[speaker001:] er and in any, in any event there are a number of things I tend to miss altogether if I want to er keep to timetable which I and I, I'm sure you're, all the, the audience or group or whatever you like to call it that will welcome an extension of the talk. I usually mention briefly on going into business on your own account, working for yourself, but I'll develop that later that that's one of the things I can dr drop out altogether if w depending on the type of group I'm with. So okay, well we'll make a start and then we've got but my first remarks were a little bit, bit so there we are. I did mention that er I'm a retired tax inspector and I'm very long retired, I've been retired for thirteen years, thoroughly enjoying it, hope you too but your first questions w must be what the devil am I doing thirteen years retired tax inspector talking to you on a technical subject, why on earth can't you get the real thing? The short answer was that when I was working as inspector of taxes I used to give these talks, I was required to give talks. And the revenue got mean and decided it couldn't afford the time of serving officers and it left pre-retirement council and other bodies with a gap to fill er the only other people who are er professional if you like, who could fill it, would be accountants and they weren't available. So they had to pull pa back people like me from retirement. Which is fair enough because one of the things I mentioned about the benefits of er or the things we should try to achieve in retirement or secure in retirement, is that if you've had a challenge in life whilst you're working then for goodness sake don't drop it when you retire. There is still the need for a challenge in life and a sense of responsibility or whatever you like to call it. And I find this challenging, these talks, which is why I wasn't at all sorry to be asked to do so and why I continue to do them and I enjoy giving the, I enjoy meeting people, I meet an awful lot of, of nice people. And I learn quite a lot myself but it does give me that little bit of a challenge that er I think is helpful in retirement. Anyway that's by the way. But it so happens, you might say well all these years retired I can't be much good at the job, you'll be interested to know that I give talks to groups which include retiring tax inspectors.
[speaker002:] [LAUGHTER]
[speaker001:] Now you get the odd situation that an old codger like me I'm telling people who are just retiring about er how to deal with income tax in retirement. I mention that not in any boastful sense it's only to reassure you that if I can do that then I, I can't be very much out of giving the wrong gen. I'm pleased to know that myself as well. Okay. So that's the background of why I'm giving this as long retired er tax inspector the mean, my own department has got a bit mean. Now your second question must be where do I get my information from, how do I keep up to date? And oddly enough one of my friends asked me only yesterday when he said what's on your programme for next week, he said how on earth do you keep up to date? I say who's in. And it really isn't eas it really isn't difficult to keep up to date er once you've got the background because although income tax does change it only changes annually, it may well change more frequently changes annually. And this year there's been very little change altogether, you may have noticed that or very little change at all. But I'm able to get quite a lot of information and I'm saying this because you too can get it. And there are a number of publications, one of which I regard as my bible, this is out of date of course, tax saving guide on Which, Which tax saving guide. I could dispense with anything else, everything else, including visits to the tax office which I rarely do except to replace my er brochures and and er things that I send round for information. So with that alone you can keep up to date with income tax. Another one h have you met the magazine Choice? It's aimed at people over fifty. Er pleasure of young parents, your rights, franchise and dental treatment, low cost homes, competition. Investigating the possibilities of work after fifty. Well they do periodically articles on income tax, insurance and investment and they're all done by top of the mill people. Another one which may surprise you, Saga. Send a granny abroad or sex and games abroad.
[speaker002:] [LAUGHTER]
[speaker001:] We're still, we're still going, I, I haven't met it yet but
[speaker002:] [LAUGHTER]
[speaker001:] . Saga too does excellent investment, income tax and insurance articles from time to time. Thoroughly recommend all, you don't have to be members, we, we are members of the magazine club, because all these are available in local libraries. Er yes, I was going to say something else about Saga. When er I first was introduced to the Saga magazine I read their articles on insurance and I felt that this is, this sounds alright, and we're now covered for insurance through Saga, it's through Lloyds of course, reputable companies, for both the house and the car. You'll be interested to know I've just changed, I've just renewed my insurance policy on my car which is an E reg V W Golf diesel. It's a fully comp, I'm paying a hundred and fifty one pounds. Now I can't touch that anywhere else and I doubt whether anybody else can.
