for the next 12 months.

Anyway enough serious talk today. I recently came across a great comment on an Irish website http://www.askaboutmoney.com/ which I highly recommend for impartial financial advice. While explaining about risk the poster had this to say about investment:

In 12 months time imagine your portfolio down 40K. Sick as a parrot I would say - out of 10 how many parrots?
On the other hand, and no more likely, you may be up 40K - Happy as a pig... Out of 10 how many pigs?
If more parrots than pigs then you are short term risk averse and better off investing your money in a high interest deposit account- these days the depositor is king - appreciate your power!!
If no parrots or pigs then you genuinely have a long term view - go for your choice of mixed investments.

Not only is this very funny but really highlights the point that investment decisions are not merely determined by current or even future market conditions but rather a whole range of issues.

January 2008

2008-02-06T05:20:00.000-08:00

Transfer £40 (EUR 60) into a high interest rate savings account each month and you'll have enough money to head off on holiday next Christmas.£480 (EUR720) plus interest could mean you spend the next festive season skiing in Switzerland or sunbathing in the Seychelles......

Sole Traders - You're Not Alone

2008-01-23T04:18:00.000-08:00

As the deadline draws near for filing self assessed tax returns in the UK, and only days after a family member secured her first order for her new business, I thought it might be useful to summarise the key requirements of a sole trader.

For many, the very thought of tax returns and record keeping can be daunting enough to put them off following their dreams, but it's important for people to realise that there are plenty of ways to get answers to your questions and that with a bit of organisation you can easily manage the financial aspects of your business.

Registration

You are required to inform HMR&C when you have become self-employed within 3 months of starting your new business. You will be asked to provide the details laid out in form CWF1 either over the phone (0845 9 15 45 15) or by post.

Filing Requirements

Once registered, you will be required to file an annual self-assessed tax return. The tax year runs from April to the following March ie. the current tax year runs from 01/04/2007-31/03/2008 (2007/08).

If you were registered before the end of the tax year, you have to file the return no later than the end of January following the tax year, in this case 31/01/2009. If however, you wish to simply submit your documentation and ask the revenue to do your calculation for you, the deadline is the end of September in this case 30/09/2008.

While this may sound like a long way off, I would strongly advise tackling this important step as soon as possible while events are still fresh in your mind and before the pile of invoices gets even bigger!

Don't forget, a late filing will result in a fine of GBP100.

National Insurance Contributions

As a self-employed person, you may be required to pay two different types of NIC:

(i) Class 2:

This is a fixed weekly amount that can be paid monthly or quarterly through a direct debit. The current amount is GBP2.20 and this will go up to GBP2.30 from April 2008.

NB - if you earn less than GBP4,635 in this tax year (GBP 4,825 in the next tax year), you are entitled to apply for a Small Earnings Exception (SEE). See form CF10. However, be mindful that any gaps in your contributions could reduce the pension amounts you are entitled to upon retirement - see blog entry "Bridging The Gap".

(ii) Class 4:

This is a variable that is determined by the amount of annual taxable profit you make.

If you make less than GBP5,225 in this tax year (GBP5,435 in the next tax year), you are exempt from this tax.
You must pay 8% on taxable profits between GBP5,225 - GBP34,840 in this tax year (between GBP 5,435 - GBP40,040 in the next tax year).

Example: if you make a taxable profit of GBP 20,000 this year, you will pay 8%*(20,000-5,225) = GBP1,182.

Any taxable profits above GBP34,840 (GBP40,040) are taxed at 1% for class 4 contributions.

VAT

For VAT requirements see blog entry "VAT as easy as ABC"

Keeping Records

As a sole trader, you are now responsible for your tax returns and the basis upon which your tax liability is calculated.

To ensure you pay the correct amount of tax and don't risk paying fines, it is essential that you keep clear and well organised records of everything occurring in your business.

A good approach is to set up a file with the following sections, where you should file documents as you receive them in chronological order:

Correspondence and forms sent to/from HMR&C
Bank statements
Receipts for business expenses
Invoices received
Invoices issued
Business bills - electricity/telephone/heating etc

I would also advise setting up an excel spreadsheet with a separate worksheet for income and expenses, where you should input the details of each invoice and receipt. This will make filing your annual return a much less stressful experience.

