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Yahoo
7 hours ago
- Business
- Yahoo
Savers pour record £14bn into Isas ahead of Reeves crackdown
Savers poured a record £14bn into cash Isas in April amid fears of a raid by Rachel Reeves on the tax-free accounts. Monthly deposits were the highest since the system was introduced in 1999, according to Bank of England data. While Isa deposits tend to rise towards the end of the tax year on April 5, Ruth Gregory, at Capital Economics, said the record total 'was probably due to speculation around the Chancellor considering slashing the cash Isa tax-free allowance'. Ms Reeves has been consulting on changes to the Isa system as she seeks ways to push more money into stocks and shares to boost growth. Savers can currently stash up to £20,000 into an Isa every year, with the option to split the money between cash or stocks and shares. The Chancellor confirmed last month that she will not change the overall annual limit on contributions, although she left the door open to curbing the amount that can be held in cash. Ms Reeves said: 'I'm not going to reduce the limit of what people can put into an Isa, but I do want people to get better returns on their savings, whether that's in a pension or in their day-to-day savings.' Emma Reynolds, the City minister, previously told a Lords committee that cash Isas were draining investment from the London Stock Exchange. 'Why have we got hundreds of billions of pounds in cash Isas? We have failed to drive an investment culture,' she said. Lowering the amount that can be put into cash Isas would mean millions would be able to save less each year tax-free and would face a choice between putting money into savings accounts subject to tax or investing in riskier stocks. Banks and building societies have been urging Ms Reeves to leave the system as it is. David Postings, the chief executive of UK Finance, which represents both banks and building societies, told The Telegraph last month: 'They are an easy-to-understand product that help individuals start saving and set aside money for the future. 'The money banks and building societies hold in cash Isas is also lent out, supporting borrowers and the wider economy.' Robin Fieth, the chief executive of the Building Societies Association (BSA), said: 'Simply changing Isa limits is unlikely to encourage people to invest, but it will hurt people who are responsibly saving for short-term goals, when investing is not appropriate. 'If the Government decides to make any changes to Isa limits it should make them to both stocks and shares Isas as well as Cash Isas, otherwise the administration of the system will become unnecessarily complicated.' Roughly 22.3m British adults hold more than £725bn in Isas, according to government data. The average amount stashed into a cash Isa was £5,295 in the 2022-23 tax year, according to official statistics, although this has climbed further against a backdrop of rising interest rates. 661,000 of the 6.5m people who put some money into an Isa in 2021-22 put in the maximum £20,000 annual limit in cash. While capital gains held in Isas are also tax-free, cash accounts outnumber stocks and shares by a ratio of 2:1. Despite this, more money is held in equities overall, with some £425bn parked in stocks and shares compared with £300bn in cash. James Blower, of The Savings Guru, a comparison site, said the 'astonishing' April deposit total also reflected the fact that interest rates on offer tended to be market-leading. He said: 'This is certainly helping fuel interest because there's very few people who won't be better off choosing an Isa as a result.' Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Times
19 hours ago
- Business
- Times
UK house prices rise as fall after end of stamp duty holiday looks like a blip
House prices rose in May, with market activity holding with a decline after the end of the stamp duty holiday looking like a blip, data from the UK's largest building society showed. The average house price increased by 3.5 per cent annually in May and by 0.5 per cent month on month, Nationwide said, taking the average price to £273,427. The rise follows a bigger-than-expected 0.6 per cent month-on-month fall in prices in April as the rush to beat the end of the stamp duty threshold relief faded. Annual price growth slowed to 3.4 per cent from 3.9 per cent in March. Robert Gardner, Nationwide's chief economist, said: 'Mortgage approvals data suggests that market activity appears to be holding up well following the end of the stamp duty holiday. Despite wider economic uncertainties in the global economy, underlying conditions for potential home buyers in the UK remain supportive.' Gardner said the market was being underpinned by low unemployment, wage growth that was outstripping inflation and lower borrowing costs. The Bank of England cut interest rates to 4.25 per cent last month from 4.5 per cent — the fourth rate cut since August 2024. Alex Kerr, UK Economist at the consultancy Capital Economics, said: 'The increase in Nationwide house prices adds to the evidence that the recent soft patch for the housing market was a temporary blip rather than a longer-lasting downturn as a result of the softer outlook for the wider economy.' Zoopla, the property search website, has said that estate agents in May have been busier than since the post-lockdown 'race for space' in 2021 as more people look to move after two years on the sidelines, drawn in by cheaper mortgage rates. It said sales had picked up last month, with mortgage rates and availability continuing to improve, while buyers also have more options. There are 13 per cent more homes for sale than in spring 2024. and most of those looking to sell are also looking to buy. Anthony Codling at RBC Capital Markets, said: 'The summer months are typically a quieter period for the housing market than the spring, but with prices rising not falling the fear of missing out is likely to bolster housing market activity.' Since April 1, first-time buyers in England and Northern Ireland have had to pay stamp duty on property prices of £300,000, down from £425,000. The threshold at which other buyers begin to pay the tax has dropped from £250,000 to £125,000.
