Your money queries are answered by Peter Rutherford, senior director of Rutherford Wilkinson Ltd, chartered financial planners.
Q: My wife and I have been talking about making wills but I am reluctant to do so as solicitors are so expensive and I think she will get everything anyway. Am I wrong to take this approach?
A: The cost of a will is really quite cheap compared with the time and expertise that a solicitor can bring to it. I strongly believe it is worth the expense. If you die without a will then the law makes one for you but your spouse is certainly not guaranteed to receive everything particularly if there are children involved. There is also the potential for parents, brothers and sisters and ultimately the Crown to benefit from your estate if there is no will. For those not married but living together a will is absolutely essential as a “Common Law” partner has no standing under the law of intestacy. I recommend to all my clients that they have one.
Q: I am retired and have a small pension which means I do not pay tax. I do have some Stocks & Shares ISAs but I have noticed that there has been some tax charge on interest it received. I thought they were tax-free, so my question is can I claim this tax back?
A: The ISA rules state cash may be held in a Stocks & Shares ISA but only short term or for a reasonable amount to cover charges and expenses. Any excess which generates interest is taxed at the flat rate of 20% regardless of the tax rate of the investor. As HMRC do not count this as the income of the investor they do not allow it to be recovered by a non-tax payer. A higher rate tax payer has no further tax liability.
Q: I have an endowment policy which has been running for a long time and has a reasonable value in it. I have been told I can take a loan from it but I would like to know if there are any tax issues I should be aware of?
A: This is a complex area and the first thing is to establish when the policy was taken out. The rules change for policies effected after 26 March 1974. It also depends on whether or not the policy is classed as a “qualifying policy” and whether or not the interest payable is at a commercial rate. It is possible the loan is classed as a chargeable event which can create a tax charge for a higher rate tax payer. You need to seek advice and have all the details of your policy available. Advice should be from an independent financial adviser or if you are dealing direct with the insurance company they should be able to clarify the position in your circumstances. I think an important point to note is that a lot of policies carry these options and could be useful for individuals or businesses with some cash flow problems.
To request a free “Investor’s Guide” and with any questions you would like answered please contact me at Rutherford Wilkinson Ltd, Northumbria House, 21-23 Brenkley Way, Blezard Business Park, Newcastle upon Tyne, NE13 6DS. Website www.rwpfg.co.uk . Telephone 0191 217 3340 or email peter.rutherford@rwpfg.co.uk Rutherford Wilkinson Ltd is authorised and regulated by the Financial Services Authority.