Records should be kept up to 5 years after you have filed the related tax return, you never know when you might be asked to justify something you put in an old return.

Additional Support

For more information, take a look at the excellent guide provided by HMR&C - "Working for yourself - the guide" .

All that remains to be said is good luck with your new ventures and don't be afraid to ask for help...

Where has all my money gone?

2008-01-14T06:07:00.000-08:00

We are now half way through what is widely regarded as the most depressing month of the year, January! Personally I find January a great time for rebirth, re-growth and renewal. To this end I have decided to take my own financial advice and keep a record of every cent I have spent since the start of the month. Now I agree this is hardly the most exciting way to spend those long, dark January nights when all you can think about is the hot water bottle and some comfort TV, but bear with me.

For the last number of years I have attempted to get good control and proper management of my finances. My motto has always been to try and make the money I work so hard to earn work harder for me. I have kept reasonable control on my monthly spending, but just keeping a record of everything I have spent since the start of the month has been a revelation. Two things really stand out:

1. You spend less: The simple process of recording everything you spend really makes you tighten your spending. It’s totally psychological but if you have to record everything you buy you tend to really consider all purchases. At the weekend I was about to buy yet another work shirt for EUR 55 and then I just asked myself, James you already have ten shirts for work why the hell do you need more! Having to write things down acts as a value check on your spending.

2. You identify your weaknesses: For the longer term this is probably more significant. Certain patterns emerge regarding your spending. For example I realized that I spend far more at the weekend than I thought. I have been kidding myself that a Saturday night out cost EUR50 when in actual fact I withdrew 50 at 9.30pm and another 50 at 1.30am!!!

Understanding where your money is going and where you can make real long term saving will greatly help improve your financial health in 2008.

So go ahead, start today, write down every single purchase for 1 month, I guarantee you at the end you will have saved money but more importantly will start to get a real handle on where your money is going. If it worked for me, it can work for you.

Interesting Quote!!

2008-01-07T05:41:00.000-08:00

I picked up this quote from the Sunday Business Post Online, and while I agree with the sentiment, as an accountant I can hardly claim to be a sex guru!!!

‘‘Money management is like sex,” according to Gibbons Burke, a US technical analyst. ‘‘Everyone does it one way or another, but not many like to talk about it and some do it better than others. But there’s a big difference: sex sites on the web proliferate, while sites devoted to the art and science of money management are somewhat difficult to find.”

Mr Burke clearly hasn't logged onto FinLowe Finance yet!!

Financial Makeover Part Two

2008-01-03T09:19:00.000-08:00

I hope all our keen bloggers have completed their homework and now have a more realistic view of their finances.

Now we move onto the second step of the budgeting process. Allocating your income.

As we pointed out in the previous post, our philosophy is to treat personal finances the same way the professionals treat theirs. By saving and managing your money effectively over a twelve month period and by planning expenditure for the following twelve months, you can avoid credit card and other high interest debt and ensure that you can pay your bills on time and still afford that holiday in the sun.

Short term expenses: These are your regular monthly bills: mortgage/rent, phone, shopping, electricity, gym membership, car repayment, any loan repayment etc. These expenses will be paid monthly directly from your current account.

Medium term/long term expenses: These expenses, such as car insurance, house insurance, summer holiday, any planned home improvements, estimated doctor/ dentist visits, clothes, should be totalled for the entire year and divided by the number of months remaining in the year. This calculated amount should then be transferred from your current account into a “savings 1” account which you should set up through your bank.

By setting up a savings account where you have instant access to your funds, you will benefit from a higher interest rate on cash you will have transferred there during the year. As these bills fall due you can then pay them from this account.

Of course not all annual bills fall due in December, therefore you will need to plan the amount to be transferred based on when bills fall due i.e. should you require 1000 for your car insurance in May you would need to save 200 a month towards this.

Discretionary income and investment: The remaining amount should be transferred to a “savings 2” account. This account can be investment in pensions/fund/ property and should represent your long-term savings/retirement/investment plan.

