FREE ENERGY SAVING

As it gets colder million of us worry about heating bills for the coming winter. But governments and the energy companies have money to get rid of to help us save energy. Some of these schemes offer free insulation for every householder regardless of their income or circumstances.

You should apply soon - some schemes close at the end of September. The deals may not be repeated next year.

One quick way to find out what you can get is to call the Energy Saving Trust on 0300 123 1234. It will tell you what help is available locally as well as details of the schemes for everyone run by energy companies as well as the schemes in England, Scotland, Wales and Northern Ireland run by national governments and assemblies. The service is free and impartial. More at www.energysavingtrust.org.uk

Energy companies

In Great Britain the big six energy companies all have schemes that provide insulation free. They normally cover loft and cavity wall insulation in suitable homes. The average saving on fuel bills is reckoned to be £175 a year for loft insulation and £135 a year for cavity wall insulation. These are standard industry average figures and your own experience may be different.

British Gas, EDF, Scottish Power, and SSE will insulate any home in Great Britain free - you don't have to be a customer of theirs and there are no conditions about your circumstances or income. Of course, your home has to be suitable - not all are. If you already have loft insulation that may not be a barrier to getting it upgraded to modern standards. The current standard is 370mm – about 11 inches – but the joists in the loft will be smaller – often six inches. So storing things on the joists may be difficult in future.

Low income customers may also get up to £300 as a bonus - amounts differ and the cash will be paid in vouchers to spend in High Street shops. British Gas will also pay for any scaffolding if that is needed and give elderly customers up to £150 to pay someone to clear the loft.

Remember these four schemes are for everyone NOT just customers of these firms and regardless of income or personal circumstances. They are running out of time so call today.

British Gas 0800 980 8177

EDF 0800 096 9000

Scottish Power 0845 601 7836

SSE 0800 072 7201

You may find cheaper numbers by using www.saynoto0870.com

E.On has a similar scheme but just for its own customers.

nPower will only insulate the homes of its own customers who have a low income and also get certain benefits related to age, children, or disability.

Smaller energy suppliers and those in Northern Ireland may not have similar schemes. But it is worth asking.

The big power companies offer the deals because they have a legal obligation to achieve reductions in the amount of energy we use - it is called the Carbon Emission Reduction Target (CERT). They have to meet these targets by the end of 2012. They are all trying to do as much as they can to hit them in time.

These deals may never be repeated as CERT has ended and arrangements are different next year.

Government schemes

Warm Front (England) 0800 316 2805

NEST (Wales) 0808 808 2244

Energy Assistance (Scotland) 0800 512 012

Warm Homes (Northern Ireland) 0800 988 0559

All four offer help with insulation and with heating systems – such as boilers or inefficient fires – but to qualify you must be on a low income, normally you have to be claiming a means-tested benefit as well as being over pension age OR have young children OR be disabled.

Call to find out more. If you are calling from a mobile you may find cheaper numbers on www.saynoto0870.com

Other schemes

As well as the major energy companies Tesco is offering a free-to-all insulation scheme. 0800 321 3456 www.tescohomeefficiency.com/free-insulation

Many local councils are also offering energy advice and insulation schemes. The Energy Saving Trust on 0300 123 1234 can give you more information about those in your area.

Beware of anyone who cold calls you at the door offering free insulation or energy saving work. Never trust them. Always say you will call whoever they claim to represent and look the number up yourself in the phone book or on the internet or check with the Energy Saving Trust.

People in mobile homes, tenants, and those in older properties may find they cannot get help. But the Energy Saving Trust can let you know what is available.

WARNING

Qualifying conditions may change. There may be application deadlines and claims after the deadline may be refused. Some end on 30 September 2012. Apply as soon as you can.

UNIVERSAL CREDIT - 83% 'TAX' RATE FOR SOME

UPDATED 26 JANUARY 2014
Universal credit has not been rolled out as planned. Only 2960 households in five local authority areas of Britain were put on Universal Credit by the end of October 2013. Most were men, most were single, all were childless - see data published 22 January 2014 http://tabulation-tool.dwp.gov.uk/UC/Universal_Credit.html

UPDATED 31 MARCH 2013
Householders who get the new means-tested benefit called Universal Credit could keep just 19p of every pound extra they earn – an effective tax rate of 81%. In some parts of England it could be more - losing 82p to 83p in every pound that is earned, leaving them with 18p to as little as 17p for every extra pound they earn. Those losses are similar to many under the present system and could undermine the work incentives which the new system is designed to create. And for graduates on incomes above £15,795 but low enough to get Universal Credit, the deductions would be more, adding about 2.5 percentage points to those figures. Worst case would be earn £1 keep 13.5p.

Universal credit

Universal Credit will be rolled out from October 2013 to replace six means-tested benefits and tax credits. It will be paid to people on low incomes who cannot work, are looking for work, or work on very low pay.