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Business Standard
20 hours ago
- Business
- Business Standard
US remittance tax to revive hawala, hand cartels a financial lifeline
Hidden on page 1,054 of President Donald Trump's 'big, beautiful bill' is a threat to impose a 3.5 per cent tax on all remittance transfers made by non-citizens to accounts outside the country. This is a dangerous, backward-looking provision, and will make Americans less safe without raising much revenue. It is easy to understand why a measure like this would appeal to the current administration. It makes migrants' lives harder, and that's enough for it to be worth passing into law. And it certainly will create difficulties for millions of legal and illegal immigrants in the US, as well as for their families outside. Mexico's president, Claudia Sheinbaum, has been a vocal opponent, saying — correctly — that this is unjustifiable double taxation. Her country, the largest destination for such transfers, has a lot to lose. But other countries are also worried. India is the third-largest destination for remittances from the US, receiving about $18 billion in 2024; the Philippines and China aren't far behind, at $14 billion each. According to Capital Economics, US-based remittances support 3 per cent of the Philippines' GDP. The impact on migration-dependent areas of the world will be severe. For some countries in Central America, national income might fall by almost 1 per cent if this proposal is implemented. Meanwhile, some estimates suggest that even a higher 5 per cent rate would only increase the US' takings by 0.1 per cent. For the remittance tax's backers, that's beside the point. Vice President JD Vance, when he was still a senator, introduced a similar bill. At that time, he said that 'this legislation is a common-sense solution to disincentivise illegal immigration and reduce the cartels' financial power.' That argument is exactly backward. What common sense actually tells you is that if less money is available in some of the poorest parts of Central America, it increases the incentives for people there to try and move to the US to join their family members already there. As for the impact on criminal networks — well, history suggests that they'll welcome this. The world has spent decades trying to make legal transfers cheap and efficient. An additional levy might increase the cost of transferring even small sums four fold. This would reverse all our efforts to force this trade above ground. If legal transfers are made too expensive, illegal and informal networks take their place. Some people have happily assumed that Bitcoin will fill the gap. But, more likely, there will be a renaissance in simpler, older mechanisms for international transfers. In South and West Asia, we call these methods 'hawala.' But other parts of the world derived equivalents independently. In China, for example, such mechanisms are called 'fei-ch'ien.' From a customer's point of view, they're simple to use. All you need to do is find a well-networked trader and give them the cash to be transferred. That person then calls somebody in their clan or village back home, who gives the same amount of cash to the chosen recipient. The two members of the hawala network settle accounts between each other once or twice a year, through smuggling or perhaps through false invoices and shell companies. Naturally, such informal mechanisms to transfer value can be used not just to evade the remittance excise, but taxes in general. Worse, they are frequently used as conduits for terrorism and drug financing — which is why governments have spent decades trying to stamp them out. This was hard because, if enough people use these systems, they can be more efficient and cheaper than formal finance. The exchange rates that hawala traders offer are often more attractive, and their fees take less of a bite out of small transactions than many banks do. In spite of the best efforts of regulators and cops, hawala networks only really shrank when other routes became more competitive. Informal currency traders need a large volume of transactions to be efficient and offer the best rates to their customers, so when their custom shrank, they became less attractive. It's this self-reinforcing loop that the remittance tax threatens to break. Suddenly, hawala networks — and their equivalents in South and Central America — will become appealing again. And when this method returns to its former prominence, it will become easier to pay those who smuggle opiates or people. And, of course, criminal syndicates of various types will once again step in to run these systems, and profit accordingly. The vice president is, not for the first time, wrong: His administration's remittance tax doesn't attack the cartels, it empowers them.