It is very important that all short-term debt such as credit cards, personal loans, car loans be repaid BEFORE you begin investing. Remember the bank will always pay you less interest than it's charging you, that's why they make massive annual profits!!!

Starting this process as soon as possible will help you to get far greater control of your finances and hopefully create good financial habits that will ensure you continue in good financial health throughout 2008 and beyond.

Financial Makeover - New Year, New You

2007-12-30T07:51:00.000-08:00

Everyone knows that Christmas can be tough on your finances. Aside from all the presents and socialising, many people’s household budgets go out the window over the festive period, leaving them wondering what they spent all that money on. But all is not lost – the New Year is a great time to makeover your finances and plan for the year ahead so that you can manage your money, sort out your debts and meet your financial goals in 2008.

Start budgeting:

Decide now that 2008 will be the year your finances get in shape. During the next few weeks we will be providing numerous ideas and tips to help you get your finances in line.

Our philosophy is that personal financial management should take its lead from the professionals. In business, financial management is not simply about managing day to day cash flow but rather monthly, quarterly and annual budgeting; setting aside sufficient cash to ensure a year of no surprises where all income and expenditure has been foreseen with a contingency set aside for any unexpected bills.

People effectively "cash account" with the money they earn. They concentrate simply on the short term, pay the rent/mortgage, pay the car repayments, the electricity and other utilities and then anything remaining is simply discretionary income. They feel they have the safety net of their overdraft or their credit card should any big bills come in. This is a naive and potentially risky way of dealing with your finances.

Our approach, which takes its lead from big business, is to plan for the next twelve months setting aside sufficient funds each month to cover those annual bills as well as budgeting effectively on a day-to-day basis.

First three steps

Identify the following:

1. How much you are earning
2. How much you are spending
3. What you are spending your money on

It is vital that you are honest with yourself even if you discover you spend 50% of your income on pick and mix! Avoid the mistake of overestimating your income and underestimating your expenditure.

Once you identify where your money is going you can see where you might need to make adjustments so you can achieve your goal of a year with healthy personal finances.

So your homework for the next few days is to sit down, take a page of A4 paper draw a line down the middle. On one side list any and all sources of income and on the other all expenditure. The idea is to include as much detail as possible. Include day to day spending, mortgage/rent bills as well as annual items such as car insurance, gym membership and any other expenditure you can foresee for the next twelve months. For items that are difficult to value such as weekly shopping bills etc., estimate them as accurately as you can.

This cathartic process is a major step on the road to financial recovery and good health.

December 2007

2007-12-29T04:53:00.000-08:00

When you get your December salary, transfer part of it to a seperate account in anticipation for the long month of January. Many people get an early salary in December and then nothing until the end of January, with the joy of overstretched credit card bills to pay off along the way.

Festive Finance Tips

2007-12-05T15:50:00.000-08:00

Now I'm a sucker for seasonal traditions and annoying Christmas songs but when the time comes to take down the tree and recycle the Christmas cards, my New Year's hangover is always heightened by the sheer dread of looking at the damage done to my bank account during the giddy days of December.

To help people start the year on a more positive note, here are a few festive finance tips to keep the seasonal spending under control.

Set a budget for different spending areas before you start your Christmas shopping. Allocate a limit to the amount you spend on each person on your list and be strict with yourself, think about how many of last year's Christmas presents become this year's recycling.
Add up how much you have allocated to each person and to the food shopping and make sure it's a manageable amount. Be honest with yourself, denial leads to more debt!
When it comes to the dreaded supermarket shop, try and buy as much as you can in the weeks leading up to Christmas (providing you have a good hiding place from the hungry hoards). By breaking the bill up over several weeks, there will be less of a shock when you do the 'big shop'.
When you get your December salary, transfer part of it to a seperate account in anticipation for the long month of January. Many people get an early salary in December and then nothing until the end of January, with the joy of overstretched credit card bills to pay off along the way.
Take care when buying gifts from outside of Europe. While the prices quoted on the internet may seem remarkably cheap and the weakness of the US Dollar very favourable, there is the unmentioned matter of customs and excise duty and import VAT to be considered. For specific details on duty charges, check out the rules on HMR&Cs website.
When buying gifts, make sure you keep the receipts in case there is a problem with the goods and they need to be returned. Check that goods are in working order as soon as possible as there may be a restricted return period.