It is supposed to let people keep more of what they earn and thus boost incentives both to return to work and to earn more once in work. For every £1 extra earned the credit will be reduced by 65p allowing the claimant to keep 35p. This so called ‘withdrawal rate’ of 65p in the pound is said to be much lower than rates under the present system and allowing them to keep 35p of what they earn is seen as an incentive to work. The Government says that is a big improvement on the current system where a combination of different rules and tapers can lead to individuals losing more than more than 90p in the pound if they pay tax and their means-tested benefits are cut. 

However, that figure of 65p withdrawal rate is only accurate for people who earn less than £149 a week and are not householders.

Taxpayers

Universal Credit is worked out after tax and National Insurance have been deducted. In 2013/14 anyone earning more than £149 a week will pay National Insurance and once they earn £181 a week income tax begins. Someone paying National Insurance will lose 12p in the pound before their Universal Credit is worked out. The total loss from NI and reduction in Universal Credit is 69p from each £1 they earn. So they keep 31p. If they pay income tax as well they lose just over 76p of each pound and keep just under 24p. Those figures were confirmed by Pensions Minister Steve Webb in Parliament last year. (Hansard, House of Commons, 11 September 2012, col.196).

But that is only part of the picture.

Householders

Universal Credit, despite its name, does not replace all means-tested benefits. It does not include the means-tested reduction in council tax called Council Tax Benefit. From 1 April 2013 that benefit has been replaced by a very similar scheme  called Council Tax Support which will be operated by local councils. Like all means-tested benefits Council Tax Support will be withdrawn as income rises. The standard taper is 20p for each £1 rise in net income (after tax, NI and Universal Credit). In other words for each extra pound of net income help with council tax is reduced by 20p. The result is that for each £1 earned a total of 81p disappears in tax, NI, reduced Universal Credit, and reduced Council Tax Support. The calculation is at the foot of this blogpost.

Localism

In some areas of England and Wales the reduction for every £1 of income earned may be even higher. As part of the transfer to local councils the Government has cut the money it currently pays towards help with council tax. From 1 April 2013 councils get 90% of the money they got to pay Council Tax Benefit. The Government has already said that out of that reduced budget they will have to pay exactly the same benefit to anyone over pension age. Nearly half of all Council Tax Benefit recipients are pensioners so the other half – working age people who can claim Universal Credit – will bear the whole of the funding cut. That will mean a reduction for them of between 19% and 33% according to the Institute for Fiscal Studies (www.ifs.org.uk/comms/comm123.pdf chapter 5). 

Councils have now published the details of their schemes which begin on 1 April. The great majority are keeping the taper at 20%. But 31 have decided increase the taper. Four - Rochdale, Trafford, Brent, and Harrow) to 30%; another 15 to 25% and one to 21%. Only three (Brentwood, Mid Sussex, and Wiltshire) are cutting it to 15%. See Localising Council Tax Support by Peter Kenway, New Policy Institute www.npi.org.uk/files/New%20Policy%20Institute/LocalisingCouncilTaxSupport.pdf

In areas which raise the Council Tax Support taper to 25% householders on Universal Credit who pay tax will find that 82p of each pound earned disappears in deductions. In areas with a 30% taper they will lose 83p and keep just 17p for each extra pound earned in income tax, National Insurance, reduced Universal Credit and reduced Council Tax Support. In the three areas where the taper is 15% people will lose 80% of each extra pound.

Conclusion

Losing more than 80% of each extra pound you earn is hardly an incentive to work or to work harder.

You can read the 11 September parliamentary debate on Universal Credit here

www.publications.parliament.uk/pa/cm201213/cmhansrd/chan41.pdf

CALCULATION OF TOTAL DEDUCTIONS FOR A TAXPAYER HOUSEHOLDER

FOR EACH £1 OF EXTRA INCOME WITH 20% TAPER

EARNS EXTRA		£1.00
Tax	20%	-£0.20
NI	12%	-£0.12
Net after tax		£0.68
UC reduction	65%	-£0.44
Net after UC		£0.24
CTS reduction	20%	-£0.05
NET GAIN		£0.19
Effective 'tax'		81%

CLAIMING WINTER FUEL PAYMENT ABROAD

UPDATED 18 MAY 2015
UK expats living in some other European countries can claim the Winter Fuel Payment this winter. To qualify this winter 2015/16 they must have been born on 5 January 1953 or earlier and have 'a genuine and sufficient link to the UK'. They must also live in one of 25 countries listed below. From Winter 2015 it is no longer paid in seven warmer EU countries.

Until 2012 people who lived outside the UK could not claim the Winter Fuel Payment. If they had already qualified and claimed it in the UK they could keep it if they moved, but they could not claim it for the first time from outside the UK.

