Q. What is the Marriage Allowance for tax purposes?
A. HMRC has released further details of what is now being called the Marriage Allowance but was previously launched as the “Transferable income tax allowance”. This is the ability for one spouse (or civil partner) to transfer up to 10% of the personal allowance (or £1,060) to their spouse provided they are not a higher or additional rate taxpayer. This is only available where neither of the couple was born before 5th April 1935 (these couples are entitled to the slightly different “Married Couple’s Allowance, which is potentially more valuable). HMRC has stated that around 4 million couples will be eligible for the marriage allowance. Those who benefit will be where one partner is a basic rate taxpayer, but the other has income less than the personal allowance. The maximum tax saved is 20% of £1,060, or £212, and it is introduced for the 2015/16 tax year. It is possible to register for the allowance on the Government website at https://www.gov.uk/marriage-allowance. It should take around 3 minutes to register!!
Q. A few years ago I was badly injured in a road traffic accident and have been awarded substantial damages. I have been surviving on State Benefits since my accident as I have been unable to work. My solicitor has mentioned a Personal Injury Trust as being a good idea. I am not sure why, what do you think?
A. Personal Injury Trusts are very useful for protecting means tested state benefits, for example: Employment Support Allowance, Job Seekers Allowance, Tax Credits, Housing Benefit, Council Tax Benefit etc as well as allowing you to continue to benefit from free prescriptions, free dental and free optical services. The capital value of the trust is ignored when you are assessed, meaning you continue to receive any of these benefits you were previously entitled to, whilst still being able to spend your damages on anything else you wish. In addition the benefits within a PI trust are ignored by the local authority for the purposes of care home fees which can be a substantial benefit.
Q. I have seen some adverts from investment companies showing high levels of income from bond funds. However, they often show two rates, one being the distribution yield and the second being the underlying yield. What does this mean?
A. The advertisements you have seen are for corporate bond funds. They are loans to large companies who promise to make fixed interest payments and to buy back the debt at the end of the term of the bond at a fixed price. Prices of these bonds fluctuate on a daily basis as they are tradable.
The distribution yield is the level of interest that the fund is receiving and that could be paid out. The underlying yield (also known as yield to redemption) takes into account the income expected and the capital loss or gain when the borrower buys back the loan at the end of its life. Consequently, if the distribution yield is higher than the underlying yield you can expect to suffer some capital loss along the way.
If you have a question you would like Trevor to answer, please email it to: yourmoney@rwpfg.co.uk or post it to Your Money, Rutherford Wilkinson Ltd, Northumbria House, 21-23 Brenkley Way, Blezard Business Park, Newcastle upon Tyne, NE13 6DS.
0191 217 3340