On that note, I need to do some wrapping, so I'd like to take this opportunity to wish all our bloggers a very HAPPY CHRISTMAS and a prosperous New Year.........

November 2007

2007-12-02T13:05:00.000-08:00

Write a Will

Here are 5 reasons why you should have a will written.

1) If you die without a will (known as dying “intestate”), there are certain rules which dictate how your money, property or possessions should be disposed of. This may not be the way that you would wish your money and possessions to be distributed.

2) Unmarried couples or partners who have not entered into a civil partnership cannot inherit from each other unless there is a will, so if one of the couple was to die, the other could be left in serious financial difficulties.

3) If you have children, you will need to make a will so that arrangements for the children can be made if either one or both parents die.

4) It could be possible to reduce the amount of inheritance you have to pay to the taxman by using a will.

5) If your circumstances have changed, it is important that you make a will to ensure that your money and possessions are distributed according to your wishes. If you are married or enter into a civil partnership, this will make any previous will you have made invalid.

Bank of Ireland Update

2007-11-26T01:30:00.000-08:00

Just a quick word about our tip last week.

For those who took our advice congratulations, 22% return in just over two weeks, up to EUR 10.95 today. I still believe it's good value under EUR 10.50 just be careful of overpaying on commissions. This is the first time I have bought shares and paid EUR 72 commission on the trade which is very high. For BOI customers, the easiest method would be through your own branch.

I have looked into purchasing shares online through Irish stockbrokers and the best value appears to be sharewatch.

Another very good article about transaction costs of trading is in the Irish Independent.

Sharewatch also provides a price comparison with other Irish stockbrokers including Davys, Goodbodys and Dolmen.

Goodbody online provide some very useful daily financial advice free in their morning meeting wrapup section.

My Investment Tip

2007-11-22T10:12:00.000-08:00

After a little dose of doom and gloom, we decided we'd better brighten up the dark days of November with a little investment tip. So far my favourite investment has been property in Abu Dhabi, see post 3rd October. This is working out really well for us; as the dollar continues to fall our investment becomes cheaper and cheaper. Hopefully, by the time it comes to selling in 2009/10, a strengthening dollar will further add to our return.

Our most recent punt is on the stock markets and more specifically the Irish index of shares. We have recently bought 400 shares in The Bank of Ireland @ €9.01. We feel this represents great value. Bank of Ireland (BOI) shares have fallen dramatically in value since highs of €18.83. A 50% decline in share value hardly represents a strongly performing company, but bear with me.

The steady decline in share price has been largely caused by the subprime market volatility and its knock on funding implications for banks. This funding issue is not as significant for Irish banks as they have largely avoided the subprime issue, and also do not require the same level of funding from international capital markets as many of its US and UK competitors. BOI is essentially a profitable bank with profits of over EUR 1 billion forecast for six months to September 2007. Profits for the second half of the year have been revised downward but are still considerable. Concerns over the Irish housing market slowdown have added to the fall in share price.

We purchased a modest holding of 400 shares at EUR 9 yesterday. Coincidentally UBS Fund Services acquired a 3% shareholding in the Bank and many stock brokers have moved from a neutral position to a buy position on the share.

Our main motivation is the tantalizing prospect of making some money off the back of the banks whose increased charges and fees continue to irritate us on a daily basis!

We plan to hold the shares until about March, April 2008 after the BOI year end. I must stress that this is pure speculation and is a high risk strategy, not advisable unless you can afford to lose your investment. We would strongly advise against borrowing to fund such a short term investment. Most advisers would argue that it is not possible to make considerable gains over such a short period of time, we will keep you posted.

Will You or Won't You?

2007-11-19T04:52:00.000-08:00

Where there's a will there's a way

Moving on from James' obsession with murder to the more cheery topic of wills...... As seen in November's Tip of The Month, there are many valid reasons why you should set up a will. While this may seem a little depressing and instill the fear of excessive solicitor fees, I imagine these things are far easier to communicate to a solicitor in our lifetime than to a psychic after death.

