DEAR TRICIA
Need some practical financial advice? YOUR MONEY Editor Tricia Phillips and her team can help
QI’ve got less than a year left on a five-year fixed-rate mortgage deal. Will I get charged a large penalty if I switch to another deal now? I’ve found one that has a much cheaper rate of interest and it will reduce my monthly payments, which would be useful.
A
There is usually an early redemption charge if you want to switch deals during a fixed mortgage term. The amount usually reduces as you near the end of the deal, and the amount you pay is based on a percentage of your
outstanding balance. So, the amount you are charged will depend on the size of your outstanding loan. Check your key features document for your mortgage, which will give details of any early exit penalties. Or call your lender to find out what your options are and how much it may cost to repay your balance earlier. Q
I have inherited around £25,000. Do I need to pay tax on this?
A
You do not usually pay tax on the money you inherit at the time you receive it. But you may need to pay
income tax on any profit that you earn later from your inheritance, such as dividends from shares you buy or rental income from a property. The estate of the person who died usually pays inheritance tax if it is due.
Q
What is the difference between a retail bond and a fixed-rate bond? I’ve been offered a retail bond paying a much better return on my cash but I’ve never heard of them.
A
Fixed-rate bonds are usually offered by banks and building societies and
you invest cash for a fixed term and will earn a fixed rate of interest, with up to £85,000 of your money protected with most banks under the Financial Services Compensation Scheme. Retail bonds, on the other hand, are available from fund managers and they invest in companies. They are much riskier and that is why you get offered a better return. Your cash is at risk and you could lose some or all of your investment, depending on how the company performs over the term of the bond.
QCan children have both a cash, and a stocks-and-shares junior ISA? We have been saving into a cash ISA for our son and don’t want to risk the pot we’ve already saved up. But we would like to dabble with a little cash to try to create a good start for him when he is older.
ALike with adult ISAs, a child can have a junior cash ISA and a junior stocks and shares ISA. You can currently save up to a maximum of £9,000 per child per tax year.