The change was brought about by a judgement of the European Court of Justice in a case about disability benefits. The court ruled that it was wrong to prevent people from claiming the benefit just because they did not live in the UK at the time of the claim. As long as they had what is called 'a genuine and sufficient link to the social security system of the UK' they can claim from another European country. The DWP interprets that as meaning that the person worked and paid National Insurance in the UK for a long period of time, certainly enough time to qualify for a state pension. The new rule began on 16 September 2013.

The Winter Fuel Payment is £200 per household where a qualifying person lives. So a couple will normally get £100 each. If someone is over 80 (born 27 September 1935 or earlier) the payment is £300.

Payments cannot be claimed for earlier winters. A loophole which allowed some payments from the late 1990s to be claimed was closed from 1 April 2014.

The countries
Claims for this winter 2015/16 can be made by people living in Austria, Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Estonia, Finland, Germany, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Netherlands, Norway, Poland, Romania, Slovakia, Slovenia, Sweden, or Switzerland.

The payment is not made to people living in the Channel Islands nor the chilly Isle of Man because they are outside the EU.

Claims for people living in Cyprus, France, Gibraltar, Greece, Malta, Portugal, and Spain are no longer allowed, even if you got one there in the past. They were paid up to winter 2014/15.

The seven countries were chosen because the average temperature of the whole country in the months November to March were warmer than the average temperature in the warmest region of the UK - South West England where it is 5.6C. However, the Department for Work and Pensions calculated the average temperature for France including its four tropical overseas territories - Martinique and Guadeloupe in the Caribbean, French Guiana on the equatorial coast of South America and Réunion which is south of the Equator in the Indian Ocean tropics. Mean winter temperatures in these places range from 20.5C to 25.8C. If they had been excluded the average temperature in France would have been 4.9C, which is below the cut off point for the payment. But including the four territories raises the average to 7.0C thus enabling the Government to exclude tens of thousands of expats living anywhere in mainland France. In fact only six regions in mainland France have a mean winter temperature higher than that in SW England. The DWP claims it had no choice about including the overseas territories. It had to use the definition of France which the French government uses which includes them. 

A Met Office report on temperatures in 34 European countries by region contains the data and will enable the new law to be applied if other countries such as Turkey join the EU. No other country in the 34 would be excluded.

Claiming
Find out more about winter fuel payment and how to claim. People living abroad will normally have to make a claim. And so do men in the UK aged under 65 in the first year they qualify.  If you want to get advice call +44 191 218 7777 if you live abroad. If you live in the UK call 03459 15 15 15.

If you do not qualify this year find your qualifying date in future here - assuming the rules do not change which they might.

18 May 2015
vs.3.0

CASH-IN-HAND

I hate to agree with a Treasury Minister. It’s not my job to support the Government, whatever its politics. My job is to hold Ministers to account and point out the flaws in what they say – a job I have relished for more than 25 years. So when Treasury Minister David Gauke said on 23 July that it was “morally wrong” to pay your plumber or decorator cash-in-hand in return for a discount I confess I was in a dilemma. Because I think he is right.

And I go further. If you do a deal with a tradesperson to pay cash in exchange for a lower price to ‘avoid the VAT’ – as someone once said to me – then you are in a conspiracy to evade tax. You are both breaking the law.

So at its simplest I agree with David Gauke. We should not pay cash if we know, think, or suspect that the purpose of paying by cash rather than by cheque or card is to keep the transaction off the books and away from any possible investigation by HMRC.

But of course the world is more complicated than that.

Cash can be good

Most cash payments are not about tax dodging.

A small trader with a big overdraft may prefer cash to cheque so that the money does not have to go through the banking system. It also helps cash flow – this morning’s cash payment may be used to buy supplies this afternoon for the next job.

Cash is also certain. Since the banks decided to scrap the cheque guarantee card in June 2011 any cheque can bounce which means a lot of hassle and expense trying to recover the money.

And cash is cheaper. Most banks charge for each cheque paid into a business account. And every time a debit or credit card is used it costs the trader money. Not just the fee or percentage the card issuer takes but also the cost of renting the machine to take the payments.

Some people deal with cash for the simple reason that their business is so small they do not have any taxable income – like handyman Chris on the Radio Wales phone-in today who earned less than £8000 a year.

And it would be ridiculous to pay small amounts by card or cheque.

So there are a lot of reasons to prefer cash. But of course those reasons do include the disreputable one – unlike other means of payment cash does not leave an audit trail. So it is clearly the payment method of choice for those who do want to evade tax.

Cash can be bad

I am sure everyone with a home or a car has asked the cost of a job and been told one price and then a lower one ‘for cash’. That is the moment when you must suspect that evading tax is on the agenda. If the discount is 5% then it may simply be because of those other advantages of having cash rather than a payment that is more expensive, less certain, and takes more time to process. But a much bigger discount means it is probably an attempt to involve you in a conspiracy to keep the payment off the books and hidden from HM Revenue & Customs. 

Of course, tax fraud is often initiated by customers. Paul, a carpet cleaner, called the Tony Livesey show on Radio 5 Live last night to say that he charged £95 to clean a carpet. To which many householders replied  ‘what will you take for cash?’ 