I can understand the temptation to ignore the matter but it seems crazy not to take the time to write down how you would like your worldly goods, that you've worked so hard to obtain, to be distributed.

Having said that, while there are formal requirements when it comes to writing a will, if your circumstances are straightforward, there is no actual need to use a solicitor. However, as the rules are quite specific and it is so crucial that the document has the effect you intend, it might be a good idea.

Choosing a Solicitor

We would recommend that you contact a few local solicitors to compare prices, bearing in mind that the cost will reflect the complexity of your circumstances. Realistically tho, you'll be looking at around £50 to £300 (EUR75 to EUR450).

It might also be worth checking your insurance policies/trade union rights as you may be entitled to free legal advice in relation to writing your will.

If you are determined to avoid the use of a professional, there are some great online software based options. Two great options are online legal website 'Lawpack' that offers both online will writing and software downloads from £14.49, and 'Desktop Lawyer' who provide a variety of wills and other documents.

Prior to meeting with your solicitor, consider the following points and list the key facts relating to your circumstances to reduce the time required on your will & therefore the amount they can charge!

Content

Things you will need to consider when drawing up your will include the following:

How much money and what property and possessions do you own? For example, property, savings, occupational and personal pensions, insurance policies, bank and building society accounts, shares.

Who you want to benefit from your will? You should make a list of all the people to whom you wish to leave money or possessions. These people are known as beneficiaries. You also needs to consider whether you wish to leave any money to charity.

Who should look after any children under 18?

Who is going to sort out the estate and carry out your wishes as set out in the will? These people are known as the executors.

NB. An executor takes on a huge amount of work and responsibility in the form of dealing with all the paperwork and paying all outstanding debts, taxes, funeral and admin costs out of the assets you leave behind. They will also have to execute any financial transfers/gifts that you stipulate in your will. Therefore, it might be courteous to ask the person you have in mind or else appoint a professional!

Requirements for a valid will

To ensure a will is a valid legal document, it must be:-

In writing
Written by some who is 18 or over
Made voluntarily and without pressure from any other person
Made by a person who is of sound mind. This means the person must be fully aware of the nature of the document being written or signed and aware of the property and the identity of the people who may inherit
Signed by the person making the will in the presence of two witnesses
Signed by the two witnesses, in the presence of the person making the will, after it has been signed. A witness or the married partner of a witness cannot benefit from a will. If a witness is a beneficiary (or the married partner or civil partner of a beneficiary), the will is still valid but the beneficiary will not be able to inherit under the will.

NB. Although it will be legally valid even if it is not dated, it is advisable to ensure that the will also includes the date on which it is signed.

Storing your will

Once a will has been made, it should be kept in a safe place and other documents should not be attached to it.

There are a number of places where you can keep a will:-

At home
With a solicitor
At a bank
At the Principal Registry of the Family Division of the High Court, a District Registry or Probate Sub-Registry for safe keeping.

If you wish to deposit a will in this way you should visit the District Registry or Probate Sub-Registry or write to The Probate Department.

Changing a will

If your circumstances change after writing your will (ie marriage/divorce/children), you will need to amend the original document. To do this, you must either make a 'codicil' (supplementary document detailing alterations for simple changes) to the original will or write a new will. If a new will is created it will supercede all previous versions.

We highly recommend that you take action and resolve your will asap. A bit of effort now will save an enormous amount of conflict and stress down the line.

Just a quick update, there is an great new website available for our Irish readers www.wills.ie, very easy to use

2007-11-19T04:51:00.001-08:00

October 2007

2007-11-19T04:50:00.000-08:00

Set up a monthly direct debit from your current account to cover the balance on your credit card. This will allow you to monitor your spending and eliminate any nasty surprises. An awareness of your financial position is vital no matter how unappealing that may be!

Murder on the Dance Floor

2007-11-17T08:44:00.000-08:00

Hello all. Sorry about the lack of posts recently, Beth & I have been really busy at work. Both of us work in the financial services industry and have been so busy as financial markets continue to experience severe turbulence.

