Pension warning

The government is to write to more than 100,000 people who are set to receive no state retirement pension because they haven't made enough National Insurance contributions.

A new rule imposed in April laid down that people needed at least 10 years of contributions in order to start qualifying.

MPs on the Work and Pensions Select Committee had complained that many would have been unaware of the change.

The Department for Work and Pensions has decided to write to those most at risk "as a one-off exercise" before the end of the year.

It will target individuals within 9 years of state pension age whose records suggest they will have fewer than 10 qualifying years of contributions by the time they retire.

The 10 year rule was introduced alongside the New Station Pension, paid at a flat rate of £155.65 to those with a full 35 years of contributions.

1,100 tax dodger prosecutions

Here is the counterblast from HM Revenue & Customs, in the face of today's attack from MPs on the Public Accounts Select Committee, accusing officials of not doing enough to tackle tax fraud...

HMRC says it has 1,100 prosecutions of tax dodgers in the pipeline.

Last year it secured 1,200 prosecutions, resulting in prison sentences of 407 years.

Those prosecuted included barristers, accountants, lawyers, bankers, medical consultants, people hiding money offshore, money launderers and smugglers.

Two out of five of those convicted had dodged more than £50,000 of tax.

So what about the criticism that HMRC only has 35 wealthy people either in court or waiting to be prosecuted for tax evasion, despite having 26,000 staff working on enforcement and compliance?

Well, the figure is correct, but the explanation from the tax office is that all of the 35 have wealth of at least £1m.

In other words, the number isn't as small as it looks because the people involved are from a tiny proportion of the population.

Critics will, no doubt, say that this is exactly the well-off part of the population which tax officials need to concentrate on, to make it clear that no one gets an easy ride.

How many avoid Inheritance Tax?

If giving money or other assets to family or friends to avoid inheritance tax is standard practice among the better off, as experts say, why do we have no idea how much of it goes on?

Not one of these bodies has any clue: HM Revenue and Customs, the Institute of Chartered Accountants in England and Wales, the Chartered Institute of Taxation and the Institute for Fiscal Studies.

Just by way of a reminder, you can give away the assets and avoid 40% Inheritance Tax, as long as you live for another 7 years.

Between 7 and 3 years before you pass away there is a tapered rate, so less than 40% is paid.

The only figure that HMRC can provide is the amount of tapered relief which is granted, which adds up to £35m a year.

One suspects that is a tiny proportion of the quantity of tax avoided, legally, by making what are called PETs or Potentially Exempt Transfers.

But the total isn't tracked, because PETs don't have to be registered with the tax office.

The Prime Minster says the exemption allows parents to pass on money to their children, while Labour says it wants the wealthy to pay their tax.

Meanwhile, some accountants warn that imposing Inheritance Tax on gifts made more than 7 years before death could lead to double taxation.

If you give property or shares, they argue, Capital Gains Tax is triggered, while gifts from earnings would have incurred Income Tax.

But can someone tell us how much the Exchequer is losing from allowing PETs?

It would be nice to know.

Travel insurance after Brussels attacks

In general travel insurance policies do not cover the transport disruption caused by terrorist acts. Here is what the Association of British Insurers says today:

"Travel insurance policies are designed and priced to cover non-refundable cancellation costs in specific circumstances.

Typically these will include cancellation due to medical reasons, being made redundant, called up for jury service. Speak to your travel provider, tour operator or travel agent for advice.

While cancellation due to terrorist acts is not usually covered:

- Some policies may cover you if you cancel due to Government advice against travel
- If you make alternative travel arrangements away from the affected region, then you can usually transfer your travel insurance to cover your new destination.

While some travel policies may exclude terrorist acts, this would not usually apply to any claims for emergency medical treatment or personal injury claims that would be covered in the normal way."

The insurance brokers' trade body, BIBA, points out that some policies do not exclude terrorist acts, including its own version, designed for brokers to sell.

In those cases, baggage, personal accident, delay and cancellation would be included in the cover.

However, no insurer will compensate holidaymakers who decide against going on a trip because of a worrying event, when their means of travel hasn't been affected.