So David Gauke’s attack is on the middle-class homeowner as much as the tradespeople they pay. In the short-term, of course, you both benefit personally from such as deal – the job costs you less and the trader pays no tax. That is why it is a conspiracy to defraud!

But ultimately if you do pay cash-in-hand – and even as you say it you can feel the conspiratorial wink which accompanies that phrase – everyone loses. It is the slippery slope that led to the economic woes of Greece where tax is seen as a voluntary activity – a view supported in the past by a corrupt revenue collection service.

Bigger tax dodges

But hang on, I can hear you say. What about the real tax dodgers. The richest people in the world who, the Tax Justice Network estimates, have salted away £13 trillion in tax havens many of which are British Overseas Territories or Crown Dependencies. What about the £35 billion in UK tax which is evaded or uncollected each year? That figure from HM Revenue & Customs itself. What about the cunning plans operated by accountancy and law firms big and small, often called ‘tax planning’ or ‘tax mitigation’, which allow people and businesses to wriggle through gaps in the law to emerge tax-free on the other side thumbing their nose at the rest of us and singing ‘nah nah ni nah nah’!

And hang on again, you add. Rather than lecture us about this small-time tax dodging the Government  should be tackling the major tax evoidance (as I call it) of the people who think they are too rich or too clever or too famous to pay tax like the rest of us. Only then will people on modest income struggling to make a living or to pay for essential repairs feel it is right to pay the full whack – and their taxes. Fairness goes both ways.

All that is true. But that still does not justify entering into a conspiracy to help the local gardener or decorator or mechanic evade the tax due on their modest income.

Size of the problem

Paying traders in cash is not the biggest source of tax loss to the Government. HMRC says the ‘hidden economy’ costs about £4 billion a year out of the £35 billion total ‘tax gap’. In 2008 the parliamentary Public Accounts Committee estimated that up to two million people were engaged in taking cash-in-hand to reduce their tax bill at a cost to the Revenue of £2 billion a year. All these estimates are highly speculative. And whatever the true figure it is going to be a tiny percentage of the estimated income tax receipts in 2012/13 of £155 billion and an even smaller proportion of the total tax take of £592 billion. It is certainly not the worst wrong in tax dodging. But it is still wrong. And there is no excuse for joining in. 

It is our business

Of course it is the trader’s job to keep the books accurately, report their earnings in full and pay the correct tax. And it is not our job to ensure they do that. But if you saw a mugging the street or a burglar emerging from a window carrying a computer it would not be your job to deal with that either. But shouldn’t you do something? If only shout and call the police?

So when you pay a trader in cash always ask for a receipt. Ideally, it should be from a proper receipt book with a place of business stated clearly on it. For any large amounts get an invoice – it protects you if something goes wrong. If the bill includes VAT check that the firm is registered. And never ever ask for or agree to a big discount for cash.

It won’t stop tax dodging. But you at least will have occupied a nice square of solid moral ground from which you can demand that the wealthy pay their fair share too. 

Sources

·         Tax Justice Network www.taxjustice.net

·         HMRC Measuring Tax Gaps 2011 www.hmrc.gov.uk/stats/mtg-2011.pdf

·         Public Accounts Committee Tackling the Hidden Economy December 2008 www.publications.parliament.uk/pa/cm200708/cmselect/cmpubacc/712/712.pdf

·         Report tax fraud to HMRC www.hmrc.gov.uk/reportingfraud/help.htm

·         Check if a VAT number is correct ec.europa.eu/taxation_customs/vies

PAYING FOR CARE – DEJA VU VU VU

FIGURES UPDATED JANUARY and MARCH 2015

Budget 2013 confirmed that the care cost cap would begin from April 2016 and the cost of bringing it forward would partly be met by extending the freeze on the Inheritance Tax threshold for three more years 2015/16 to 2017/18 - see para 1.196.

A Government comes to power. It commissions a report into how we pay for the growing cost of care for an ageing population. In July, just before Parliament disappears for the summer and more than a year after the report was published, the Government responds. It says it will improve the means-test which assesses what help people get with the cost – including raising the upper capital limit above which no help is given. And it promises a loan scheme to ensure that no-one would be forced to sell their home to pay for care.

Yes, it is 27 July 2000 and the last Labour Government publishes its response to the Royal Commission on Long Term Care which it commissioned in 1998.

The more I read that twelve year old document the more astonished I am at how similar it is to the recent Coalition Government response to the Dilnot report on long term care which it commissioned shortly after coming to power in 2010. In 2000 there are plans to improve the lot of carers, set common principles for assessments for care needs in different parts of the country, and provide for individually tailored care packages. And of course the announcement of a national scheme to let people pay the cost of their care after death from the proceeds of their home. It began in 2001. 