A recent article in the Financial Times caught my eye. The article was about Charles Prince who was the former CEO of Citigroup, the world's largest financial services company with assets of more than USD 2.3 trillion and 332,000 staff around the world!!

Prince was quoted in July shortly before the collapse of the subprime market as saying;

"When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance. We're still dancing". Unfortunately for Prince and world financial markets, the DJ had played too many tunes and the club was well and truly closed."

However, this got me thinking about a nightclub as an analogy of our attitude to personal investment. Historically, nightclubs are very fickle businesses opening and closing with regularity, often under new management. The most important factors for success are not only providing what the clubber wants, but also maintaining that element of chic or cutting edge cool. Initially the "in" crowd will come to a new club, glamorising it. As word goes around, the club develops a reputation as THE place to be. It becomes more and more popular, with everyone wanting to get in. So much so that if "your name's not down you're not coming in". Management become increasingly aware of their 'cash cow' and prices go up, marketing increases, top DJs are brought in and it's champagne and VIP rooms all around.

This is the point where the original hip crowd realise that what made the club cool in the first place has all but disappeared. They look at the dance floor with ladies dancing around their handbags and guys checking them out in their Ralph Lauren suits and head for the door. Initially nobody notices. The DJ plays on. The barman passes the waitress another magnum of Cristal Champagne. Over the weekends however, the paparazzi stop showing up, the queues begin to thin and a dated feel begins to enter the club every Saturday night. After a few months, all but the last stragglers have moved on leaving them to pick up the tab.

Personal investment schemes can follow a similar pattern. From Spanish property, to buying to let, to investing in subprime mortgage products. We as private investors are usually the last to hear about the best new deal and are often the ones left footing the bill. This is not to discourage anyone from investing, but always be aware that even the top professionals in the world get it wrong .......... regularly. They are lucky enough not to be investing their own money, you are not.

And what of our friend Mr Prince? Well, investors called for his head following the subprime collapse and he was forced to resign. Beware, its murder on the dance floor.

UK VAT - As easy as ABC

2007-10-26T08:30:00.000-07:00

We were recently asked by a friend about the basic concepts of VAT and how it affected her as someone who is both an employee and self-employed. As explained below, this is a tax applied to business transactions rather than employment income so it is important to distinguish the nature of your income when applying the VAT principles.

What is VAT?

Value Added Tax (VAT) is a tax charged on most business transactions made in the UK or the Isle of Man.

It is also charged on goods, and some services, imported from places outside the UK (special rules apply for EU and non-EU imports)

UK and Isle of Man

All goods and services that qualify for VAT are called ‘taxable supplies’.

Once registered for VAT, you must charge VAT on all your taxable supplies, no matter how diverse.

The value of these supplies is called your ‘taxable turnover’.

Examples of taxable supplies include:

• Selling new and used goods
• Renting and hiring out goods
• Providing a service, ie. hairdressing or decorating

Certain services are ‘exempt’ from VAT. These include loans of money, insurance, certain types of education and training and some property transactions (selling, leasing and letting land and buildings, but not garages, parking spaces, hotel or holiday accommodation). Supplies that are exempt from VAT do not form part of your taxable turnover.

Rates of VAT in the UK

• 17.5 per cent (standard-rate)
• 5 per cent (reduced rate)
• 0 per cent (zero-rate).

All goods and services which qualify for VAT at the standard, reduced or zero-rate are called ‘taxable supplies’, whether you are registered for VAT or not.

Registration Requirements

You must register for VAT if:

At the end of any month the total value of the taxable supplies you have made in the past twelve months or less is more than the current threshold - £64,000 or

At any time you have reasonable grounds to expect that the value of your taxable supplies will be more than the current registration threshold - £64,000 - in the next thirty days alone.

(Value of taxable supplies = Taxable turnover = Total income from the sale of taxable supplies and NOT just the profit made.)

To register for VAT you must complete form VAT1 which you must send to HMRC within 30 days of any of the above. You will then receive a certificate of registration (form VAT4) detailing the effective date of registration along with your registration number.

Registration can be done online on the HMR&C government website.