CNA
4 days ago
- Business
- CNA
Core inflation in Japan capital hits 2-year high, keeps rate hike chance alive
TOKYO :Core inflation in Japan's capital hit a more than two-year high on persistent rises in food costs, data showed on Friday, keeping the central bank under pressure to hike interest rates further. But factory output slid in April in a sign manufacturers are feeling the pinch from slowing global demand, highlighting the dilemma the Bank of Japan faces in balancing inflationary pressures and the hit to the economy from steep U.S. tariffs. The Tokyo core consumer price index (CPI), which excludes volatile fresh food costs, rose 3.6 per cent in May from a year earlier, exceeding market forecasts for a 3.5 per cent gain and perking up from a 3.4 per cent rise in April. It was the fastest annual pace of increase since January 2023, when it hit 4.3 per cent. Core inflation in Tokyo, seen as a leading indicator of nationwide price trends, thus exceeded the BOJ's 2 per cent target for three straight years. A separate index that strips away the effects of both fresh food and fuel costs, closely watched by the BOJ as a broader price trend indicator, rose 3.3 per cent in May from a year earlier after a 3.1 per cent rise in March. "The Tokyo CPI showed a further broad-based acceleration in inflation, which suggests that the BOJ may hike even earlier than our current forecast of October," said Marcel Thieliant, head of Asia-Pacific at Capital Economics. A Reuters poll, taken on May 7-13, showed most economists expect the BOJ to hold rates steady through September with a small majority forecasting a hike by year-end. MORE PRICE HIKES COMING Sticky food inflation remained the main driver of the rise with non-fresh food prices up 6.9 per cent in May from a year earlier and the cost of rice soaring 93.2 per cent. But services inflation also accelerated to 2.2 per cent in May from 2.0 per cent in April, suggesting companies were gradually passing on rising labour costs. "The fact services prices rose is positive for the BOJ, which wants to keep alive expectations of further rate hikes," said Masato Koike, senior economist at Sompo Institute Plus. "But U.S. policy uncertainty will make it hard to keep the BOJ from hiking too soon. By the time the dust settles, price developments could have changed in a way that makes rate hikes difficult," he added. Many analysts expect consumer inflation to slow in coming months as falling crude oil prices and the drop in import costs from the yen's rebound. The hit to exports from U.S. tariffs and slowing global demand could also hurt Japanese manufacturers' profits and discourage them from raising wages next year. Separate data released on Friday showed Japan's factory output fell in April by 0.9 per cent from the previous month. Manufacturers surveyed by the government expect output to increase 9.0 per cent in May and drop 3.4 per cent in June, the data showed. But food inflation may not allow the BOJ to pause on rate hikes for too long. Japanese firms plan to hike prices for 1,932 food and beverages in June, triple the number from a year ago, a survey by private think tank Teikoku Databank showed on Friday. BOJ Governor Kazuo Ueda told parliament on Friday the central bank was mindful that companies continued to actively hike wages and raise prices to pass on higher costs. "Japan may face a tricky situation where public attention to rising food prices heighten inflation expectations, which have so far been stable," said Tsutomu Watanabe, an academic at the University of Tokyo's graduate school of economics. The BOJ ended a massive stimulus programme last year and in January raised short-term rates to 0.5 per cent on the view Japan was on the cusp of durably meeting its 2 per cent inflation target. While the central bank has signalled readiness to raise rates further, the economic repercussions from higher U.S. tariffs forced it to cut its growth forecasts and complicated decisions around the timing of the next rate increase.
Yahoo
4 days ago
- Business
- Yahoo
Stocks waver after court ruling against Trump tariffs and worries of continued uncertainty
A federal court ruling striking down some of the Trump administration's tariffs has injected a fresh bout of uncertainty into markets, with U.S. stocks in mixed territory Thursday. In early trading, the S&P 500, Dow Jones Industrial Average and the tech-heavy Nasdaq all showed modest gains. Bond yields fell as investors sought out safe-haven assets. A federal three-judge panel on Wednesday ruled against Trump's 10% blanket tariffs and 20% fentanyl tariffs on China, stating that he had exceeded his constitutional authority. The ruling has the effect of lowering the U.S.'s average effective tariff rate from 15% to 6.5%, according to Capital Economics consultancy. The ruling did not affect import duties on automobiles, auto parts, and steel and aluminum. A second court ruling Thursday by a U.S. district court came to a similar conclusion as the trade court. Markets initially cheered the possible elimination of some import taxes. But by Thursday afternoon, most gains had dwindled. Experts said the courts' decisions ultimately add another layer of uncertainty to Trump's trade-war effort. The administration immediately filed an appeal to the Wednesday decision, and CNBC reported it may ask the U.S. Supreme Court as soon as Friday to pause the rulings. In a note to clients following the trade court's ruling, Goldman Sachs analysts said despite the decision "might not change the final outcome for most major US trading partners." The administration may seek to quickly replace the 10% tariff "with a similar tariff of up to 15%" under a different U.S. statute, they wrote, while it works to tap another statute to reimpose duties against larger trading partners. Even if the nation's highest court were to rule against Trump's tariffs in their current form, "it would be unlikely to mark the end of the tariff war given the various other routes through which the Trump administration could impose tariffs," Capital Economics analysts wrote in a note to clients. The investment bank UBS warned clients that "significant policy uncertainty remains." Even if the struck-down tariffs do not come back, they wrote, "at least some of the economic impact has likely already begun to take effect." Analysts with Citi noted the ruling is likely to derail the administration's ongoing trade discussions. "The administration is likely to either successfully appeal the ruling or to use other authority ... to keep tariff rates high and revenue substantial," they said in a note. "For now, the ruling will complicate and potentially delay trade negotiations." Trump administration officials said that they were considering alternative ways of reimposing the affected tariffs, but that they were confident their original directives would be reinstated. "We're going to see what happens on appeal, and we're very confident in our success there," National Economic Council director Kevin Hassett told Fox Business. "But the fact is that there are things, measures ... that we could start right now." "But we're not planning to pursue those right now because we're very, very confident that this really is incorrect," Hassett added. Meanwhile, computer chipmaker Nvidia reported that its quarterly revenues had climbed 70%, beating Wall Street estimates. With its chips powering much of the artificial intelligence revolution, Nvidia is now seen as a bellwether for the health of the tech sector and indeed much of the economy as businesses look to incorporate AI into their operations. As a result, its performance has become tightly correlated to that of the broader market. Nvidia shares were up as much as 5% in pre-market trading. This article was originally published on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