£2,000 of digital tax allowances and how you can use them

In his Budget, the Chancellor trumpeted the benefits of special tax-free allowances for people making money from the internet.

From next year you will be able to earn £1,000 from selling stuff via ebay and other auction and selling websites.

And you'll be able to make another £1,000, tax free, by renting out your property in different ways. That's what many people are doing by using sites including airbnb and ownersdirect.

So who is likely to do well out of these allowances? And have we been dodging tax up until now, simply by making money from online sales?

Flogging on the net
If you make money from the internet, flogging goods stacked up in your garage, for instance, or renting out the garage itself, then that money can be taxable. That's if you are working as a trader.

George Osborne calls you a micro-entrepreneur, selling services online or renting out all or part of your home.

The first £1,000 of income from your online sales will be tax free, although you won't be able to take off your running expenses before calculating the total.

Micro-entrepreneurs only have to declare income above the £1,000 threshold for tax purposes.

When it comes to renting out furnished accommodation, there is already a Rent a Room scheme giving you £4,250 tax free, rising to £7,500 from next month.

You will be able to use the new property allowance at the same time, though not for the same part of the home.

So, for instance, you could rent out the spare room using the Rent a Room scheme and use the new £1,000 allowance to save tax on renting out a parking space on the drive.

Are you a trader?
The big question is whether you are a trader in the first place.

If you are simply selling junk from the attic, books and CDs, a spare bike or even your used car, it is unlikely that the proceeds would be taxable anyway.

These are one-offs. What the tax people are interested in are repeat sales, when the intention is to make a profit.

On the other hand, renting out parts of your home on a regular basis would normally be taxable.

That's if you have already used up your personal allowance, the amount - currently £10,600 - that you can earn before income tax kicks in.

How to work out if you are a trader or not, from the tax people at HMRC...

What we consider to be trading

It can sometimes be difficult to tell the difference between trading and not trading.

You are most probably trading if:

• you want to make a profit

• you have bought goods to sell them on

• you sell things often or regularly

• you register as a business seller on an internet auction site

• you sell from a market stall

• you buy things wholesale or through trade suppliers

• you change or improve things before selling them on

• you sell things that you have just bought

• you sell things that are related to another business that you run

• you have borrowed money to pay for the things that you are selling and you need

to repay that loan.

You are probably not regarded as trading if:

• you only sell things to cover your costs

• you sell a personal possession or something that you have been given or

have inherited

• you only make sales occasionally

• you are not registered as an online shop or trader on an internet auction site

• you make no changes or improvements to the items that you sell

• you occasionally sell a personal possession that you have acquired or bought

some time ago.

Showdown: Lifetime ISA v. Pension

There is going to be a showdown between Pensions (red corner) and the New Lifetime ISA (blue corner).

People will have decide -- when they have some cash to save -- which is the best to use. They might not be able to afford both.

So here are the pluses and minuses...

Pensions

Pluses
Up front tax relief
Employer contribution
Tax free lump sum when you retire
Can use for pension from age 55

Minuses
Can't dip in to the money while saving
You pay income tax on your pension when you take it

Lifetime ISA

Pluses
25% top up bonus when you pay in
Can use to help buy home (or if have terminal illness)
Can dip into your contribution
The money is tax free to use when you retire

Minuses
No tax relief on contributions
Have to wait till 60, not 55, to use for retirement
5% charge if dip in
Have to be under 40 to open

Help to Save criticised

The debt charity, Stepchange, has criticised the government's new Help to Save scheme for low paid workers, saying they will have to wait too long for the benefits.

The proposals, which will be fleshed out by the Chancellor in this week's Budget, would provide a 50% bonus to those who manage to save up to £50 a month.

As many as 3.5m people in low paid work and receiving working tax credit or universal credit would qualify, with the maximum level of help set at £1,200.

However, they will have to save for two years before getting any bonus.

Stepchange says such a wait may see families overtaken by events as they dip into funds for emergencies.

The charity warns that the thought of losing the bonus could act as a disincentive to save in the first place.