Voluntary Registration

There are advantages and disadvantages to registering voluntarily. Before you apply weigh up carefully whether it will benefit you.

Benefits include :

Increased credibility for your business and,
If your business makes standard or zero-rated supplies, you’ll be able to claim back input VAT that you have paid.

However, once registered for VAT, you'll have to:

Account for output tax on all your taxable supplies
Keep proper VAT records and accounts
Send in VAT regular returns
Charge VAT on all supplies that could reduced your competitive edge in terms of prices.

Rule Breakers

If you don’t register for VAT at the correct time you will still be liable to pay VAT on taxable supplies and you are likely to pay penalties for late payment.

VAT Return

If you are registered for VAT, you are basically acting as a tax collecter on behalf of the revenue office. The return you file (normally every 3 months) simply compares the amount of VAT you have received (Output VAT) to the amount of VAT you have paid (Input VAT) and the difference is settled with the tax man. The return must be filed no later than the last day of the month following the period being reported.

Input VAT is the VAT that you pay out to your suppliers for goods and services that you purchase for your business, ie. the VAT added to the invoices you receive IN the post.

Output VAT is the term used to describe the VAT you charge on your sales of goods or services, ie. what you add on the invoices you send OUT.

VAT returns can also be done electronically

Exempt/Zero-Rated Supplies

If the only services you supply are exempt supplies, you can’t normally be registered for VAT.

If you are registered for VAT and have some exempt supplies you may not be able to get all your input VAT back.

If you only supply goods that are zero-rated, you may not have to register for VAT even if your taxable turnover goes above the registration threshold, but you do have to tell HM Revenue & Customs (HMRC) first and apply to be ‘exempt from registration’.

Registration might be worth considering if you supply zero-rated supplies and have paid a lot of VAT in relation to business costs, as you will be able to reclaim the VAT you have paid.

Deregistration

If you no longer qualify for compulsory registration and want to deregister, it is compulsory to inform HMR&C.

This is just a basic overview. For more information call the National Advice Service 0845 010 9000 or drop us a line.

Freehold V Leasehold

2007-10-24T13:16:00.000-07:00

There are two main legal categories of land and property ownership.

Freehold

Purchasing a freehold property means that you are the full owner for an unlimited duration. As the freeholder you will have full responsibility for the maintenance and repairs of the property. Subject to law and planning restrictions, you can do what you like to and on your premises.

Leasehold

Purchasing a leasehold property means that you own the property for as long as is specified in the terms of the lease. You are granted the right to live there by the freeholder. At the end of the lease the property becomes the possession of the freeholder once again. In essence you are simply paying for the right to occupy a portion of a building for a given length of time.

Many leases are originally granted for up to 999 years, but existing leases on properties are usually shorter. The majority of leasehold properties are flats or commercial property, although some houses are leasehold.

The lease stipulates who is responsible for maintaining and repairing different parts of the property and any conditions you must meet as a resident. Check these if you are considering buying a leasehold. You must also pay a ground rent to the the freeholder, usually a small amount paid each year. Your solicitor should check that the seller is up to date with ground rent payments before you sign the contract.

You should not buy a property with a lease of less than 60 years, and mortgage lenders are very unlikely to lend for a lease as short as this. Lenders normally want at least 20 years left on the lease after the end of the mortgage term. As a leaseholder you have the right to extend the lease for 90 years or even to buy the freehold if certain criteria are met, though the application process is expensive and takes a long time. Contact the Leasehold Enfranchisement Advisory Service for more information.

Bank accounts - What to look for

2007-10-20T09:36:00.000-07:00

With the DIY phenomenon that has swept the nation, stashing cash under the floorboards just isn't an option in this day and age. So thankfully we're incredibly spoilt when it comes to choosing a suitable bank account. Be it simply for safekeeping your hard earned cash or for providing flexible international transfers for your new business, you need to decide the type of account you're looking for. The standard accounts are:

Current account - Standard account for everyday use.

Savings account - Less flexible, higher interest account for money we can afford to put aside.

Student account - Only available to registered students and likely to offer reduced interest charges on overdrafts and other incentives.

Business account - Suitable for regular transactions regardless of the size of your business.

