Personal Finance can be extremely complex and therefore leaves ground for misconceptions. Which? carried out a survey on over 1,000 members of the general public giving them statements and asking whether they thought each one was true or false. Here are the 10 statements that had the highest number of incorrect responses.
10th. Buy To Let – ”Buy to let is a reliable way to fund your retirement” (33% incorrect)
Rental income isn’t guaranteed – if your tenant decides to move out, your monthly receipts would suddenly stop. There could be a long period of time between finding a new tenant. Even worse, a tenant could cause untold amounts of damage and refuse to pay their rent.
9th. Care Fees – ”Putting your home into a trust guarantees you won’t have to sell it to cover care home fees” (38% incorrect)
If the local authority thinks you’ve deliberately disposed of an asset to increase its eligibility for funding, it will include the asset in the assessment.
8th. Inheritance – ”If you gift your house to your children, it won’t count towards the IHT bill” (38% incorrect)
Gifting your property to your children won’t reduce the bill if you continue to live in it rent-free. To avoid this you’d need to pay your children a market rent for the property and continue to live there for at least 7 years. Remember your children would then become liable for tax on the rental income.
7th. ISAs – ”You can open more than one cash ISA in any tax year” (43% incorrect)
You can split your allowance between cash and stocks & shares. However you can only open one cash ISA in each tax year.
6th. Compensation – ”The FSCS only applies to high street banks” (43% incorrect)
Whether or not deposits with a bank are covered by the FSCS, doesn’t depend on its size or how well established it is. What matters is whether it’s authorised by the Financial Conduct Authority.
5th. Scams – ”Your bank is legally required to refund all your money if you’re the victim of a scam” (45% incorrect)
If money is taken fraudulently from your current account, your bank must refund it immediately, unless it can prove you acted negligently.
4th. Pensions – ”The new state pension is a flat £ 155.65 a week” (54% incorrect)
The amount you will get under new state pension rules will depend on your national insurance contributions. You’ll need 10 years’ worth to receive any state pension at all. To qualify for the full level you’ll need to have 35 years of contributions.
3rd. Tax – ”You’ll pay capital gains tax on the profit you make when you sell your home” (57% incorrect)
Capital Gains Tax is not payable on any profit you make when you sell your only or main home. If you have more than one home only your main residence is exempt.
2nd. Debit Cards – ”Debit card transactions aren’t protected” (63% incorrect)
There is a lesser-known scheme called ‘chargeback’. This is where you can ask your card provider to reverse a transaction if the goods you bought failed to arrive, are faulty, damaged, different from the description advertised, or the company has gone bust. It isn’t a legal protection, but it’s backed by Visa, MasterCard and Amex. Claims must typically be made within 120 days of you noticing a problem and should be made to your bank.
1st. Credit Cards – ”There is a credit blacklist” – (84% incorrect)
There’s no such thing – if you have a poor credit or limited credit history and have been rejected by a number of lenders, you may think that you’ve been barred from borrowing. But the reality is that when you apply for credit, the lenders make their own decision based on its own assessment criteria. You could be rejected by one company, accepted by another.
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