[speaker002:] [cough]
[speaker001:] Now I'm not selling their services but er er there are some er quite surprising er bonuses to pick up from er being members of this, these er various societies. There's yet another one and I always hesitate to mention this one, Help the Aged, I think it's most, yes?
[speaker002:] Sorry, can I just come back to the car insurance? Is it for one driver or any driver?
[speaker001:] No no my wife drives. Yeah.
[speaker002:] Well I pay three hundred and twelve
[speaker001:] Yeah.
[speaker002:] I, I admit I've got a son who's
[speaker001:] Right.
[speaker002:] twenty five
[speaker001:] Yeah.
[speaker002:] but er nevertheless
[speaker001:] Mm. Incidentally I always do this and yet I must reassure you that I'm not a Saga representative in anyway, I'm just keen on, on Saga and their facilities. I asked people if th if they would like a complimentary copy of the Saga magazine and all their brochures and they can do so by er, members like myself we're asked from time to time, do we know any friends who would like a copy? So I usually leave a er sheet of paper on the table and if you're, if you're interested in getting a free brochure what I shall do at the end of the course is to send this off er together with one of the cards that they let me have and er in due time you'll get a free Saga magazine. So I'll leave it about if you don't bother if you're not but er I, I, I think that they're er they're very good organizations. We don't now go on the Saga holidays, simply because they er or solely because you need to go down to Gatwick to catch the planes and we're not to doing that East Midlands or. Anyway that's very much by the way. But I was saying about Help the Aged, Check Your Tax. They do some quite remarkably good booklets so don't rip it off by the heading and er nobody regards themselves as aged these days do they? There's an office in town opposite Boots on Parliament Street and there's a great range of leaflets in there on all sorts of things. So please don't be put off by the title, it says Help the Aged, I ain't going in there! Just have a browse and have a look in and see what's. Right, now I mustn't be seen to be indicating in any way that er you don't have to bother with it all, because they too put all out some excellent er booklets, brochures I've got two thick pads of them which I'll let you circulate. just to see what's available. you'll be surprised what's available in the. And the changes in my day when, when I was working, we'd have some leaflets but they were written in a very er sort of... technical way. These are, they really are good. The er you'll be interested I think, those of you who've not met the er independent taxation changes that have come about, there's a great booklet a great series of books on er independent taxation about people who are considering working for themselves there's some booklets. So the revenue themselves do er a really good information service and if you go into any tax office, you don't have to go to the counter, there's often a queue or you get this little card system which, number system you're, you're next. All these booklets are o on display just inside the general office, Right, now another way contact my is in Cardiff, I know yours isn't up to local or if no it isn't it
[speaker002:] Mine is local but I don't know what will happen when I've retired.
[speaker001:] Ah yes I yes I, I mean local. Yeah, the superannuation, I've mentioned the, the er Paymaster General, which basically. So my, my tax office is in Cardiff, now the quick way in to your tax office, where ever it is, and if it changes, is you get the telephone number, you get the reference room of Salaries or Pension Department, you ring your tax office, quote your name, the tax office reference although that's n these days isn't important but you must quote your national insurance number, by doing that you get put through to the person who presses a button and says, oh yes you're Mr or Mrs so-and-so, what can I tell you? It's like this commercial organization when you ring up don't you? They say oh yes sir we know all about you we've got. Well you can do that by simply quoting your name, national insurance number to your own tax office. And er if it's more convenient, if you've got er a lengthy inquiry, call into any tax office, the nearest one, I've even called into tax offices when we've been away for a weekend, just to pick up brochures and things like that. Er well not in any weekend because they would be closed, wouldn't they? But I've called into other tax offices and they too can get on their video screen y th your history from your tax office. And then they're, they're fully au fait with all your affairs and talk to you quite sensibly.
