Some of your self employed clients may be in for a nasty shock in the next week or so. Indeed this month in the UK some 4.8 million people will be filing tax returns and paying the taxman what they owe. But there is an added twist for 2018. HMRC has made things a little more interesting (read: difficult) this year by implementing a new rule.
As of January 13th taxpayers will be unable to pay their tax bill using a credit card which gives you, their trusted broker, an opportunity.
In years gone by many self-employed workers would put their tax bill on their credit card in order to defer the pain of the payment until a later date. However, as a result of the new ban on credit card charges the HMRC has taken the decision to stop taxpayers paying on plastic. Since it will no longer be able to pass on the costs of processing credit card payments it is unwilling to take the hit.
While one can understand where it’s coming from the worrying thing here is that I’d hazard a guess that many taxpayers are unaware of this new rule and may be happily filling in their tax returns, plastic in hand, thinking all will be well and oblivious to an imminent hit on their cash flow.
Indeed, according to official figures, last year 454,000 taxpayers used personal credit cards to make their tax payments worth a total of £741m.
Telling your clients now about this change now could earn you some good brownie points and give them valuable extra time to make alternative arrangements and avoid a late payment fine. Of course for larger amounts second charge lenders will lend to pay tax bills. Consolidation or business finance may also be appropriate if they are relying so heavily on credit cards for cash flow so a well crafted email to your clients could result in some decent new business enquiries
2 out of 3 borrowers get a lower rate than our representative example of a regulated secured loan below:
Mortgages and Remortgages
£80,000 over 240 months at an APRC OF 4.3% and a discounted variable annual interest rate for two years of 2.12% at £408.99 per month followed by 36 payments of £475.59 and 180 payments of £509.44. The total charge for credit is £39,873 which includes a £995 broker / processing fee and £125 application fee. Total repayable £119,873.
Secured / Second Charge Loans
£63,000 over 228 months at an APRC OF 6.1% and an annual interest rate of 5.39% (Fixed for five years – variable thereafter) would be £463.09 per month, total charge for credit is £42,584.52 which includes a £2,690 broker / processing fee. Total repayable £105,584.52.
£4,000 over 36 months at an APR OF 49.9% (fixed) and an annual interest rate of 49.9% would be £216.21, total charge for credit is £3,783.56. Total repayable £7,783.56.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME
REPAYING YOUR DEBTS OVER A LONGER PERIOD CAN REDUCE YOUR PAYMENTS BUT COULD INCREASE THE TOTAL INTEREST YOU PAY. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
If you have been introduced to Promise Money by a third party / affiliate, Promise may pay them a share of any fees or commission it earns. Written terms available on request. Loans are subject to affordability status and available to UK residents aged 18 or over. Promise Money is a trading style of Promise Solutions Ltd. Promise Solutions is a broker offering products which represent the whole of the specialist second mortgage market and is authorised and regulated by the Financial Conduct Authority – Number 681423.
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