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Yahoo
19 hours ago
- Business
- Yahoo
The best mortgage rates on the market right now
Mortgage rates have begun to tick downwards, ending a three-year run of climbing rates. Most major lenders now offer rates below 4pc, with central interest rates on the way down. The Bank of England has already made two Bank Rate cuts this year, with at least one more expected before the end of 2025. However, the heady days of rock-bottom rates and near-free loans are long gone. The difference of a few percentage points between deals can cost you thousands of pounds over the length of the mortgage. To help you navigate this, Telegraph Money has launched mortgage 'best buy' tables, powered by live data, so you can stay informed about the latest rates. Choosing a mortgage can feel daunting, especially for first-time buyers unfamiliar with the process, or existing homeowners facing the prospect of higher bills if mortgage rates are higher than when they bought their property. Borrowers will be keen to find the cheapest possible option that meets their needs but may also have preferences over lender or struggle to meet requirements at some banks. Here, Telegraph Money reveals today's top residential mortgage rates, whether you're buying a new home or remortgaging, for those who prefer to fix or want a variable-rate deal. These rates refresh every day, from Tuesday to Saturday. If you are a landlord, here are the best buy-to-let mortgage rates. How we determine the best rates The best mortgage rates The best remortgage deals Expert opinion: What to consider when choosing a mortgage Mortgage rates FAQs These Best Buy tables show the best mortgage rates widely available in the market. This means certain accounts are excluded, including those that are available only to local or existing customers, buyers using government support schemes, properties with high energy ratings or clients of specific brokers. The data is provided by mortgage lenders and verified by Koodoo, the trading name of Mortgage Power Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 845978) on a non-advised basis. The tables update daily between Tuesday and Saturday. Rates are representative for a £150,000 loan value, £275,000 property value and 25-year term. Try Koodoo's comparison tool to see if better deals are available for your circumstances. The information in this article is intended for information purposes and should not be taken as endorsement or advice. Your property may be repossessed if you do not keep up repayments on your mortgage. These 'purchase' rates are for those buying a new property, such as a first-time buyer or a second stepper upgrading to a family home. Those looking for a new deal in their current home need a 'remortgage' deal and we show the best rates further below. Homeowners who need to remortgage their home will be offered different rates than first-time buyers or home movers who need a 'purchase' mortgage. These are the best deals for owners staying put. Chris Sykes, mortgage consultant for Private Finance, said: 'It's important, especially for first-time buyers, to understand how mortgage rates are tiered.' Certain factors will affect the rates available to you. For example, workers who are self-employed or receive much of their income as bonuses may not be able to access the best rates. The size of your deposit also makes a huge difference to the rates lenders will offer you. 'Generally, with every additional 5pc deposit that you put forward, you get a better rate. The longer the mortgage takes, the lower your monthly payments will be. But ask yourself if you want to be paying this in your 70s,' Mr Sykes said. If you want flexibility and don't want to lock in a long-term rate – for example, if you plan to sell up or believe interest rates will fall – then a two-year fixed-rate mortgage might be for you. If you want to protect yourself from the turbulence of interest rates for longer, or you think they might rise, then guaranteeing a rate for five or even 10 years could be a better option. A variable-rate mortgage might suit you if your plans don't suit committing to a fixed-term deal (perhaps you're planning to move house soon, for example), or if you think you could get a cheaper deal than fixes can offer – for example, opting for a variable tracker mortgage ahead of Bank Rate cuts. Alex Ogario, of Knight Frank, said: 'Compared with a two-year fixed rate, a five-year fixed product will tie you in for longer. However, you've secured a rate for that time. So if you want to have more stability, do not need more flexibility and don't want to be exposed to interest rate volatility for this period, then it might be a good idea to lock in a rate now and not have the risk for the next five years. 'However, shorter and longer fixed terms are available, so finding a suitable option that's tailored to your specific needs should be the aim. 'The choice between a two-year and five-year fixed rate often depends on the person's risk appetite. Some people don't want to be exposed to volatility but then others want to keep options open and be able to change course if needed. There is no one-size-fits-all option here and it is also determined by other variables, such as requirements for flexibility and future expectations of interest rate movements.' Mortgage brokers can help you get a better mortgage as they often have access to cheaper deals than you may be able to find yourself. They can also alleviate some of the stress involved with buying a house. If you're self-employed or are struggling to find a lender who will approve your application, it might be a good idea to speak to a broker. They can also be helpful if you spot a better deal while you're waiting for the purchase to go through, and help you switch to it quickly. Mr Ogario said: 'With the volatility and uncertainty that we're seeing in the market, people should be doing their due diligence more than ever and taking advice from experienced and qualified experts. 'Don't go to the shop without your wallet, which means don't find a property without having done any research on finance. Often our most successful and sophisticated clients from a financial perspective are the ones who ask the most questions.' There is no specific minimum salary to get a mortgage, but how much you earn affects how much you can borrow, as lenders want to ensure you can afford the repayments. As a general rule of thumb, lenders will allow you to borrow up to 4.5 times your annual income, although some will be more generous. Remember that income is not the only factor taken into consideration; your deposit and outgoings also make a difference.
