One million people in the UK are part of a share save scheme, but what exactly are they?
An Introduction to Share Saves
You may see share save schemes referred to as Save As You Earn (SAYE) or employee share ownership schemes.
Introduced in the UK in 1980, share save schemes help you save towards buying shares in the company you work for.
For a company to participate and offer this scheme to its employees, it must be (or be owned by) a public company listed on a stock exchange.
How do they Work?
You save directly from your wage and then at the end of the savings period you are given the option to buy shares in your company or take your savings in cash.
The company will give you an option price, which is the price you will be able to buy shares for at the end of the scheme.
You can save up to a maximum of £500 a month under the scheme. The amount you opt to save is then fixed every month. So, if for example, you opt to save £50 a month for the duration of the scheme, you can’t then increase this to a contribution of £200.
The company may set an eligibility period wherein to join the scheme, you must have worked for the company for a minimum length of time.
What do you get?
As we noted earlier, you can take your savings as cash or as shares in the company. However, there are a number of options and combinations as to how you can do this:
Take it as cash. Here, the scheme has been used as a savings account of sorts. With this option, you will get back every penny you put away into the scheme. However, the money will not accrue any interest whilst sitting in the scheme, unlike how it would in an ordinary ISA
Buy and sell the shares. For example, you may choose to do this if the share price has risen above the option price given to you at the start of the scheme, so buying and selling the shares allows you to immediately make a profit
Buying and selling some but not all of the shares
Buying some shares and taking the rest as cash
You have 6 months to make this decision, so you don’t need to choose as soon as the scheme comes to an end.
You will pay no income tax or national insurance on the difference between what you paid for the shares and their value, but you may have to pay capital gains tax if you sell the shares.
What Information should my Employer give me?
Your employer will usually extend an invitation for you to join the scheme a couple of months before it begins. They should disclose the following information to you:
The scheme’s length, which will be either 3 years or 5 years
The deadline for signing up to the scheme
How much you can save each month. Under share save schemes, you can save between £5 and £500 a month. However, your employer may have their own rules, where they have increased the minimum payment you must make, lowered the maximum payment you can make, or a combination of the two
The price you can buy shares for at the end of the scheme. This price is set at the start
Is this Right for Me?
Whether share saves are right for you is a personal decision. If you would only want to take the savings as cash at the end of the scheme period, a savings account is probably a better option for you, as you can benefit from savings growth via interest.
Additionally, if you are struggling with debts or need to focus on building an emergency savings fund, it’s probably worth prioritising this over share saves.
However, if you do have a bit of spare income each month and want a low-risk form of investment, share saves may be a good option for you.
by Red Star Wealth
For many of us, our mortgage is our biggest monthly expense. Therefore, the question of whether we could still afford to meet our mortgage repayments if we were out of work is an important one… and this is where mortgage payment protection insurance comes into play.
What is Mortgage Payment Protection Insurance (MPPI)?
MPPI covers your monthly mortgage payments if you’re made redundant or are unable to work due to serious illness or injury. There are three main types of policy cover:
Unemployment
Accident and sickness
Combined
MPPI can help prevent you from defaulting on your mortgage and risking repossession of your home if you’re left without your ordinary income to make mortgage payments.
How it Works
You begin receiving payments after you’ve been out of work for a specified waiting period, which is usually set between 30 and 60 days but can reach up to 180 days. Therefore, it is still always important to consider having an emergency fund, as you still need to cover costs during the waiting period.
There is usually an exclusion period, which is the time elapsing between the start of your policy and the time you are actually eligible to make a claim on the insurance. This exclusion period is usually set between 30 and 180 days.
You will then receive set monthly payments, usually for up to a maximum of 2 years.
Depending on your MPPI provider, you may be able to get a policy where your bills are also covered, in which case you will receive 125% of your mortgage costs.
