Money: Readers' lives - How to turn concrete into cash

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I AM 76, my wife is 64. We own our freehold property worth pounds 85,000. We have heard of Barclays' shared appreciation mortgage. What other schemes are available to allow us to release some capital?

DH, Cumbria

In addition to Barclays, Bank of Scotland offers a shared appreciation mortgage. You take out a mortgage and opt to pay 0 per cent interest (so you just take the loan and make no repayment at all). Or you can pay a fixed interest rate of 5.99 per cent. The bank recovers its loan when the property is sold.

The bank also takes a percentage of any rise in the value of your home. The exact percentage depends on the interest rate you choose and the size of the loan relative to the value of the property. For example, if you opt for a 0 per cent loan the bank gets any appreciation of three times what they call "loan to value". What this means is that if you take out a loan for 20 per cent of the value of the property, the bank will get 60 per cent of any future rise in value.

Another way to make use of the capital tied up in your home is to take out a home-income plan. You obtain an interest-only mortgage of up to pounds 30,000 and use the money to buy a fixed-rate annuity. (You can take 10 per cent of the loan as capital to spend.) You use some of the income from the annuity to pay off the mortgage.

The net increase to your income is the annuity less the cost of paying the interest on the mortgage. A key factor reducing the cost of borrowing (and so increasing your net income) is the basic-rate tax relief on the mortgage interest. In effect, the government pays 23 per cent of the interest.

Arguably, home-income plans are a convoluted way for elderly people to boost their pensions. The money you borrow as a mortgage to buy the annuity is paid off when your home is sold (which, typically, will be after you die). These "safe" fixed-income, fixed mortgage rate home-income plans have been available since the early 1970s. Don't confuse them with a variety around in the late 1980s, which are now banned.

The older you are when you buy an annuity, the higher your income. For this reason, home-income plans may not be suitable for people who are much younger than 70. Since your wife is only 64, you may want to wait a few years. But you can always get a quote.

The specialist in this area is Hinton & Wild, 374-378 Ewell Road, Surbiton, Surrey KT6 7BB (0181 390 8166). This intermediary has been long established in the business and should be able to advise on all the pitfalls.

There is a different option, the home-reversion scheme. With this, you sell part or all of your home (between 40 per cent and 100 per cent) but continue to live in it. In return you get an income for life or a lump sum. These schemes are not subject to a pounds 30,000 limit.

I HAVE just completed my tax return for the 1997/98 tax year and my (self-employed) earnings were less than in the previous year. I believe this may entitle me to reduce the tax demand for which payment is due at the end of July. How exactly does this work?

LW, Hertfordshire

Your tax bill for the 1997/98 tax year (6 April 1997 to 5 April 1998) is paid in two main instalments, on 31 January 1998 and 31 July 1998. You are asked to make "payments on account" on these dates, based on the previous year's tax bill. If it eventually turns out that you owe more or less tax in 1997/98 than in the previous year, an adjustment will be made to the tax you are asked to pay on 31 January 1999 (when you also pay your first instalment for 1998/99).

You can choose unilaterally (you don't need the approval of your tax office) to reduce your payments on account if you think your tax bill will be lower than the previous year. But if you end up paying too little, the Inland Revenue will charge interest at an annual rate of 9.5 per cent from 31 January or 31 July on any shortfall up to the amount you were asked to pay on account.

By contrast, if you pay the instalments as requested, and this turns out to be too much, you will be paid interest of 4.75 per cent (a reasonable rate, especially for higher-rate taxpayers because it's tax-free). By the time the July 1998 payment is due, many taxpayers will know how much they earned in 1997/98, especially if they have already completed the tax return sent out in April. Unfortunately, not everyone will feel confident enough to work out the tax bill and, in any case, it is easy to make a mistake. So err on the side of caution and risk overpaying in July.

You can notify your tax office of your intention to reduce a payment on account at any time up to 31 January 1999. Get form SA303 from your tax office or make your claim on your tax return.

Letters to an old employer that ran a non-contributory pension scheme in the 1970s have been returned. I know the company was taken over in the mid 1980s. Could you give details of the government-backed agency that traces old employers' pension schemes?

DS,West Midlands

Contact the Pension Schemes Registry, PO Box 1NN, Newcastle upon Tyne NE99 1NN (phone 0191 225 6393). Give the agency as many details as possible.

Write to the 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 Do not enclose SAEs or any documents you wish to be returned. We cannot give personal replies or guarantee to answer letters. We accept no legal responsibility for advice given.