Yahoo
20 hours ago
- Business
- Yahoo
Best cash Isas: Today's latest rates
A cash Isa is similar to a savings account, but with a crucial difference – you don't pay tax on the interest you earn. It is one of four types of adult individual savings accounts (Isas) – the others are stocks and shares Isas, innovative finance Isas and lifetime Isas. You can save up to £20,000 per tax year, which is known as the Isa allowance. Your Isa allowance is renewed at the start of the tax year on April 6, and you cannot carry over any unused allowance from the previous year – if you don't use it, you lose it. You can either deposit this sum into one account or spread it across several, and you can transfer your Isa savings between providers if you want to take advantage of a better rate elsewhere. In this guide, Telegraph Money explains how cash Isas work, covering: How we determine the best rates The best cash Isas Expert opinion: Things to consider when choosing a cash Isa Why choose a cash Isa? Cash Isa FAQs The Best Buy tables below show the best savings rates widely available in the market. This means certain accounts are excluded, including those that are available only to local or existing customers. The data in these tables is provided by Savings Data Limited and is compiled using automated tracker tools and updates from savings providers. Savings Data Limited then manually checks the information and enters it into a database that feeds the live tables, which update daily. The savings accounts shown are protected by the Financial Services Compensation Scheme. The information in this article is intended for information purposes and should not be taken as endorsement or advice. Find the best cash Isa for you using the tables below. These accounts usually allow you to make as many deposits and withdrawals as you like – but this flexibility can come with lower rates. For the savings equivalent, you can see our guide to the best easy-access savings accounts. Accounts in the table below show the best Isa rates on the market for accounts that offer a variable rate of interest. While this could increase at any time – which can be valuable when rates are on an upward trend – it could also decrease. These accounts require you to give a certain amount of notice to your provider when you want to make a withdrawal, indicating the number of days you must wait until your money is released. You can usually make as many withdrawals as you like – but be sure to check the account terms first. If this way of saving suits you, make sure you check our guide to the best notice accounts. These types of Isas require you to lock your money away for a specified period of time. The rate of interest is guaranteed throughout this period, which can give you peace of mind should other rates take a tumble. For the savings account equivalent, which you might want to use if you've used up your Isa allowance, see our guide to the best fixed-rate bonds. For Isas suitable for children, see our guide to the best Junior cash Isas. And, if you're saving to buy a home or fund your retirement, don't miss our guide to the best lifetime Isas. Choosing the best cash Isa for you can be tricky, depending on why you're saving and how you want to save – but there should be options to suit everyone. Caitlyn Eastell, of analyst Moneyfactscompare, said: 'For savers that are more tax savvy, cash Isas may be the ideal option as you receive a £20,000 Isa allowance each year and can pay into multiple Isas within the same period providing this limit is not exceeded. Isas aren't too dissimilar to their traditional savings counterparts with easy access, notice, fixed and regular accounts being an option. 