[speaker002:] That's quite interesting, Bernard, as an ex tax inspector you go away and worry about your income tax over the weekend like we do. [LAUGHTER]
[speaker001:] No, well you're right except that I find it more convenient to replace my booklets if I'm in er Cardiff on my weekend when I happen to pass a tax office I pop in, replace them. Okay that's, that's enough about that. Right I mentioned about er about questions, fire away as, as you think about it. Now the first main subject if you like or part subjects is personal allowances because they affect everything that er I'm going to say. Now you may know all about personal allowances or you may think you know all about personal allowances and I thought like that. But they have changed in the last few years and there are some quite significant elements about personal allowances that you ought to know about, one of which is independent taxation, and this talk is actually personal allowances and independent taxation. Now independent taxation, as you may know, came in, we're now in ninety three four, I've only just altered the heading because very little else has changed and I'm a lazy so and so I can't rewrite it just for the heading. The previous year was ninety two ninety three, the year that's just gone. The previous year to that, ninety one ninety two, there was a change in the income tax regulations, affecting married women, only married women, everybody is the same, stayed the same. In, prior to ninety one ninety two which is three years prior to now, a married woman was entitled to the same as that, it was, they didn't call it basic allowance, the same amount only if she was married of course and working, it had to be earned income. And if a married woman in her own right had investment income, she'd got money in a building society or a bank or what have you... Morning! Then, and no earnings, she didn't qualify for an allowance at all, because investment income, then, was her husband's. A married woman's investment income, prior to ninety one ninety two, was her husband's not hers. But from ninety one ninety two onwards a married woman was entitled to an allowance in her own right, and it still mystifies me knowing Mrs Thatcher was in office for all those years, why it took so long for this to happen,. So ninety one ninety two a married woman was entitled to a basic personal allowance of three four four five which could be set against any income erm or investment. And the change now means that if a married woman, it doesn't, as I say, it doesn't affect single women, if a married woman now hasn't earned income using all her allowances, so she doesn't work hasn't worked, never qualified for a pension, or does work but doesn't earn more than that, and the couple have got investment income then it's sensible to switch that into the wife's name to give her income to use up her allowances. Because otherwise the investment income stays with the husband, taxed at his rate which could be forty, and they're therefore wasting the balance of allowances, the wife's allowances. Or if a wife was earning, working or had a pension and did use her allowances, but the husband was paying forty percent, the same switch of investments, transferring income to the wife, even though it was chargeable at twenty percent or twenty five, was relieving the husband's forty percent. Or down the scale again, the husband could be paying twenty five percent and the wife twenty percent, and they could switch investments between the two. Or between wife and husband, we tend to think only of transfer from husbands to wife, but er we do meet quite er a w er ladies who've got quite high earnings and they themselves are paying forty percent in which case they should make sure that any investment income of theirs is transferred to the husband, so as to get the, to either use up allowances that are not being used at all because of absence of the income, or to benefit from these different rates of tax.
[speaker002:] They might run off and take it with them. [LAUGHTER]
[speaker001:] Well this is the risk you have to take but er, and it's a, it's a profit at this stage where er people are coming up to receiving lump sums in retirement and wonder how best to invest it, well seems to me there's no better investment than to, than to put it into tax free sources that you have available to you. Now when I say transfer assets to er a wife it will also if you've got a joint account. It may, may be in the husband's sole name and maybe his lump sum on retirement would otherwise be going into his own account oh and they may say put it into a joint account. Now with joint accounts the revenue regards the income as being shared equally, whether or not the capital was put in equally the, the revenue says interest on a joint account is equally shared. And it may well be that an equal share of interest doesn't achieve the best result. So if you've got an account in a husband's name and it would be better in a wife's name, close the account. If you've got a joint account look to see whether closure and transfer of the asset into the wife's name will give you a better result. It's no good saying to the revenue well half of it er my wife has half of this account therefore I'm not regarding it as mine. It has to be an account in the wife's name, it has to be a genuine transfer to a wife so that there's no doubt about it but it is a on her account. But you can see that er for someone who has no, a wife who has no income and her husband's paying twenty five percent or forty percent then by moving a, say er twenty thousand at erm well er whatever percentage to fill up these allowances er if you're getting ten thousand or twenty thousand put, put it into the wife's name that they give us the interest is then hers, if she has no other income it neatly can be swallowed up by the allowance.
