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Ask the experts - your questions answered - October 2006

Ask the experts

Each month we ask different Independent Financial Advisers (IFAs) to give us their solutions to issues facing those who take an interest in their money. Expert opinions each and every month.

It is easy to contact an independent financial adviser in your local area, call 0800 085 3250

Q. Anne in Hemel Hempstead asks: Would it be worth my while to register, for tax purposes, as a sole trader? I am a self-employed professional tutor whose sole source of income is tuition fees.

There is a possibility that registered charities or companies may use my services in the future to a limited degree. I do not currently charge VAT and have no reason to believe I may charge VAT in the future unless I publish and sell tuition materials. I currently work at home and my income is less than £18,400 per annum.

Jason Butler, Partner at Bloomsbury Financial Planning, answers:

If you are working on a self employed basis then you already are a sole trader and as such required to register with HMRC.

This is not an optional thing! The Government's 'Working for yourself' guide will provide help.

As such you may deduct allowable expenses incurred in your business in order to determine your taxable income.

This income, together with any other taxable income from savings and investments, will then be subject to deduction of the personal income tax allowance in order to deteremine how much, if any, will be taxed at 10%, 20% and 22%. At the levels you have stated you look like falling well below the thresholds for both higher rate income tax and VAT.

There is an option to elect to be VAT registered but this is unlilely to be benefical to you as you are likely to collect and pay over far more VAT on your fees than you could reclaim on expenses.

Q. My daughter has asked me that she would like control over her babys\child trust fund. A cute little baby can become a rebellious teenager. I told her that was not possible. If she went ahead with a childrens investment plan instead, what would best be done with the governments £250 voucher.

Jason says: The investment strategy of a child trust fund (CTF) is under the control of the parent or legal guardian until the child reaches 16.

From that age the child is legally allowed to take control of the strategy although they cannot withdraw the capital until age 18, at which point they become absolutely entitled to do so.

Although there is no obligation to use the CTF structure should you wish to make additional savings for the child, the government's vouchers can only be invested in a CTF - hey cannot be applied to any other investment vehicle.

If your daughter does not apply for a CTF within the time limit allowed, one will be selected at random from a number of providers and the cash may then end up in an investment that she does not consider suitable.

Although your daughter (and the child from age 16) may switch to another provider, there may be a cost to this and so it is preferable to select a suitable one at outset. The official website http://www.childtrustfund.gov.uk/ contains more information.

Q. Charlie in Corby asks: How do I get my bank charges refunded?

Tiscali Money says: Read our article on how to reclaim bank charges. It contains a summary of what you have to do as well as details of sites where you can get template claim letters.

Q. Martyn in Cumbria asks: I have existing cash mini Isas.Am I allowed to transfer them to a new provider lumping them all together? Are there any restrictions on the amount I can transfer and does this transfer then use up my years allowance

Donna Bradshaw, Financial Planing Strategist at IFG Financial Services, answers:

The simple answer is, yes, you can transfer all your existing mini cash ISAs to one provider 'lumping' them all together. There are no restrictions on the amount that is transferred, providing all the money transferred is from existing cash ISAs. The money transferred would not affect your current year's allowance of £3,000 as the money transferred represents ISA allowances from previous tax years.

Q. Roy in exeter asks: At what rate should I buy my eiros for a break abroad, or should I get them over in Spain through my current account Nat West?

Donna says: Rates fluctuate all the time therefore it is difficult to speculate at what rate you should buy. I consulted with my colleagues at Siddalls, specialist independent financial advisers to people moving abroad, who give advice on moving currency and they also said that playing the speculation game with such small sums isn't really worth it.

However, what is likely to have more impact is the charges for exchanging your money, which can be explicit or taken into account in the rate offered, therefore I would recommend you use them as the basis of your decision. Online, Travelex appears to offer the best rates, www.travelex.co.uk.

Q. Sarah in Suffolk asks: My complaint to the FSA about a mis-sold endowment was initially upheld but needs to go to a final adjudication. This final process started well over a year ago and we are no nearer to a result. Can I freeze my endowment rather than sell it as I feel I am throwing away good money?

Donna says: Sarah may be allowed to stop contributions to her endowment; however, it will depend very much on the terms and conditions of her policy and the provider.

And even if she were able to do so, it may not necessarily be the best course of action as investment conditions have changed and with profits performances have generally been improving and she may lose out on some of potential upside if she were to discontinue premiums.

Therefore, before taking any action, she should check her policy terms, compare the strength and performance of the fund and speak to the provider about any potential down-sides of stopping premiums.

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