'It is worth considering that for the variable rate options, interest could increase or decrease over time, and those Isas that are fixed for an agreed term will either not allow earlier access or may deduct a certain amount of interest.' Cash Isas can also be an effective way of saving for the longer term. Mark Hicks, of Hargreaves Lansdown, said: 'Cash Isas have certainly seen a resurgence of late. Looking at what may be coming in Labour's Budget, and the rhetoric around higher taxes, cash Isas should be the first port of call for all savers at the moment. 'If you've got £20,000 or less, definitely go for a cash Isa first and ensure your money is protected from tax. If you're fortunate enough to have more than £20,000 to save in an Isa, then you can look at other saving accounts as well.' Cash Isas are beneficial for many savers as they offer an easy way to make sure your returns remain free from tax. Their popularity took a dip when the personal savings allowance (PSA) was introduced in 2016, as it means some savers can earn up to £1,000 in tax-free savings interest each tax year. When interest rates are low, only those with large savings pots or high incomes come into the scope of paying tax on savings interest. However, savings rates have been high for some time; until recently it was not uncommon to be earning 5pc. Someone with a £1,000 PSA could face a savings tax bill with £20,000 in savings – a problem that doesn't occur with a cash Isa. What's more, your growth is protected as it compounds for years into the future, which has helped some savers become Isa millionaires. The main issue that comes with a cash Isa is the £20,000 Isa limit on how much you can pay into it each tax year. If you want to move a large savings deposit in order to protect your returns from tax, it may need to be moved gradually over several years. In some cases, interest rates offered by cash Isas can be lower than their savings equivalent. Providers are well aware of the extra tax benefit Isas offer, and know they don't have to be as competitive with rates. It's important to shop around and find the most competitive rate you can – the tax-free benefits of an Isa will often outweigh the loss of a little interest. There is no limit to the number of cash Isas you can have – but it's a good idea not to have so many that you lose track of them. You can hold cash Isas you've paid into in past tax years, and – now that Isa rules have changed – you can also open and pay into as many as you like in the same tax year. The key thing is to make sure you don't pay in more than £20,000 across all Isas in the same tax year. Yes, you can combine Isas into one account – but in order to do this without affecting the tax status of the money, or your Isa allowance, you must move the cash via an Isa transfer. There are quite a few rules to bear in mind – you can find out more in our comprehensive guide to Isa transfers. This depends on the rate you're earning and the rate of inflation. At the time of writing, lots of cash Isas can beat inflation, but you increasingly need to shop around for them as rates continue to slide. It's a good idea to keep an eye on what's happening with inflation versus the best Isa rates so you can gauge whether or not you have a competitive deal. Our inflation calculator shows the effect rising prices can have on your savings. It's never too late to put money in an Isa to benefit from its tax-free status. However, you may miss the end of the tax year if you leave it too late to make a deposit. The annual Isa allowance resets at the start of a tax year on April 6, which means the 2025-26 allowance recently renewed. You can put all of this into one account, or split it among several. Mr Hicks said: 'Isas were typically seasonal, with a big spike in demand around the end of the tax year. They are much less timely now and every year the cash Isa season gets longer and longer.' 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
Telegraph
3 days ago
- Business
- Telegraph
Is it worth deferring my state pension?