[speaker002:] Does anyone have to pay any tax say on building society?
[speaker001:] Well on building society in that your building society are have change too in ninety one two at the same time. Prior to ninety one two when independent taxation came in banks and building societies were just taxed at source, as it is today. But you couldn't get that tax back, whatever your circumstances were. An odd situation, don't quite know why, there are nu numerous odd situations in here er in income tax, there's nothing fair about income tax at all. And building society, anybody who has a building society account prior to ninety one two if they hadn't income really i they were silly to have money in the building society account because they were having tax deducted but couldn't get it back and at the same time as the independent taxation they changed the er tax system for building societies and banks which meant that banks and building societies were then deducted tax at the standard rate of twenty five percent and it could be refunded or repaid or not deducted in certain circumstances, so back to your question, anybody who has money in a building society now, or isn't taxable, should ask the building society not to deduct tax, as they're entitled to do, fill a form and, and where people can state that they don't, they're not liable to pay tax, building societies and banks will not now deduct income tax. And you'll be
[speaker002:] And that's a mar that is a married couple?
[speaker001:] That's for a married couple, but er anybody who hasn't income, single person, children! Children, particularly our own grandchildren I discovered er had got money in the building societies I mean we give them money for presents and throw it into a building society, and I said what's happening about your, your tax? What tax? You know and then they realize that er in showing a building society account they just showed the interest after deduction of tax. And they n have now claimed exemption, so any child or any person who hasn't got income using up all their basic allowances should apply to banks or building societies not to deduct their tax
[speaker002:] Could could I just ask
[speaker001:] Yes?
[speaker002:] if you've, you've not already opted for individual er taxation er and you decide to do so after retirement how, how do I go about doing that, I mean does, does i if I invest er a lump sum in my wife's name, we've got to have opted for individual
[speaker001:] No.
[speaker002:] taxation have we? No.
[speaker001:] No, there's no such thing as individual taxation.
[speaker002:] Th well what I meant was er what did I mean? I'm not sure.
[speaker001:] Independent?
[speaker002:] Independent taxation.
[speaker001:] Independent taxation. Well ind all independent taxation is, it isn't an option, it simply means that a wife from ninety one two is independent of her husband for all tax purposes.
[speaker002:] Oh right. That's
[speaker001:] all
[speaker002:] automatic is it?
[speaker001:] Automatic.
[speaker002:] Oh right, right you see yeah
[speaker001:] And from that day
[speaker002:] never think about these things.
[speaker001:] from that day a wife's
[speaker002:] Right.
[speaker001:] a wife's income is not included in her husband's return.
[speaker002:] Right.
[speaker001:] You do not now show your wife's
[speaker002:] Right.
[speaker001:] income. She is required to have an inc a return of her own.
[speaker002:] Right so I don't need to do anything for that?
[speaker001:] You don't need to do anything, you simply, you simply move your money into an account in your wife's name.
[speaker002:] In me wife's name.
[speaker001:] Gives her income and it's balanced by her allowances and if you move not sufficient to, for the income to exceed that then at the same time it goes into a bank or building society you apply for them not to deduct income.
[speaker002:] Right you just fill a form in? At the building society or the bank or?
[speaker001:] You just fill a form in. Yeah. Building societies and bank, and further
[speaker002:] Thank you.
[speaker001:] further to that, I don't know whether anybody's got a recent notice of coding, I did. Can you help someone to get your tax back? They're asking me! Can I help someone to get my tax back. The revenue is so desperate now because of this change in banks and building societies have left people not knowing what the situation is, and er there are millions, I'm, I'm not exaggerating there are twelve million, over two million pounds is being spent by the revenue on a new tax-back advert, sorry I did exaggerate, the idea is to remind about ten million people on all, on low income, that they could claim back tax which has been deducted from taxed savings. And it is men and women, people on low income and children, you know your, so bear in mind your own children and grandchildren, if they haven't got income up to three four four five, tell them to watch this deduction of tax from banks or building societies. There are also these privatization a lot of husbands and wives bought these shares of privatization had it in joint names, well that tax will have been deducted and can be reclaimed also, so er this was a change that came about with independent taxation. Have I dealt with that?