While the specifics will vary depending on the requirement of your account, the standard services would include the following options:

Interest on balance
Overdraft facility
Internet/telephone banking
Cash card/Debit card/Cheque card/Credit card
Direct debits & standing orders
Automatic transfers national & international

So how on earth do we decide?

Some of the key criteria that you should consider are detailed below. You need to check out the terms of available bank accounts and determine which one is best suited to your needs. A great site for comparing accounts is moneysupermarket.com . Check it out, bearing in mind the following:

(i) Bank Interest

Ever changing interest rates can have a huge impact on your bank balance. If you're looking to build up some savings, you want an account that offers the highest rate of interest possible. One of the pay-offs of a high interest savings account however could be flexibility in terms of withdrawals & payments, so consider how you intend to use the account day to day.

If there's a chance you'll need to rely on an overdraft facility, you must check the interest rate you'll be charged as it will always be higher than the rate the bank would ever pay you on your savings.

The rates a bank account will quote are AER for positive bank balances and APR for balances in the red (see definitions below).

(ii) Overdraft facility

An overdraft is a very handy facility and is a cheap option in terms of short-term, low level borrowings. However, it can also become a slippery slope, and it's often very difficult to get back into a positive balance once you become accustomed to spending the bank's money! Take control of the limit set on your account. Set it to a realistic level that you can control, try & treat it as an emergency money pot.

Be very careful not to exceed your limit. Bank charges are particularly harsh on borrowers pushing their luck, in the region of £30 (EUR50) a transaction.

(iii) Bank charges

Charges are often a flat rate amount. You could be subject to charges on withdrawals, electronic payments and breaches of overdraft facilities. Some banks will simply charge a monthly amount as a service fee, so check the details and consider which account will result in minimal fees for you.

(iv) Cash card/Debit card/Cheque card/Credit card

A cash card allows you to draw money from Automated Teller Machines (ATMs or cash machines). Many banks set a daily limit as to how much you can take out, even if your account contains funds.

A debit card allows you to pay for goods at the point of purchase, providing there's money in your current account. Some shops may also provide 'cashback' when making your purchase.

A cheque guarantee card is used to back up any cheque you write - usually up to the value of £50-£100 (EUR 70-EUR 130).

A credit card allows you to pay for things on credit ie. buy now, pay later. You will receive a seperate statement for this facility and need to arrange repayment from your current account regularly as you will pay for the pleasure, as you would if you took out a loan.

(v) Accessibility

Check out how many cash points there are in your area and the availability of customer support services. There's nothing worse than feeling abandoned by your service provider.

(vi) Electronic banking

Internet banking is the way to go if you actively use your account. You can keep a close eye on your balance and the transactions being processed, and arrange for electronic payments including direct debits (regular payments) and standing orders (fixed regular payments).

Most banking is virtual these days and you rarely actually need to carry cash when you can do it all on the Internet or with bank cards.

Warning

Watch out for promotional offers, especially on business bank accounts. They are designed to attract custom and you need to check what the true terms will be after the promotions end.

Definitions

AER - Annual Equivalent Rate

The interest received on a savings account is referred to as the Annual Equivalent Rate (AER). Any interest rate quoted as an AER will only be accurate if you do not withdraw money from your account during the year in question. The reason for this is that the AER illustrates what the interest would be if the interest was paid and compounded (added to the interest from previous payouts). Therefore, any withdrawals that you make from the account can affect the rate you will receive at the end of the year.

Don't forget that if you're a UK taxpayer you will also need to deduct 20% from any interest calculation as the interest you earn is a taxable source of income. Most banks and building societies will quote the interest a gross amount (before tax is taken), and will pay the interest into your account as a net amount (after tax is taken).

APR - Annual Percentage Rate

Any borrowings that you may have will charge you interest, instead of paying you interest. The interest that you are expected to pay is often referred to as the Annual Percentage Rate (APR). The APR is the rate of interest that a lender is required by law to quote, and it represents the true cost of the borrowing. If you are looking to take out any form of borrowing, then you should try and get the lowest APR you can, as this will be the total amount of interest that you are expected to repay over the course of your agreement.