A little-known secret about your state pension is that delaying when you start taking your payments could mean getting higher amount when you do decide to claim. If you live a long time, it could net you thousands of pounds. But it doesn't work for everyone, and there are some catches to navigate – from gambling on your own life expectancy to potential tax implications. Here, Telegraph Money sets out who could benefit from state pension deferrals, how it affects you and the best ways to avoid some significant drawbacks. What is deferring your state pension? Am I eligible and how does it work? How much would I get? Is deferring still worth it? State pension deferral FAQs What is deferring your state pension? Deferring your state pension is when you decide to wait beyond your state pension age to claim it. People currently reach the state pension age on their 66th birthday. For every nine weeks you wait, you'll get an extra 1pc on top of your original payment when you do come to claim it. Benefits of deferring your state pension There are some major benefits to deferring: Higher payments. The 1pc for every nine weeks stacks up to 5.8pc extra a year, every year, and that's on top of your existing payments. That means you will have more money coming in, and it's guaranteed for life. Your payments will increase each year. Under the triple lock, this extra amount you're receiving will also increase each year by at least 2.5pc. Due to higher inflation, it actually increased by 8.5pc last year and will rise 4.1pc from April 2025. Potential tax savings. You might pay less in tax if your income drops before you claim your state pension. For instance, if you're earning over £50,270 a year, you'd pay 40pc tax on your state pension. If you waited until your income was lower, such as by stopping work, you'd pay less tax. Drawbacks of deferring your state pension There are some major potential pitfalls to deferring and you'll need to consider these: Getting less money overall. The state pension changes each year, but it's generally accepted that it takes between 19 and 20 years from state pension age to break even if you defer, regardless of how many years you defer for. If you die before then, you could end up receiving less money than if you'd started claiming payments as soon as you reached state pension age. A lower income before you claim. You will have less money during the time you defer and if you claim before the end of a nine week period, you won't qualify for that specific 1pc increase. Figures from the Office for National Statistics (ONS) imply that deferring is something of a gamble. Its online calculator suggests that the average 65-year-old men could can expect to live further 20 years, to 85, and 65-year-old women a further 22 years, to 87. This is projected to rise to 21.9 years for men in this age bracket, and to 24.1 years for women by 2045. What is more predictable is how this could negatively affect your tax bill, which we also discuss below. However, it's important to remember that you're not committed to deferring your state pension. If you change your mind, you can just claim it. Am I eligible and how does it work? Anyone can defer their state pension: You don't need to do anything, as your state pension won't start until you actually claim it. This can be done online, over the phone or by post, but you should get a letter explaining all this shortly before you reach state pension age. If you haven't reached it yet, our state pension age calculator can help you find out when this will be. There's no maximum amount of time you can defer for, and you'll keep building up money for every nine weeks you wait. However, it is crucial to also bear in mind that if you or your partner are claiming certain benefits, such as pension credit or Universal Credit, you will not build up extra money by deferring during that time. If you're planning on continuing to claim those, it's unlikely that deferral will be the right option for you. How much would I get? Currently, you would get an extra £2.30 a week, or £120 a year, for every nine weeks you defer. This is because the full state pension for people who reach retirement age after April 2016 is £230.25 per week, or around £11,973 per year for 2025-26. If you deferred for a full year, the 5.8pc increase would add an extra £694 to what you'd receive annually. Alternatively, you can look at it as giving you around £13.35 a week extra. How long can I defer my pension for? You can defer your state pension payments for as long as you like. As state pension payments won't begin until you make a claim, the length of time you defer for is entirely in your hands. The key is working out when the best time to claim is – this will depend on your other income, whether you're keen to minimise tax, and whether you're concerned about potentially missing out on any of the benefit you're entitled to. Navigating higher tax brackets Income from the state pension forms part of your overall taxable earnings, so there are some considerations and calculations to make. It might be worth deferring to save yourself tax. For example, if you reach state pension age, carry on working and your income is over £50,270, you will lose 40pc of your state pension in tax if you claim it immediately. However, if you defer until you stop working, you'll pay less tax if your total income then drops into the lower tax bracket of 20pc. If your only income was your state pension, you could even pay no tax at all. Natalie Kempster, of financial planner Argentis Wealth Management, said: 'Someone earning £150,000 per year would effectively pay 45pc tax on their state pension, meaning that they would net just £6,326. Defer your pension until the following year, when you are retired and a basic-rate taxpayer, then the numbers start to look a whole lot more favourable.' However, Dean Butler, Standard Life's retail managing director, said you should also consider whether taking a higher income later (through deferring) might actually push you into the next tax band, as opposed to taking a lower income from an earlier date. This brings its own