[speaker002:] Er, interest rates are going up and down
[speaker001:] Yeah.
[speaker002:] If y you,s say that the wife's income i is, is three, four hundred erm and interest rates go up and then you go over,
[speaker001:] Over.
[speaker002:] what happens then?
[speaker001:] Well the, the er official answer is that you [tape change] will be authorized to uprate the value of all. It's quite simple, save the revenue billions of pounds in er overtime payments over the years, but that's what they are. there's a great range of them, all sorts of different letters er merely er categorizing certain types of person. Anyway back to main point, so up to retirement quite straightforward, no problem at all and this is why he could have gone on for donkey years without a return of income, his salary goes up of course, it's picked up in the tax tables, his personal allowances don't change so they could swan along there for so many years without even looking at his affairs, but then see what happens in the very next tax year, when he hasn't had a return and may not get a return for a couple of years. In this case he has and they've an and conveniently of course for this example it's all been put into, into a statement. Now he's become sixty five so as you remember he qualifies for the larger age allowances, he qualifies for the larger married couples allowance, so his total allowances are of course considerably increased by the fifteen hundred pounds. But then he had no adjustments to make here, he'd no other income to collect but here he's got three sources of income to be collected out of his on the pension only. So in the first case they've given him, the first place they've given him six six six five allowances but then they pull back the total of those three. It effectively charges it because if you've got six thousand allowances and you withdraw that amount putting it against the total income it means that you're actually paying tax on those by deduction. But that's how the revenue works out how t t to collect income where it can't operate a separate pay as you earn coding system, it withdraws some of the allowances and effectively charges tax. So straight away you see what's happened in this case his code becomes two eighty one H whereas previously we've got quite a high code and yet his total income is er not er comparative to the change in code numbers and this is what has that effect, that all that tax on all this income has to be collected against his works pension, thereby causing a lot of confusion and difficulty for er people becoming retired. And as I say that is er fairly straightforward. Now on to this business of a part time job. If you are w going to work part time or full time in most cases there would be a separate coding for it, in this particular example it's an employment where they don't operate pay as you earn,i if, use my old phrase no longer applicable I suppose, a corner shop. If someone were to work part time for a corner shop keeper who had no other employees there would be no way of collecting tax at that employment. But of course if he worked for Raleigh where they've got a vast labour force a vast pay as you earn scheme then any income would be taxed by Raleigh as a subsidiary source so there would be another code number there, they would actually be collecting tax at two sources, but they would still need to allocate allowances, it may well be that, at Raleigh for example, they've covered that by allowances in which case they pull back five hundred pounds there to collect. Or they may have charged the five hundred at twenty five percent in which case they needn't then make any adjustment on his code. But you can see, whatever they do it is still an adjustment within that same basic outline. Still this little bit of involvement at a time when you think life is going to be much simpler.... So this is why I emphasize the fact that when you become retired your circumstances are all always going to change for the worse as far as adjustments are concerned. So use the opportunity, get a return, make them take a good look at you and then you know you're alright and can go on for another couple of years and make them look at you again. Okay watching time cos it's amazing how much time goes. I mentioned erm benefits of er of exempt income and I showed er a feature with this and I apologize that the fact that's it's TESSA but I do this with TESSA because it's the one way that you can illustrate the point I want to make. And National Savings and TESSA, some of them, not all, they operate this compound interest factor, now you all know what is, what compound interest is, it's, you get interest on interest. But the advantage of the er tax exempt bit is that with these you start getting interest on tax that you haven't payed,. This is what happens with tax exempt sources and by looking at a TESSA and assuming you pay the maximum each year which are those figures and assuming that the interest rate stays at seven and a half percent, it won't but it's seven and a half percent at the moment, then this is what