2012

Roll forward a dozen years and the same plans are rediscovered. Not least the ‘announcement’ on 11 July 2012 of, ahem, a national scheme to let people pay the cost of their care after death from the proceeds of their home. It was an astonishing triumph of PR over substance. And the bait was duly taken up by all media outlets – from the Daily Express to Radio 4’s Today programme – repeating as if it was a fact that 40,000 people a year would no longer be forced to sell their home to pay for their care.

In fact no-one – I repeat NO-ONE, again NO-ONE– can be forced to sell their home to pay for their care. The figure of 40,000 is more than double the actual number who do sell their homes to pay care home fees. Some of the 19,000 who do are deceived into it by cash-strapped local councils who wrongly tell them they must, aided and abetted by false headlines in the press. But some choose to use the value of their home to pay for better care than the local council will give them. And why not?

The scheme introduced by the last Government in October 2001 was “to ensure that people… are not forced to sell their homes as soon as they enter residential care.” It would “help…people who do not want to have to sell their homes in their lifetimes to pay for their care by making loans more widely available”.

Over the years the scheme became compulsory. In 2009 the Department of Health issued a circular LAC (DH)(2009)3 which said Ministers expected councils to offer deferred payment schemes and “it is the Department’s view that if a local authority were to have a policy of never exercising its discretionary powers to make deferrals, it is likely the courts would find this to be unlawful.”

We know that in 2012 8,500 people were in such schemes in England with a total debt of £197 million – an average of £23,000 each. And by 31 March 2014 that had grown to 12,458 individuals with a total debt of £273.8m - an average of £21,978 each. Lawyer Lisa Martin of Hugh James confirms that in her long experience anyone who asks for a deferred payments scheme – and insists they have a right to it – will get one. But even if they don’t all they have to do is refuse to pay. The local council still has to provide care and can let the bill clock up and take a charge against an empty home so it is paid after death. That power was given nearly thirty years ago in s.22 of the Health and Social Services and Social Security Adjudications Act 1983 (HASSASSA).

In either case no interest is charged on the debt while the resident is in care and that concession lasts for an extra 56 days with a formal deferred payment scheme.

So the Universal Deferred Payment Scheme – carefully pre-announced on 11 July before the detailed documents were published – was not new at all. Even the wording was familiar

2000: “to ensure that people… are not forced to sell their homes...in their lifetimes.”

2012 “so that no-one is forced to sell their home in their lifetime to pay for care”

The only new thing – kept carefully under wraps in those morning tours of the broadcasting studios – is that it will actually cost the heirs more than the present scheme because interest is charged on the debt from the start. That could add a few thousand pounds to the amount taken from the estate when the scheme starts in April 2015. And buried in the 150 page draft Care and Support Bill is the planned repeal of s.22 of HASSASSA to make sure there is no way out.

CAP ON IT

The other key change announced in principle in July 2012 was the cap on the cost of care. But that was a deception too. The Dilnot Commission on Funding of Care and Support proposed that the cost of care be capped. He suggested that a lifetime cap of around £35,000 would be ‘fair’. But that cap was only on the care element of the costs – the residential board and lodging charges of up to £10,000 a year would still have to be paid. And the cap is not an amount of money – it is the amount of care that £35,000 would buy at local council rates. The Government revealed in its Progress Report on Funding Reform (Figure 6) that it reckons £35,000 would buy 100 weeks of care. Someone paying £500 a week for that care would still have to buy 100 weeks-worth and spend £50,000 before the cap applied.

Figure 12 indicates that the Government has done costings right up to a cap of £100,000 which would mean paying for more than five year’s care before the cap kicked in. That would achieve its stated objective to “look at how reform consistent with the principles of the Commission’s model can be implemented, but at a lower cost to the public purse” (p23). In other words cheaper. But every penny that is spent will go mainly to wealthier groups as those with no resources get all their care paid for already. Even with a cap at £100,000 about half a billion pounds more a year would go to the richest fifth of the population (Figure 13). No wonder the Government gave no commitment about what the cap would be or when it might be introduced.

AMENDED UPDATE: With a cap at £72,000 then it would not in fact kick in until 72000/350=205 weeks of care had been paid for. If a real person - as opposed to a local council - paid £500 a week for that care they would have spent £102,500 before the cap kicked in. And they would have been paying hotel costs of £11,960 a year for nearly four years, so £150,000 gone before the cap fitted. By then most residents would have died or used up all their funds.