issues. It might not be worth deferring if it means you're then taxed at 40pc or 45pc on what you have gained, especially if it's that gain alone that pushes you into the next tax bracket. Is deferring still worth it? Some people think this depends on which state pension they receive. Under the 'old' pre-2016 state pension system, many people deferred because there was a significant uplift to be had, and there was the option to take the deferred payments as a lump sum. Claire Trott, of wealth manager St James's Place, said that compared to the old state pension, the extra amount you get from deferring the new state pension had nearly halved – the uplift for deferring dropped from 10.4pc to 5.8pc. Andrew Tully, of Nucleus Financial, said an alternative to deferring could be to take your payments straight away and use them to invest in an Isa. He explained: 'That means you have access to that at any point, and it may grow over time.' Overall, whether it's worth deferring your state pension is dependent on a number of factors, including your income, where you retire, your cost of living, tax implications and how long you'll actually live. State pension deferral FAQs Can I defer if I've already started getting my state pension? Yes, but only once. You can keep the deferral going for as long you like, but once you restart your pension, you cannot pause it again. You'll need to start the deferral yourself by contacting the Pension Service. Can I defer if I'm still working? Yes. Whether you're working or not has no bearing on deferring, or claiming, your state pension. As long as you've reached your state pension age, the decision is up to you. However, as mentioned before, there may be a tax advantage to deferring if you still have a regular income from work. What if I'm on the old state pension? If you're eligible for the old state pension, you are probably already receiving it. As above, you can still decide to defer it if you haven't already done so in the past. You will get 1pc for every five weeks you defer, which works out as 10.4pc for every 52 weeks. You can take the amount you build up as a lump sum or opt for extra regular payments. If you're on the new state pension, you don't have the lump sum option. What happens if I retire abroad? You can still defer. Each year, the state pension increases by the highest of inflation, average wage increases or 2.5pc. This is known as the triple lock and it applies to the extra amount you get by deferring too. For this to apply however, you'll need to live in the UK, the European Economic Area (including Switzerland) or a country with which the UK has a social security agreement (except Canada or New Zealand). If you live in a country that doesn't fit the criteria, you'll still receive the extra payments you have built up. However, they will be frozen at the level they were at when you either reached state pension age or moved abroad, whichever is later. What happens when I die? This depends on which state pension you receive. If you reached state pension age before April 6 2016, you're on the old state pension. This means your husband, wife or civil partner can inherit the extra payments you've built up, subject to certain conditions. If you get the new state pension, i.e. you reached state pension age on or after this date, they can't. Our guide to what happens to your pension when you die can explain more.
Telegraph
4 days ago
- Business
- Telegraph
Five clever tactics to pay off your mortgage early
Mortgages are the one financial service you spend years trying to get, but then want to be rid of as soon as you can. For most of us, a mortgage is the key to getting on and climbing up the property ladder, but they can also be your biggest monthly expense. With recent rate volatility in mind, it's hardly surprising that becoming mortgage-free often becomes the next financial goal. David Hollingworth, of mortgage broker L&C, says: 'Having a mortgage is a necessary part of making the dream of home ownership become a reality for most people, but from then on, the focus will usually shift to being rid of what will generally be the biggest debt we'll ever have.' Overpaying your mortgage is one way to do this, but if you're faced with the prospect of trying to chip away at a six or even seven-figure sum it can be rather daunting. However, there are several tactics you can adopt that will see you pay little and often, which can shrink your borrowing without dramatically affecting your budget. Here Telegraph Money, shares five tips to help pay your mortgage off early, and potentially save thousands. Five ways to pay off your mortgage faster 1. 'Round up' your monthly payments The 'round up' idea has been popularised by the many banks that offer the service to help boost savings – when you make a purchase, say, for £3.50, the money that leaves your current account will be rounded up to the nearest pound and the remainder sent to a savings pot – in this case, 50p. The same theory can be applied to mortgage overpayments. 'If your mortgage payment is £842, round it up to £850 or £900,' suggests Ying Tan, chief executive at mortgage broker Habito. 'The extra goes straight towards your remaining balance.' Rounding up by just £50 a month – an amount you might not miss from your bank balance – on a £200,000 mortgage over 25 years could knock one year and 11 months off your term and save over £13,000 in interest, he adds. 2. Overpay by £100 a month There is also merit in keeping this simple, and sticking to paying a little bit extra each month (whether that's £50, £100, or more), as this can be a great way to chip away at your mortgage over time. Mr Tan says: 'On a £200,000 mortgage over 25 years at 5pc, overpaying £100 a month could save around £24,000 in interest and shave off over three years from your term.' You might want to think about setting up regular overpayments at those occasions where you feel able to loosen the financial purse strings – such as getting a promotion or pay increase at work. 'Earmark a portion of salary increases or reduced expenses, like childcare costs dropping, towards your mortgage,' says Aaron Strutt, product and communications director at Trinity Financial. 