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100% LTV Mortgages are back

Lloyds Bank has launched a 100 per cent loan-to-value mortgage linked to a savings account to help first-time buyers get a foot on the property ladder.

The Lend a Hand mortgage was launched following research by the bank that found buying a home was among the top life goals for millennials, but half of those surveyed said the deposit was the biggest obstacle.

Lloyd’s latest launch removes the need for a deposit from the first-time buyer and instead up to 10 per cent of the loan is provided by the savings of a family member.

The mortgage is a three-year fixed with a rate starting at 2.99 per cent. The maximum term for the product is 30 years, and Lloyds will only lend up to a maximum of £50,000.

Alongside the mortgage is a savings account offering 2.5 per cent, fixed for three-years.

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Making Tax Digital

Business owners across Britain from the start of April must file VAT returns online using government-approved software. It is the first phase in the flagship Making Tax Digital policy — and has been beset by delays and complications.

Small business bosses say the new requirements, which apply (with some exceptions) to those with a turnover above £85,000, coincide with an unprecedented cocktail of cost pressures. A hike in the national living wage and an increase in employer contributions to auto-enrolment pensions also start in the first week of April.

The measures all come into force days after Britain is due to leave the EU — and Brexit heaps further uncertainty on the future of companies, forcing entrepreneurs to change how they keep tax records feels to many like another unnecessary obstacle put in their way by the government.

 “It was not supposed to be like this. Making Tax Digital was hailed as a revolution in the tax system when it was unveiled four years ago by George Osborne, then chancellor, but the programme has struggled to live up to its billing. Plans to have all individual and business tax returns submitted digitally by 2020 were scrapped last year, with officials admitting their targets had been too ambitious.

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Entrepreneurs’ Relief (ER) – share disposal update

The 2018 Budget has caused significant concerns for shareholders in companies that have multiple share classes carrying different rights and entitlements (also known as alphabet shares).

The new proposed rules change the definition of ‘personal company’ in the ER legislation in such a way as to prevent shareholders in a company with alphabet shares from claiming  ER.

On 21 December 2018, the Government proposed a significant amendment to the Finance Bill rules defining what constitutes a ‘personal company’ for ER purposes.

The revised legislation retains the old qualifying criteria (that the shareholder must have at least 5% of the ordinary share capital of the company and 5% of the voting rights) but adds in two new conditions, at least one of which will need to be met:

  • The shareholder must be entitled to 5% of the profits available for distribution to equity holders and 5% of the assets available for distribution on a winding up (these were the changes originally announced in the 2018 Budget);

AND/OR

  • In the event of a disposal of the ordinary share capital of the company the shareholder would be entitled to 5% of the disposal proceeds.

Additional provisions set out the process for determining whether the second test is met at any one time.  The legislation does not define the term ‘proceeds’, which implies that it may extend to some payments made to debt-holders on a sale of a company.

In its rationale for making the changes, the Treasury has stated that it has laid these amendments to ensure that the conditions for benefitting from the relief operate as intended and to continue ‘supporting enterprise creation and growth in the UK.’

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Unfortunately the markets struggled during 2018

The FTSE All-share was down 12.95% only UK gilts were able to give us a small positive return during the year. Research going back to 1901 from Deutsche Bank indicates that this is unprecedented. During 2017 there was only a little volatility, but 2018 made up for it. My crystal ball indicates that during 2019 we will need to be nimble to seek out returns. Good job we do not invest in bitcoin, it fell 70% during the year.

Unfortunately politics has not helped. Trump’s war of words with China’s President Xi Jinping has affected trade in the Far East as well as Japan and Germany. Italy has not helped as they are Europe’s largest issuer of debt and they are struggling to agree a budget with Brussels, just as the ECB slows down its version of QE. We won’t even talk about the UK.

As you are aware the US has been slowly increasing interest rates and removing liquidity from the markets as Trump’s tax cuts fuelled the US economy. This has affected any countries dependent on the USD. However more recently the US FED looks like it has softened its tone and may slow down the rate hike cycle, which will weaken the USD reducing the headwinds and helping emerging markets. You may have noticed the price of petrol coming down and it will also help gold.

In the UK we have started to raise rates to 0.75% from a 300 year low of 0.25%. But with inflation hovering around 2.3% and an unemployment rate at only 4% the BoE MPC will be looking to increase rates further when the conditions are better.