Your job may affect the amount you have to pay for your MPPI policy, because most insurers categorise jobs according to different risk categories. The higher risk of injury, illness or redundancy you are seen to be at, the higher your premium will be.
Other Insurances to Consider
You may wish to consider a decreasing life insurance policy, which covers the cost of your mortgage payments for your dependents when you die. This is by no means an alternative to MPPI, as cover only starts in the event of your death. However, it may be something you want to consider in addition to MPPI, so that you dependents are financially protected.
As an alternative to MPPI, you may choose to take out income protection insurance. This covers a portion of your salary, making it more comprehensive than MPPI, as the payments you receive can be used for anything, including the mortgage payments themselves. Additionally, income protection insurance often pays you instalments for longer than the MPPI 2-year limit.
Critical illness cover is an alternative worth considering if you were thinking of taking out an accident and sickness MPPI. Critical illness cover pays you a lump sum if you are diagnosed with a serious illness which makes you unable to work, but it does not provide you with a regular income through instalments.
Check whether your employment contract includes an arrangement for the company to continue to pay you your salary, or a portion of it, for a set period if you are off work due to illness. Some employers may even offer income protection insurance as an employee benefit.
Whether you get MPPI is your choice, but as with any financial decision, it’s a good idea to look at all of your options.
by Red Star Wealth
Business Asset Disposal Relief (previously known as Entrepreneur Relief) is a form of tax relief from capital gains tax.
How does it Work?
Business Asset Disposal Relief is when you sell all or part of your business or its assets and pay only 10% capital gains tax (CGT) on profits up to £1 million (the new lifetime limit). Once you surpass the £1 million limit, you will be charged the usual rate of CGT on the remaining taxable gains.
Previously, the lifetime limit was £10 million but at Budget 2020, Rishi Sunak, as Chancellor of the Exchequer, announced that the lifetime limit would be brought down to £1 million for any qualifying disposals made on or after 11th March 2020.
How much can it Save You?
If you’re a basic rate taxpayer, you will pay CGT on the disposal of assets according to the size of profits, your taxable income, and whether the gain is from residential property or not. If your taxable income falls within the basic income tax band, you’ll pay 10% CGT on gains (18% if disposing of residential property).
However, as a higher or additional rate taxpayer, you would pay 20% CGT on taxable gains from any chargeable assets (except for disposal of residential property, on which you’d pay 28%).
Therefore, Business Asset Disposal Relief could save you up to £100,000, because if claiming the tax relief on up to £1 million worth of assets, you’d reduce your tax burden by 10% (£100,000).
How do I Qualify?
Business Asset Disposal Relief covers both shares and business assets. Sole traders and partnerships can claim this relief when selling assets used in the business. Company directors and shareholders can claim the relief when selling shares or assets.
To qualify for tax relief on sale of assets, you must fulfil the following criteria for at least 24 months:
You must be an employee of the company (includes being company director) or a sole trader
You must own at least 5% of company shares if claiming the tax relief on share sales
There are also some extra things to bear in mind:
You can claim relief on share sales if a company stops trading, providing this is done within 3 years
You cannot sell a ‘going concern’, i.e, you cannot claim tax relief on the sale of something that is loss making and not commercially viable
If trying to claim the tax relief on property sales, the property must exclusively be a business asset. It must be owned by the company and used rent free
The 5% Rule
As noted above, you must own at least 5% of company shares in order to qualify for Business Asset Disposal Relief on share sales. If your share in the company is only just above this 5% lower limit, you should keep an eye on it to ensure it doesn’t drop below the threshold if you’re considering selling your shares in the near future. This could happen if your shares became diluted from more shares being allocated or other employees activating share options, meaning more shares in circulation.
If you lent any assets to the business, to claim the tax relief you must have sold at least 5% of your part of the business partnership or shares in a personal company. You must have also owned these assets yourself but let the business use them for a minimum of a year before your sale of the shares or business partnership.