3. Maintain your repayments when your mortgage rate drops If you're on variable-rate mortgage and your repayments drop when interest rates fall, you could ask your lender to maintain your repayments at their former level. This can be easier to budget for, as you'll already be used to paying your mortgage at the higher rate. Mr Hollingworth points out that you can also do this if you have slipped into paying your lender's standard variable rate (SVR) before remortgaging on to a more competitive deal. 'This could be a great way to make the most of a lower interest rate,' he says. 'For example, if a £200,000 repayment mortgage was originally at 5.25pc, the monthly payment would be £1,198.50. Switching to 4.25pc would cut the payment to £1,083.48 a month, but maintaining the original payment would lock in an overpayment each month and would ultimately pay the loan off three years, 10 months early [and save £21,950 in interest].' 4. Make bi-monthly payments We're all used to paying our mortgages once a month, but another option is to make two smaller payments each month instead. 'The concept is to effectively overpay by an extra month's payment each year by making payments every two weeks,' explains Mr Hollingworth, but he warns not every lender will oblige. 'Most lenders will take payments through direct debit so be sure that you check on whether it's even possible. Some may not be able to accommodate it and you also need to be careful that you would be hitting the required monthly payment on time.' If your lender is willing, it might be worth the effort. Mortgage broker Mojo says this strategy could save the typical borrower £49,118 in interest and knock four years and nine months off a 30-year term. 5. Pay in a windfall 'Putting your annual bonus, inheritance, or even cashback into your mortgage can make a huge dent,' says Mr Tan. He explains that paying £5,000 off a £150,000 mortgage could save you £11,710 in interest and let you pay it off one year and seven months early (based on a 5pc mortgage rate and a 25-year term). Adding this 'extra' money to your mortgage repayments mean your usual budget won't be affected, but you'll need to make sure such one-off sums don't cost you in early repayment charges (more on these later). You'll also need to be sure to tell your lender that you want to shorten your mortgage term – otherwise it may keep the term the same and reduce your monthly repayments instead. How to overpay your mortgage Most lenders will let you overpay by 10pc of the original loan amount a year without incurring any penalties, but some – such as NatWest – will allow you to overpay by up to 20pc. Just how easy it is to set up regular or one-off overpayments will depend on your lender, and what you want to do. For example, if you want to keep your repayment the same after a rate reduction, you might need to ask your lender to manually set up a monthly overpayment each time rates change – it may not be able to automate this. However, setting up simple overpayments is normally pretty straightforward as Mr Strutt notes: 'Most of the bigger lenders have apps their customers can download so they can go online and set up, then manage, their overpayments. 'It's surprising how many people with mortgages do not know about these apps and just how easy it is to make overpayments. Once you get in the habit of making overpayments then you get used to it, and you can adjust the payment to suit your budget.' The benefits of overpaying There are three key benefits of paying your mortgage off early: You'll save on interest: 'Often tens of thousands over the life of your loan,' Mr Tan points out. You'll be mortgage-free faster: Once you have paid off your mortgage you can use the cash you had been paying out to step up your retirement saving, help the kids or just enjoy the benefits of your hard work. Peace of mind: 'No more rate hikes to worry about. It's a big psychological win,' Mr Tan adds. Find out how much you could save with our mortgage overpayment calculator. What to think about before making overpayments While there are financial and psychological benefits to paying off your mortgage early, it's still important to think carefully before you plough all your spare cash into overpayments. Look out for early repayment charges (ERCs): These are essentially penalties for paying off your mortgage too quickly, and are common on fixed-rate mortgages. They could hit you hard if you overpay more than the allowed amount. Mr Hollingworth advises: 'Before overpaying it makes sense to check that an ERC will not be incurred. If so, it will put a big dent in – or even wipe out – the benefit of overpaying.' Could you get a better return on your cash elsewhere?: If you're lucky enough to still be paying ultra-low mortgage rates, you may be better off earning interest on your cash in a savings account, rather than prioritising mortgage overpayments. Depending on your attitude to risk there may also be an argument for investing your spare cash, using a stocks and shares Isa, for example. Do you have other expensive debts?: If you have any outstanding personal loans or credit card debts, it makes sense to pay them off first as they typically charge a higher interest rate than mortgages. Are your retirement finances on track?: It's great to pay as much off your mortgage as you can, but it shouldn't be at the expense of your retirement pot. It's also important to pay as much as possible into your pension to get the benefit of tax relief on contributions and the compounding of returns over time. Make sure you still have emergency savings: 'Always think about a rainy-day fund, as overpaying the mortgage will usually mean that it's hard to get hold of the cash at a later date,' says Mr Hollingworth. 'In most cases, it will require a remortgage or a further advance to be able to be able to access the overpaid funds, so make sure there is cash available to deal with unexpected expenses.' Experts typically recommend you keep around three to six months' expenses in an easy access savings account.