happens, at the end of the first year you've put in your three thousand your interest at seven and a half percent is two twenty five and you would otherwise pay tax at fifty six at twenty five percent or twenty or forty which would be those figures, but you don't. But because you don't that amount hasn't been withdrawn from that two twenty five, so that in the next year you put in your eighteen hundred and at the end of that year you get interest on three thousand eight hundred and of course the two twenty five which happens to be three seventy seven, so at that second year you start getting interest on the fifty six pounds that you haven't been required to pay. And this is what happens with this, as the years proceed you're getting interest on the previous year's interest which includes the tax that you would otherwise, that would otherwise have gone from your account in paying into income tax. So that at the end of the five years, assuming you've paid the maximum stake at seven and a half percent, you would, otherwise you would receive the nine thousand back of course, and at that rate you would receive two six seven one and that will include, if you're a twenty five percent payer, six hundred and sixty seven that you would have otherwise lost in, that would have gone out in tax. Or if you're forty percent you would have actually paid a thousand and sixty seven, but because you didn't pay that because it's tax exempt you actually gained that amount of interest on the tax that stayed in with your account. So the advice is, and I'm not an investment advisor, it's because of the exemption you must always take advantage of all tax exempt forms of savings before you look at anything else. You really should because you, you get those advantages. Not with all National Savings, there are some that don't a apply the compound interest factor, you get the interest at the end on the sum that you put in at the beginning. It's where you get the interest on interest throughout the years and would otherwise pay tax on that interest and don't and the amount that you haven't paid stays in and gets the compounding the same as the interest.
[speaker002:] right in thinking you can only have one TESSA?
[speaker001:] You can, indeed, only have the one TESSA. Husband and wife can have two accounts. And you don't need to put in the whole amount, but then if you don't put in the whole amount or you withdraw the net interest which you're entitled to do then you're pulling away the build-up aren't you? You're stopping the, you're stopping it building up. Hello shan't be long [door closing] just in time for a cuppa.
[speaker002:] If you've missed a year can you put in twice the amount the following year?
[speaker001:] Er
[speaker002:] For instance if you've missed your eighteen hundred on year two, if you put in three thousand six hundred
[speaker001:] that's a good question I don't know, I don't know.
[speaker002:] I think the answer is no, because it closes whatever the anniversary of the day you started, that's the year.
[speaker001:] Yes.
[speaker002:] If you start the twenty fourth of April
[speaker001:] Right.
[speaker002:] it goes to the twenty fourth of April next year
[speaker001:] Twenty fourth of April.
[speaker002:] and then it you on that day.
[speaker001:] Just noticed on my little notice the shop. Did you know that there's a building society shop in Nottingham? And it enables you to call in there and they will give you th the details of the best building society rates throughout the country. It's a shop, they sell building society information and they will invest for it. But er you can call in and they
[speaker002:] Where is it?
[speaker001:] It's on. It's the building society shop, they will tell you what the rates are and what are the best rates. You can say well I want to do, put my money so and so, what's the best rate for me? Or er er understand I'm not entirely certain about that, they do the same with, they will tell you which are the, which are paying the best TESSA rates. have to be careful because I'm not an investment advisor, I'm simply talking about the benefits of the tax exemption. If that happens to be investment advice well then so be it. Okay quick question.
[speaker002:] ever so quickly.
[speaker001:] We can, we can have any further in s sorry, we can have any further during the conclusion session which is, this is where we tend run on, okay?
[speaker002:] Small business you're setting up as self employed
[speaker001:] Yeah.
[speaker002:] could we talk about that some time?
[speaker001:] I'll do i shall I do it conclusion? Later?
[speaker002:] Yes.
[speaker001:] I'm, I'm run out of time now because I intended to make now erm erm short of time. But the, the afternoon session conclusion
[speaker002:] [cough]
[speaker001:] one is, as far as I can see, is to do this where we fit, where we're able to fit in subjects that er we missed, so certainly we'll fit it in on the, on the later session. I really did want to talk about being in business on your own account as opposed to er working for an employer. Okay.