For information about how and when to claim Business Asset Disposal Relief, click here.
by Red Star Wealth
The last few years have witnessed a rise in direct cremations, wherein the body of the deceased is cremated without a service and the ashes are given to the family.
Sunlife’s Cost of Dying 2023 Report found that 1 in 4 people who organised a funeral were surprised by costs. Funerals can be distressing to think about, and we often avoid doing so until a point where we have to. However upsetting, it’s still an important topic, as it can be a significant cost for people to shoulder.
Sunlife stated, “More and more we’re seeing people report actively trying to cut back, to keep their funeral spend as low as possible- no surprise given the current economic situation. Unfortunately, we’re also seeing fewer people covering costs with savings and investments, and more having to borrow money.”
Here, we can see the issue… funerals are expensive, and many are either unwilling or unable to pay the cost. So, how are people responding to the cost of funerals?
Here, SunLife shows the changes in funeral patterns over 2018-2022. As we can see here, there has been a significant rise in the number of those turning to direct cremations. The leap upwards from 3% in 2019 to 14% and 18% in 2020 and 2021 respectively, is understandable, as much as this trend can be attributed to Covid-19 restrictions. However, even with Covid-19 under control, the popularity of direct cremations is still going strong.
Much of this popularity stems from its price. SunLife found that the average funeral cost in the UK for 2022 was £3,953, whereas the average cost of direct cremation was £1,511.
Even if they have the money to cover their funeral costs, many would rather leave this as an inheritance for their loved ones.
This said, a funeral tends to be for the benefit of the living, for those who are left behind when we die. It can be beneficial to the grieving process and coming to terms with the death of a loved one.
Paying for your Funeral
Many choose to pay up front for their funeral or ensure they leave enough money behind to cover the costs. You can do this by:
Taking out a prepaid funeral plan
Taking out life insurance. Your beneficiaries can then use some of the lump sum paid to them when you die to pay for your funeral
Paying for it with your savings or estate
If you are struggling to pay for a funeral, Money Helper has a guide which you may find helpful.
by Red Star Wealth
We often avoid thinking about our deaths because it can be scary and unsettling… but making a will is definitely worth considering
What is a will?
A will is a legal document that you create before you die. It expresses your wishes as to how you want all of your assets to be distributed after death. You can also add information like who you’d like to take care of your children and pets.
You are in Control
Making a will helps you maintain control even in death, so that your wishes are met. Your assets go where you choose, to whichever family member, partner, friend, or charity you specify.
It also allows you to appoint guardians for your children, rather than this decision being left up to the local authorities or courts. Therefore, you know that your children will be properly cared for, by who you want, when you die.
Caring for Your Family
Making a will means you can provide for your family (or whoever else you choose) in death. If the family home is in your name, it is a good idea to create a will to ensure your family inherits your share of the property, or right to reside in it, so that they don’t lose the family home.
What Happens if You Don’t Make One?
If you don’t make a will, the courts will have to name someone to administer your estate. This decision may not be the same as what you would have made.
The process of naming an administrator can prove time-consuming and expensive for your loved ones. Also, there may be lots of bickering over who believes they should inherit what…by making a will, speculation is removed as you are clearly laying out what you want to happen to you and your assets. This will likely help prevent arguments and family divides.
Making a will means that all of the arrangements and decisions surrounding your estate aren’t completely left up to your family… bereavement is difficult enough as it is.
Dying Intestate
If you die without having written a valid will, you’ve died intestate. This means that your estate has to be shared out according to different rules, as you haven’t stated otherwise.
Under intestacy, only married/civil partners and close relatives can inherit your assets. It is particularly important to create a will if you have an unmarried partner or step-children whom you wish to pass your estate onto.
There is a whole host of rules regarding intestate death… check out the citizens advice website for more detailed information.
Listen up Newlyweds!
When you marry, your existing will will automatically become invalid in England and Wales, so you must update it.