NOTES

You can marvel at the July 2000 The NHS Plan: the Government’s response to the Royal Commission on Long Term Care.

www.dh.gov.uk/prod_consum_dh/groups/dh_digitalassets/@dh/@en/documents/digitalasset/dh_4082154.pdfand read my summary of how the plans turned out in 2001 www.paullewis.co.uk/archive/saga/2001/000901.htm

The recycled plans are in the 2012 White Paper Caring for our future:

reforming care and support www.dh.gov.uk/health/files/2012/07/White-Paper-Caring-for-our-future-reforming-care-and-support-PDF-1580K.pdf and the finance details are in Caring for our future: progress report on funding reform

www.dh.gov.uk/health/files/2012/07/2900021-Progress-Report_Accessible-11.07.2012-v2.pdf

Statistics on 2102 deferred payment schemes http://www.adass.org.uk/images/stories/Press12/ADASS_BudgetSurvey2012Summary.pdf
2014 figures in email 27/02/2015 from Jonathan.Gardam@adass.org.uk

You can read how to get the NHS to pay for your care www.paullewis.co.uk/archive/saga/2012/20120601Works.htm

If the NHS won’t pay here is why you still do not have to sell your home to pay for care written by me in each of the last three decades

2010 www.paullewis.co.uk/archive/saga/2010/201005Works__Care_Home_Costs.htmincludes my fact check on the false 40,000 figure

2001 www.paullewis.co.uk/archive/saga/2001/000301.htm 

1994 www.paullewis.co.uk/archive/saga/19941101HoldOnToYourHome.pdf

HOW TO MOVE YOUR CURRENT ACCOUNT

A brief poll of my tweeps found the overwhelming majority of those who had moved their current account found it easy and trouble free. The ones who hadn’t moved were afraid it would be difficult. But almost no-one had encountered problems.

Step 1: Pick your new bank. Which really means decide why you're leaving the old one. Is it for moral reasons – you just don’t like the way banks behave. Or you're fed up after computer failures. Or you want better customer service or to be paid interest on your current account? And remember not only banks have current accounts. Five building societies do as well and so do 24 credit unions. See WHICH BANK below.

Step 2: Go to the website of your chosen bank (or building society or credit union) and apply for a current account. I say ‘apply for’ because you can choose your bank but it might not choose you. The bank (etc) might say no if you have an overdraft or a poor credit record. If so try another. If it happens again see BAD RISKS below.

Step 3: Your new bank (etc) will ask if you want to move your direct debits and standing orders to your new account. Say yes and that should happen automatically without a payment being missed. Print off a list yourself and check with your new bank. It can be a good time to check you know what they are all for and cancel those inactive direct debits.

Step 4: You will normally have to tell your employer or pension provider to pay your money into the new bank account. The same applies to any tax credits or benefits – tell HMRC and DWP. In fact tell everyone who is due to pay you money. Some banks will do this for you. If you have a debit card registered to pay at online sites remember to change those details too.

Step 5: Do not close your old account. Keep a balance in it to meet any payments that might not have changed. Check frequently that things have happened correctly. There may be the odd hiccup but they are soon put right if you keep your eye on things. The whole process should take less than a month or so. The official timetable - agreed by the Financial Services Authority so the banks must do it - is here  

http://www.thesmartwaytopay.co.uk/sitecollectiondocuments/account_switching_timeline.pdf. But note that when it refers to a number of 'days' that excludes weekends and public holidays.

Step 6: After a couple of months close your old account.

You’ve moved banks!

If you have a complaint about the moving process you should make it in writing to the bank. If it is not resolved within eight weeks go to the Financial Ombudsman Service www.financial-ombudsman.org.uk/consumer/complaints.htm. You can also call the Ombudsman office for advice.

WHICH BANK?

There are dozens of banks in the UK.

The five big banks are Lloyds/Halifax, Barclays, RBS/NatWest, Santander, HSBC/First Direct. They can offer the best deals and the fastest service. The way they treat customers can vary greatly. First Direct is usually top. You can find out the ones with most complaints here

www.fsa.gov.uk/library/other_publications/commentary/firm_spec

Some banks will pay you to open a current account. Some pay interest on the balance. Some want a minimum amount going in each month. Some will try to sell you an account you pay for each month but always resist as they are almost never worthwhile. Check the overdraft charges.

There are five smaller banks. None of them plays the markets with your money like the big five do. Co-operative is about to buy 632 branches from Lloyds and will then be the sixth biggest in terms of branches. It is a mutual and has an ethical policy about where it invests its (your) money. Smile is its online bank. Yorkshire Bank and Clydesdale Bank are both owned by National Bank of Australia. Handelsbanken is Swedish owned and has 115 branches in the UK. It prefers wealthier customers. Virgin Money now has 75 branches and will operate current accounts later this year. Metro Bank is mainly inside the M25 with a dozen or so branches but is growing rapidly and says it offers specially friendly service in its branches. More about four of these banks www.paullewis.co.uk/archive/saga/2012/20120301Works.htm.

Five building societies offer a current account. Nationwide is by far the biggest and the only one which is a ‘clearing bank’ – in other words it does not have to rely on one of the big five to process its accounts. With a total of 800 branches – including its subsidiaries Cheshire, Derbyshire, and Dunfermline – it is seventh in branch numbers after an expanded Co-operative. The other four societies with current accounts are Coventry, Leeds, Norwich & Peterborough, and Cumberland.

