Readers' lives: Going offshore won't sink your tax liability
Interest in Jersey ... tax-free rent ... finding an IFA. Your financial queries answered
Sunday 16 November 1997
Like it or not, if you live in the UK you are probably 'UK tax resident' - which means you are subject to UK income tax, even on interest earned on savings outside mainland UK. If your mother counts as UK-resident, the interest on this offshore Jersey account probably faces tax.
An exception would be if her total taxable income - including the interest earned in Jersey - is less than her tax-free personal allowance. Also, if she earned interest abroad which had tax deducted at source, she would normally be able to reduce her UK tax liability by the amount of tax already deducted abroad.
In the case of offshore tax havens such as Jersey, where interest is paid gross, a taxpayer is liable to tax on the interest. Details of interest paid during the current tax year (from 6 April 1997 to 5 April 1998) should be included on the tax return your mother receives next April. If your mother does not receive a tax return she should contact her tax office and ask for one. If she is not sure which tax office covers her, she can find out by contacting any tax enquiry centre listed in her local phone book.
There was a time when something called composite-rate tax was automatically deducted at source from deposit interest in the UK. Non-taxpayers (such as people on low incomes, including non-working spouses) were not able to reclaim the tax, so they were encouraged to open gross-paying offshore accounts. Nowadays, basic-rate tax is deducted at source in the UK but non-taxpayers can reclaim the tax and, indeed, register to have interest paid without deduction of tax (ask your bank or building society for an IR85 form).
For people who are UK tax residents, the only tax advantage in opening an offshore deposit account is that there can be a period between having interest credited and paying tax on the interest. This allows you to earn a little extra interest on the delayed tax. But this tax advantage is likely to be fairly marginal for most people. The main thing to consider is whether you can actually get a higher interest rate offshore. Bear in mind that accounts opened with offshore branches of building societies don't usually entitle you to receive free shares should the society convert to a bank.
I'm about to take in a lodger. Do I have to notify the tax authorities? I understand the rent from a lodger is now tax-free.
The chances are that your lodger's income will come under the "rent- a-room" scheme. You can get leaflet IR87 from tax offices to find out whether you qualify. The scheme allows you to receive up to pounds 4,250 a year tax-free from lodgers in the home where you live yourself - roughly pounds 354 a month or pounds 81 a week. If two or more of you share rent from lodgers (as may be the case when couples or groups of singles buy a property together) the annual tax-free allowance is pounds 2,125 each. Rental income over the tax- free amount is taxable and the Inland Revenue requires it to be declared.
I need a(n independent) financial adviser. Are there services listing IFAs in my locality?
There are two free telephone enquiry services for getting lists of IFAs. Both will send their lists according to the postcode you give - so, for example, if you prefer to have an adviser near to where you work, give your work rather than home postcode. And while you get their details of IFAs for free, the IFAs are not given your details, so you do not need to worry about them pestering you.
Of the two services, the register of fee-based advisers run by Money Management, a personal finance magazine, should be your first port of call. Telephone 0117 976 9444, give your postcode and details of any specialisations you are looking for in an adviser (for example pensions, mortgages, investments). You'll then be sent six names. All will offer you the option of paying fees for any work they do for you rather than paying commission, which should give them less incentive to sell you something. Initial meetings should be free.
IFA Promotion, a marketing body for advisers, on 0117 971 1177, will also send a list of three advisers in your chosen postcode area. IFAP can supply further names, and first visits are always free. But many of the IFAP advisers will not offer the fee-based option - they will only work on commission. Last year 82,000 people called the IFAP service, of which 36,000 subsequently contacted an adviser.
Write to Steve Lodge, Personal Finance Editor, Independent on Sunday, 1 Canada Square, Canary Wharf, London E14 5DL, and include a phone number, or fax 0171-293 2096 or e-mail s.lodge@ independent.co.uk. Do not enclose SAEs or any documents you wish returned. We cannot give personal replies or guarantee to answer every letter. We accept no legal responsibility for advice given.
21 November 2014 06:44 PM
Your children have it all, your partner gets nothing
21 November 2014 07:12 PM
Halfords is gearing up for Christmas
21 November 2014 06:54 PM
Fields of dreams: venture capital trusts help young companies to grow, potentially delivering big returns for investors
21 November 2014 06:32 PM
There are many reasons for people to turn to high-cost credit, but being turned down by their banks for a loan is one
21 November 2014 07:15 PM
The £150 incentive from Yorkshire and Clydesdale runs from now until 28 February next year, but you must use the official Current Account Switching Service (CASS) and close your existing account to qualify
14 November 2014 04:42 PM
For the rising number of homeless women, the struggle is compounded by health problems and by losing their children
14 November 2014 05:37 PM
Research from Sainsbury’s Bank Credit Cards this week revealed that 15 per cent of people making a large purchase on their plastic didn’t use one with 0 per cent interest on purchases
14 November 2014 05:23 PM
Last week was hangover time, when Stock Spirits, a vodka producer, distilled a profit warning that sent its shares crashing more than 25 per cent
14 November 2014 05:17 PM
Investment melting pot: the price of gold may have fallen but Artemis Strategic Assets believes its value cannot be debased
14 November 2014 05:05 PM
Interest rates are currently as low as 0.1 per cent
14 November 2014 05:01 PM
The energy watchdog Ofgem has slammed Scottish Power, while Citizens Advice reports a string of complaints about it
14 November 2014 04:57 PM
John Lush from Hampshire got into debt with payday lenders and had the help of a debt management adviser to clear the £20,000 he owed
08 November 2014 12:00 AM
01 November 2014 12:00 AM
01 November 2014 12:00 AM
Simon Read: There may be trouble ahead for cohabiting couples who don’t make a will
Mark Dampier: Strong returns can be found if you go the opposite way to the crowds
Money Insider: Would £150 make you switch banks?
Bargain Hunter: Find the deals that have real value beneath the Black Friday hype
Gold-plated pensions – the key to retirement freedom?
- 2 Tower Bridge glass walkway 'smashed' by night-time visitor dropping bottle of beer
- 4 Woman opens professional cuddling shop – gets 10,000 customers in first week
- 5 Grayson Perry: London needs affordable housing because 'rich people don't create culture'
Rochester by-election: Ukip gains second MP as Tory defector Mark Reckless holds seat
'Beast of Bolsover' Dennis Skinner takes Ukip MP Mark Reckless to task moments after he is sworn in
Rochester by-election: Labour MP Emily Thornberry resigns after posting white van and England flags tweet
France 'blocks' Russian sailors from boarding a warship
Revealed: How the world gets rich – from privatising British public services
Rochester aftermath: Sacking of Emily Thornberry will make work of Labour MPs '10 times harder'
iJobs Money & Business
Voluntary Only - Expenses Reimbursed: Reach Volunteering: Age Concern Slough a...
Voluntary Only - Expenses Reimbursed: Reach Volunteering: Crossroads Care is s...
£20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...
£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...
Day In a Page
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens