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IHT is a tax on the estate of someone who has died, including all their assets such as property, savings, investments, and valuables. The standard IHT rate is 40%, but this only applies to the value of the estate that exceeds a certain threshold, which is known as the nil rate band Inception In 1986 the Government introduced a unified tax system to replace previous death duties. It was designed to tax the transfer of wealth from deceased individuals to their heirs, in a system built on the idea that large estates and inherited wealth should contribute to state revenues, given the increasing concentration of wealth among the more affluent in societySince the 2009/10 financial year, the nil rate band has been fixed at £325,000 per person, which means that an estate worth less than this amount is not subject to IHT. For estates above the threshold, the 40% rate applies to the value above £325,000 IHT in 2025 The previous Conservative Government froze both the nil rate band and the residence nil rate band at these levels until 2025/26. Last October, the Labour Government’s Budget extended this freeze until 2028/29 What's next? Proactive planning, such as that required for lifetime gifting and setting up a Trust, should start as soon as possible, regardless of the April 2027 horizon. There are ways to help mitigate IHT for your loved onesTrusts:&nbsp;For years, pensions have been a primary tool for avoiding IHT, often outpacing their role as retirement funding mechanisms. Wealthy individuals have relied on pensions to pass assets tax-free to their families. The new IHT rules significantly impact pension planning, especially for those using pensions as IHT shelters. Trusts – particularly Flexible Reversionary Interest Trusts – offer an effective means of preserving wealth. Making use of lifetime gifting into Trusts to mitigate IHT while protecting and preserving family wealth intergenerationallyGifts inter vivos: Gifts made to anyone from an individual’s estate are exempt from inheritance tax if they survive for a period of 7 years from the date the gift is made. The most common way of protecting the beneficiaries of these gifts from the potential tax liability is to set up life assurance policies to cover the reducing liability. These policies have a fixed 7-year term, with cover reducing in steps to match the reduced liability as taper relief takes effect Conclusion Working with a professional will ensure that an individual’s estate is structured in a way that maximises their potential for tax savings, and that their beneficiaries are best positioned to receive the full benefit of their legacySeeking professional advice will help identify any potential pitfalls or overlooked opportunities, thus ensuring that estate planning is as efficient and effective as possible *This information should only be seen as a guide and does not constitute formal tax or financial advice. Please seek professional advice*

IHT: An introduction

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Many of us would think we will never be diagnosed with a critical illness, but it could happen to anyone at any time. How would you and your family cope financially if you became ill?Whether it's paying for treatment or helping to cover your salary while you get better, a critical illness policy could make an enormous difference if you're diagnosed with a life changing illness. Protection insurers provide cover for a significant list of conditions, which could&nbsp;include cancer, heart attacks and strokes There are different types of cover; level cover and decreasing cover:<ul><li>With level cover, what you pay each month stays the same for the whole term of the policy, and so does the cover amount;</li><li>If you prefer your level-cover amount to rise with the cost of living, you can opt to protect it against the effects of inflation. However, this means that what you pay will increase over time also</li><li>Decreasing cover works like a loan repayment, with a fixed interest rate. So, the value of your cover decreases gradually, but the amount you pay stays the same</li></ul> Other key criteria:<ul><li>A critical illness policy can also include children's cover, so the whole family can stay protected</li><li>Cover can usually last between 5 and 50 years, or typically up until your 75th birthday</li><li>When it comes to how much cover you'll need, everyone's different - Think about everyday costs like the mortgage, bills and childcare. The amount can be tailored to your requirements, so you're able to live life as normally as possible</li></ul> Even a small amount of critical illness cover could allow you to take the time you need to recover, make necessary adjustments to your home, or take a well-deserved holiday. Speaking with an adviser can help you navigate the solutions available, and ensure you and your home are suitably protected&nbsp;

Personal protection: critical illness explained

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When applying for a mortgage, borrowers usually focus on their credit score and income, but spending habits are often overlooked. Mortgage lenders take a comprehensive view of an applicant’s financial behaviour to assess their ability to manage mortgage repayments. Understanding how your spending habits impact your mortgage application can help you better prepare and improve your chances of approval 1.&nbsp; Why do lenders look at spending habits? Lenders need to ensure that borrowers can afford their mortgage repayments without undue financial strain. By examining spending habits, lenders can:Assess Affordability - to ensure you can afford the monthly mortgage payments in addition to your other regular expensesEvaluate Financial Stability - consistent and responsible spending habits indicate financial stability, which reassures lenders that you’re a low-risk borrowerIdentify Potential Risks - Irregular or excessive spending can signal potential financial difficulties, increasing the risk for lenders 2.&nbsp; What Spending Habits Do Lenders Examine? When reviewing your spending habits, lenders look at various aspects of your financial behavior:Regular Monthly Expenses - <span style="font-family: inherit; font-size: calc(18px * var(--body-fontSize, 1)); font-weight: inherit; font-style: var(--body-fontStyle, normal); background-color: rgba(249,250,251,var(--tw-bg-opacity));" data-mce-style="font-family: inherit; font-size: calc(18px * var(--body-fontSize, 1)); font-weight: inherit; font-style: var(--body-fontStyle, normal); background-color: rgba(249,250,251,var(--tw-bg-opacity));">Living Costs: Essential expenses such as rent, utilities, groceries, and transportation are scrutinized to determine your monthly outgoings.Debt Repayments - Existing loan or credit card repayments are considered to assess your overall debt burdenDiscretionary Spending - <span style="font-family: inherit; font-size: calc(18px * var(--body-fontSize, 1)); font-weight: inherit; font-style: var(--body-fontStyle, normal); background-color: rgba(249,250,251,var(--tw-bg-opacity));" data-mce-style="font-family: inherit; font-size: calc(18px * var(--body-fontSize, 1)); font-weight: inherit; font-style: var(--body-fontStyle, normal); background-color: rgba(249,250,251,var(--tw-bg-opacity));">Lifestyle Choices: Non-essential spending on dining out, entertainment, holidays, gambling and luxury items can impact your affordability assessment.Subscriptions and Memberships - Regular payments for gym memberships, streaming services, or other subscriptions are also taken into accountFinancial Commitments - <span style="font-family: inherit; font-size: calc(18px * var(--body-fontSize, 1)); font-weight: inherit; font-style: var(--body-fontStyle, normal); background-color: rgba(249,250,251,var(--tw-bg-opacity));" data-mce-style="font-family: inherit; font-size: calc(18px * var(--body-fontSize, 1)); font-weight: inherit; font-style: var(--body-fontStyle, normal); background-color: rgba(249,250,251,var(--tw-bg-opacity));">Loan, credit card, hire purchase and student loan payments are taken into account. Also consider c<span style="font-family: inherit; font-size: calc(18px * var(--body-fontSize, 1)); font-weight: inherit; font-style: var(--body-fontStyle, normal); background-color: rgba(249,250,251,var(--tw-bg-opacity));" data-mce-style="font-family: inherit; font-size: calc(18px * var(--body-fontSize, 1)); font-weight: inherit; font-style: var(--body-fontStyle, normal); background-color: rgba(249,250,251,var(--tw-bg-opacity));">hildcare costs and s<span style="font-family: inherit; font-size: calc(18px * var(--body-fontSize, 1)); font-weight: inherit; font-style: var(--body-fontStyle, normal); background-color: rgba(249,250,251,var(--tw-bg-opacity));" data-mce-style="font-family: inherit; font-size: calc(18px * var(--body-fontSize, 1)); font-weight: inherit; font-style: var(--body-fontStyle, normal); background-color: rgba(249,250,251,var(--tw-bg-opacity));">pousal or child maintenance payments 3.&nbsp; How Lenders Review Spending Habits Lenders typically analyze your spending habits through several means:Bank Statements - <span style="font-family: inherit; font-size: calc(18px * var(--body-fontSize, 1)); font-weight: inherit; font-style: var(--body-fontStyle, normal); background-color: rgba(249,250,251,var(--tw-bg-opacity));" data-mce-style="font-family: inherit; font-size: calc(18px * var(--body-fontSize, 1)); font-weight: inherit; font-style: var(--body-fontStyle, normal); background-color: rgba(249,250,251,var(--tw-bg-opacity));">Lenders often request three to six months of bank statements to get a detailed view of your income and expenditure. This allows them to see how you manage your finances on a month-to-month basis.Credit Reports -&nbsp;Your credit report provides insight into your borrowing and repayment history. It shows how much credit you have available and how you use it, reflecting your overall financial health. Budgeting and Affordability Calculations -&nbsp;Lenders use affordability calculators to determine if you can comfortably manage mortgage payments along with your other financial commitments. They compare your income against your regular outgoings to ensure there is enough surplus to cover the mortgage 4.&nbsp; Improving Your Spending Habits Before Applying If you’re planning to apply for a mortgage, improving your spending habits can enhance your application:Create a Budget - <span style="font-family: inherit; font-size: calc(18px * var(--body-fontSize, 1)); font-weight: inherit; font-style: var(--body-fontStyle, normal); background-color: rgba(249,250,251,var(--tw-bg-opacity));" data-mce-style="font-family: inherit; font-size: calc(18px * var(--body-fontSize, 1)); font-weight: inherit; font-style: var(--body-fontStyle, normal); background-color: rgba(249,250,251,var(--tw-bg-opacity));">Establish a realistic budget that covers all your expenses and stick to it. This demonstrates financial discipline and ensures you have enough disposable income for mortgage repayments.Reduce Non-Essential Spending -&nbsp;Cut back on discretionary spending in the months leading up to your application. Avoid large, unnecessary purchases that can deplete your savings and increase your outgoings Pay Down Existing Debts -&nbsp;Reducing your existing debt load can improve your affordability assessment. Focus on paying off high-interest debts and maintaining low credit card balancesBuild Savings -&nbsp;Having a robust savings account not only provides a safety net but also shows lenders that you are financially responsible. Aim to save a consistent amount each monthAvoid New Debt -&nbsp;Refrain from taking on new loans or credit cards before applying for a mortgage. New debt can affect your debt-to-income ratio and raise red flags for lenders 5.&nbsp; Common Pitfalls to Avoid To present the best possible picture to lenders, avoid these common pitfalls:Overdraft Usage -&nbsp;Regularly using your overdraft can indicate poor financial management. Aim to stay within your available fundsMissed Payments -&nbsp;Missing payments on bills or existing loans can severely impact your credit score and lender’s perception of your reliability Large, Unexplained Transactions -&nbsp;Significant, unexplained transactions can cause concern for lenders. If you do make large purchases, ensure they are justifiable and not impulsive Conclusion – Do mortgage lenders look at spending habits? Yes, mortgage lenders do look at spending habits as part of their assessment process. By understanding what lenders are looking for and improving your spending habits accordingly, you can enhance your mortgage application and increase your chances of securing a favourable deal.Being mindful of your financial behavior, creating a budget, reducing non-essential spending, and maintaining a strong savings habit are all steps in the right direction. Preparing well in advance and presenting a stable financial picture will help you navigate the mortgage process more smoothly and achieve your homeownership goals.A mortgage adviser can provide you with tailored advice and support to find the best lender and mortgage product for your financial situation.

Do mortgage lenders look at spending habits?

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A bridging loan is a short-term lending solution that can be used for multiple purposes. Bridging loans are loans secured against an asset such as property or land. There are many ways that you can use a bridging loan, and this blog will highlight reasons why you may need one.To buy a new property You can use a bridging loan to fund the purchase of a new property. You may wish to buy a property with the sale proceeds of another property, but you can use a bridging loan to fund this where the sale and purchase are non-simultaneous. Once the sale of the property has completed you can repay the bridging loan.Property bought at an auction When you have agreed to buy a property at an auction, you will typically pay a 10% deposit at the auction and the rest is due within 28 days. Since the application process for a standard mortgage can take longer to complete, use of a bridging loan can be useful to ensure you don’t miss your completion deadline. Once your mortgage application has been approved, you can use these funds to repay the bridging loan.Funding the renovation of property It can be difficult to get financing from a traditional lender to do refurbishment or renovation on a property, as the lender may view it as unsuitable for mortgage purposes. If the property needs refurbishment or renovation works, a bridging loan may be suitable.Property developers or buy-to-let property investors may find bridging loans particularly useful to improve the property before renting it out to new tenants. The bridging loan can be repaid once the property has been renovated and a traditional mortgage has been secured.Buying a commercial property When buying commercial property, you may need to access funds quickly. Taking out commercial mortgages can be complex and lengthy process. And if the process takes too long, investors are at risk of losing their deposits if the sale falls through. A bridging loan can be helpful when buying commercial property since funds can become available to you within a shorter period.Dealing with long-term mortgage delays As mentioned before, traditional mortgages can take time to be approved and for the funds to be available. This may place you at risk of losing a deal on a property if you do not have financing ready in time. In this sort of situation, a bridging loan is ideal since it can cover the period between the purchase of a property and the approval of the long-term mortgage. Once the mortgage is approved, you can use the money to repay the bridging loan.Due to the shorter term and higher interest payments, it is important to consider the risks of taking a bridging loan instead of a traditional mortgage before you apply.Speaking with an experienced bridging broker is recommended, to guide you through the process. This will ensure that a bridging loan is the right choice for you.

When would you need a bridging loan

As we navigate life’s experiences, securing our financial well-being becomes paramount, especially for unmarried couples. For many, the cost of living has meant it’s harder to save for marriage. However, there are practical steps you can take to build your future together.Understanding the risksWhile married couples and civil partners have clear legal rights and entitlements upon divorce or death, unmarried partners have no rights, forcing them to rely on property, trust and contract law. Unmarried couples face unique financial challenges. Shared debts and mortgage responsibilities, coupled with the absence of legal ties, can expose couples to financial risks during unforeseen circumstances. Practical measures for financial securityTaking practical steps, such as securing adequate insurance coverage, can make a significant difference in safeguarding your joint financial responsibilities.Life insurance: Provide financial security for your partner with a life insurance policy. In the unfortunate event of a partner’s passing, life insurance ensures that the surviving partner is not burdened with outstanding debts or financial responsibilities alone. It’s essential to place your policy within a trust to ensure that your partner receives the payment.Critical Illness Cover: Protect against the financial impact of critical illnesses. This coverage provides a lump sum payment if one partner is diagnosed with a specified critical illness, offering financial support during challenging times.Income Protection: Safeguard your joint financial responsibilities with income protection. This type of insurance provides a regular income if either partner is unable to work due to illness or injury. Seeking professional adviceUnderstanding the difficulties of insurance can be complex. Consider consulting with an adviser to tailor a protection plan that aligns with your unique needs and circumstances. This practical approach to securing your financial future serves as a lasting commitment to the well-being of your relationship and can help keep you financially secure as an unmarried couple, should the worst happen.

A guide to protection for unmarried couples

In today’s unpredictable world, financial protection is increasingly important, especially for young adults. While many may think that critical illness cover (CIC) is something to consider later in life, recent trends suggest otherwise.Reports highlight that an increasing number of young adults (79%) are now contemplating purchasing critical illness cover to safeguard their financial future. The changing landscape of health and lifestyle factors has prompted a shift in perception. Young adults are becoming more aware of the risks associated with critical illnesses such as cancer, heart disease, and strokes, and are taking proactive steps to protect themselves financially.CIC Benefits The decision to invest in CIC at a young age comes with several benefits. Firstly, premiums are typically lower for younger individuals, making it a costeffective option to secure comprehensive protection against critical illnesses. By locking in coverage early, you can enjoy potential long-term financial security.CIC provides peace of mind, knowing that in the event of a serious illness diagnosis, financial support is readily available. This support can help you cover medical expenses, ongoing treatment costs, and even provide financial assistance for everyday living expenses if you are unable to work.Another crucial aspect to consider is the impact of a critical illness on long-term financial goals. Whether you are just embarking on your career path or planning for major life milestones such as homeownership or starting a family, a critical illness diagnosis can derail these plans without adequate protection in place. CIC serves as a safety net, ensuring that financial aspirations remain achievable.&nbsp;As the saying goes, “prevention is better than cure.” Investing in CIC early can allow you to take a proactive approach to your financial well-being. It’s never too early to consider protecting yourself against unforeseen circumstances. By understanding the importance of CIC and taking action to secure adequate protection, you can navigate life’s uncertainties with confidence and peace of mind.For more information, contact your adviser who can support you and discuss the options available to you.

Our latest blogs

IHT: An introduction

Personal protection: critical illness explained

Do mortgage lenders look at spending habits?

When would you need a bridging loan

A guide to protection for unmarried couples

Critical Illness Cover for Young Adults