Building societies are mutual organisations which are owned by their customers. So there are no shareholders taking dividends out of the company. Their directors are paid far less than the directors of big banks. And they do not gamble money on international markets.

Twenty four credit unions offer current accounts. They may take longer to process payments but all should do payments by the next working day. They are generally small organisations with the advantages and disadvantages that brings. And there may not be one in your area. You can find a list here www.abcul.org/about/productsservices/cucaand find the credit unions that you can join here www.findyourcreditunion.co.uk. Credit unions are mutual organisations too.

In Northern Ireland there is Northern Bank which will soon take the name of its owner Danske Bank. First Trust Bank is owned by Allied Irish Bank AIB. Ulster Bank is part of RBS Group. And Bank of Ireland has many branches.

BAD RISKS

If a bank does not like you it does not have to do business with you. If you have an overdraft it is harder to move your current account. If your credit record is poor – and that can just mean you don’t have any credit cards or a mortgage or loan – then you may be rejected. Other things that give you a bad credit score are moving home frequently, not being an owner occupier, having late or missed payments on your record or court judgements for debt against you.

You can check your credit record at the three credit reference agencies. You have a right to a copy for just £2. You can get those here

http://experian.co.uk/consumer/statutory-report.html

www.equifax.co.uk/Products/credit/statutory-report.html

www.callcredit.co.uk/stat-report-online/

If there is an error on your record the agencies must correct it. If you have a poor record but there was a good reason for it or there is a dispute over a payment, you can add a ‘notice of correction’ which has to be read by anyone using the record.

The credit reference agencies will all try to tempt you to pay them every month for regular reports, credit scores and other extras. There is no need to do that. But if you want a free credit report then sign up to the free 30 day trial they offer and cancel it as soon as you get the first. If you cannot see how to cancel it on the website just tell your own bank to cancel the payment authority. It has to do that and refund any payments taken subsequently - see http://paullewismoney.blogspot.co.uk/2012/04/continuous-payments-racket.html. Callcredit has a subsidiary called Noddle which offers a free credit report for life. It makes its money by encouraging users to do deals with financial service providers.

Some banks will expect a minimum income and others will not want customers whose only income is from benefits. All the big banks have agreed to offer a basic bank account even to bad credit risks. These accounts do not have overdrafts but most do allow direct debits and standing orders. If you have been bankrupt in the last six years or you have a fraud flag by your name you may be rejected. The organisation that records fraud allegations is called CIFAS. You have a right to know if it does have your name on its fraud database. But it may be very hard to find out much else about it. Contact CIFAS here www.cifas.org.uk/enquiries_and_complaints. Ask which bank made the fraud allegation so you can challenge it with that bank. Banks are very resistant and difficult about providing any information if fraud is suspected. If you are not guilty of any fraud and all your attempts to put things right have failed then threaten CIFAS with court action for spreading damaging and false information. See http://news.bbc.co.uk/1/shared/spl/hi/programmes/money_box/transcripts/money_box_30_june_12.pdf and search for Fred.

IN PRAISE OF CASH

A lot of people ask me where they should invest £XX,000 from redundancy/mother’s estate/house sale etc?

I always reply that I never give investment advice because investments can lose you money and I never want to give advice that has cost people anything. I know invested money can go up but it can also go down. And by the time those selling you the investment have taken initial charges, annual fees and hidden costs from your money, the investment has to do very well indeed to leave you any profit. Generally it doesn’t beat cash. And it certainly won’t guarantee to do so.

So I always advise people who suddenly have a few thousands or tens of thousands of pounds which they are not using – put it in cash. Unlike investments cash cannot go down. It just goes up. Which helps you sleep at night. And the same goes for tens or hundreds of pounds or even hundreds of thousands.

But you have to make sure that your money is safe and the return is worthwhile.

Safe

Up to £85,000 saved in a UK registered bank, building society, or credit union is guaranteed by the Deposit Protection Scheme run by the Financial Services Compensation Scheme (FSCS). The limit is ‘per registered institution’. So money in two banks which share a licence will only be protected up to £85,000 in total. That can be confusing. For example Derbyshire Building Society, Dunfermline Building Society, and Cheshire Building Society are all owned by Nationwide Building Society and operate under one licence. So if you have £85,000 in one of them any money in any of the others will not be protected – only the total between all four will be safe up to £85,000. www.fscs.org.uk

It gets even more confusing with the banks. Bank of Scotland, which owns Halifax and Birmingham Midshires, operates under one licence. But that is separate from the licence of its owner Lloyds Banking Group. But Cheltenham & Gloucester, also part of Lloyds, does not have its own licence so money in it counts as part of any money in Lloyds itself.