Yahoo
4 days ago
- Business
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Councils to lose £334m as second home tax raid backfires
Second home owners dodging the double council tax raid will cost local authorities £334m, analysis shows. A loophole means owners can escape paying four-figure bills by flipping their properties into holiday lets and renting them out for 70 nights of the year. The move allows the properties to qualify for business rates relief and also exempts owners from paying any council tax at all. In the past year, the amount of lost council tax revenue has doubled from £170m, according to research by property firm Colliers. Experts and politicians said the figures proved the tax raid was backfiring. Kevin Hollinrake, the shadow housing minister, said: 'Labour couldn't even be bothered to carry out any impact assessment, nor have they asked councils to restrict the policy to where there are localised problems in the housing market. 'This policy has massively backfired on them and it will be local people who pay the price.' In Cornwall, the second home capital of the country, £52m of council tax income will be lost to 10,731 holiday let properties. John Webber, of Colliers, said: 'The new policy towards second homes is making the situation even worse. The point is less money will be collected locally which will mean less to spend on services or on affordable housing that local residents actually need. 'The problem is not second home owners; it is politicians failing to understand the issues and having the courage to do something about it.' From April 1, all local authorities were given the option to charge 100pc council tax premium on second home owners under measures brought in by the Conservative government. Those in Wales can charge premiums of up to 300pc. Some 230 out of 296 councils in England and 20 out of 22 in Wales have imposed this inflated levy with some local authorities in Wales charging even more. Telegraph Money is campaigning for the tax to be scrapped. A property is considered a holiday let if it is available for at least 140 nights and is actually let for 70 in one year. The council uses the property's rateable value – based on its type, size, location and how much income you would make from letting it – to work out your business rates bill. Many second home owners will qualify for small business rates relief, which offers up to 100pc relief, if the property is the only one they let. For properties with a rateable value of £12,001 to £15,000, the rate of relief will go down gradually from 100pc to 0pc. For instance, if your rateable value is £13,500, you'll get 50pc off your bill. In England and Wales, there are an estimated 73,838 holiday let properties that qualify for business rates relief. While this number has fallen from 80,000 last year, due to tougher restrictions, Colliers now expects numbers to increase because of the double tax policy. Before 2023, homeowners simply had to declare an intention to let a property to holidaymakers to qualify for business rates relief. In her maiden Budget, Rachel Reeves, the Chancellor, ended the favourable tax treatment of furnished holiday lets, which came into effect on April 6, to encourage landlords to let to long-term tenants. Despite stricter criteria, the number of properties claiming 100pc business rates in the south west of England has only slightly fallen, from 23,000 last year to 21,678 this year. Councillors are calling for the Government to tighten the restrictions. Peter La Broy, a Cornwall councillor, said: 'Converting homes into small businesses to be liable for business rates is simply tax avoidance. I will be relentless in lobbying to close these loopholes.' Mike Stoddart, an independent councillor in Pembrokeshire, said he believes 'there is quite a bit of tax avoidance along the lines' of flipping to business rates in the county. The Welsh government has already taken efforts to close this loophole, by raising the qualifying threshold for a holiday let from 70 days to 182. A government spokesman said: 'We've abolished the furnished holiday lets tax regime so landlords are not incentivised to rent homes as holiday lets, and will introduce a short-term let registration scheme to protect communities. 'We have already introduced tougher rules to make sure that second homes cannot be eligible for business rates unless they have rented out as holiday lets for at least 70 days last year and keep any further action under review.' The Local Government Association was contacted for comment. 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.