The Financial Services Authority publishes a brief guide to major banks and building societies and how they are linked www.fsa.gov.uk/consumerinformation/compensation/brands

And moneysavingexpert has a useful online tool to check other banks a brand is linked to www.moneysavingexpert.com/savings/safe-savings#whatcounts

Your money is safe up to that limit even if the bank holding it went bust. Although a bank going bust is very unlikely, I still recommend keeping below the limit. Just as I always wear a seatbelt even though I do not expect to have a collision.

Most banks operating in the UK are regulated here and covered by the FSCS. But those which have their home in another EU state can be regulated in their home country. Technically they operate here as a branch. If the bank did fail you would have to go to the compensation scheme in its home country. The amount protected is slightly less. It is €100,000 – which at the moment is worth just over £80,000.

Banks based in countries outside the EU have to be regulated and registered in the UK so the £85,000 limit applies. And some EU based banks – such as Santander and Bank of Ireland UK – are separately licensed and protected in the UK.

The amount protected is per person. So for a couple with a joint account up to £170,000 is protected in the UK and €200,000 in the rest of the EU.

If you have more money than you can easily divide into £85,000 chunks you can get it all protected by using National Savings & Investments. It is 100% backed by the UK Government up to any amount. But its rates are generally quite low. Some are tax-free and the combination of 100% protection and 0% tax can make them attractive to people with a lot of money who pay higher rates of tax. More at www.nsandi.com

Worthwhile

People often complain that their money is earning nothing in a savings account. And that can be true. First Direct for example, which is part of HSBC, pays 0.05% on its basic savings account. So on £1000 it would pay you 50p a year for the use of it – even though it would be making £10 a year or more by lending it out. No wonder people say rates are rubbish!

But it is not just the fault of the banks. If we search out the best savings deals we can earn more than 3% on instant access accounts and more than 4% if we are prepared to leave it in one place for four years.

These rates come with catches. The 3% instant access accounts all offer a ‘bonus’ for a year or so. After that the rate will fall down to something pathetic like 1% or 0.5%. So you must move your instant access money at least once a year.

One interesting alternative is offered by a bank called Investec. It has two accounts where it guarantees to pay the average of the top ten or top five accounts on the market. In exchange you must give it three or six months’ notice to withdraw cash. It is currently paying more than 3%. You need at least £25,000 to open the account.

Remember that if you commit to a savings account that is a fixed rate for a fixed period such as one year or even four, you cannot get your money out early. If you do you will pay a hefty penalty. And although 4% a year or more over four years may seem a good rate now, if interest rates start to rise it may seem poor value by 2016. So it is a gamble on future interest rates.

You can check good savings rates at www.savingschampion.co.uk. I like this site because its top buys are not influenced by deals it has done with the providers. You can also use www.moneyfacts.co.ukto find the best buys. But beware that MoneyFacts’ first offerings will not necessarily be best buys – they will be clients. To get the real top rates, click on ‘savings’ then use the search to put in your criteria and then click on ‘sort’ in the column ‘AER’ to make sure the best really are on top.

Inflation

People who want to sell you investments often say that inflation destroys cash. And that £1000 today is worth 3% less in a year's time because inflation is 3% (or whatever it is). It is true that in the long term inflation destroys wealth of any sort that you hold. But inflation applies equally to the value of investments as it does to cash. So although high inflation is undesirable for those with money, it is irrelevant to the discussion about the value of cash versus investments.

Remember too that with an investment you have to add fees and charges onto inflation before you will make a real penny. So the inflation rate for investments is always higher than it is for cash. Always.

If a financial sales person mentions inflation, ask what guarantees they will give that the value of your investments will beat inflation. And when they say things by way of a 'reply' just repeat 'yes but what is the guarantee?' Then put it in cash.

Remember too that if you have debt then inflation is your friend. And who has the biggest debt? The Government which says it wants to control it!

Tax

The interest earned on savings is taxable. All banks and building societies deduct tax at 20% from the interest automatically. If you are a basic rate taxpayer that means tax is paid and you need not worry about it. If you are a non-taxpayer you can register to have the interest paid gross and claim it back from past years back to 2008/09. HMRC says there is around £200 million waiting to be claimed http://www.hmrc.gov.uk/incometax/tax-free-interest.htm. If you are just above the tax threshold then you may be able to claim half the tax deducted back. This is very complicated to work out but there is some help here http://www.hmrc.gov.uk/taxon/bank.htm

If you are a higher rate taxpayer you must tell HM Revenue and Customs so the extra tax can be collected either through self-assessment or your tax code.

If you are part of a couple and one of you pays tax and the other doesn’t you can save tax by holding the savings in the name of the non-taxpayer. To do that the money must be transferred into the name of the non-taxpayer. If you split up then the money will belong to just that person.

If you pay tax then your first savings account should be an ISA where interest clocks up tax-free. You can put up to £5,640 into one this tax year 2012/13. Again move your money each year to keep up with the best rates. You do that by opening up a new ISA and getting the new provider to do the transfer for you. Do not just take it the money out and put it in a new ISA. If you do then it will lose its tax-free status.

Enjoy your cash!