Credit Card Application Process

Making an application for a new credit card might seem a daunting process but you can make the application easy by applying online. Not only is the application simple and straightforward, you will also be saving time and helping the environment.

Information That Credit Card Providers Will Require

The information that is required by credit card providers is relatively common and varies little from each financial organisation. Credit card providers will be looking for the following information from you:

Proof Of Identity

The increase of identity fraud has meant that your credit card provider will need to verify your personal details. You will need to provide information about your place and date of birth, name changes, and addresses for the last three or more years. This will need to be verified in the form of utility bills and current bank statements, etc.

Your Employment Details

Credit card providers will want to have evidence of your full time employment and details of your employment history. If you are unable to provide this information your credit card application is unlikely to be successful.

Your Income And Outgoings

Credit card providers will need to satisfy themselves that you will be able to pay off the debt that you create using their credit card. To do to make this judgment, they will want to examine your monthly income and compare that to your monthly outgoings.

Most credit cards and financial organisations have sophisticated algorithms that enable them to make their judgments objectively and without prejudice.

Credit Rating

This is not something you will be able to provide but you must be aware that a potential credit card provider will check your credit rating to decide if you constitute a good or bad risk to them. Your credit rating is determined by a complicated scoring process which is calculated by examining your credit history. Credit card providers will be looking for a good credit rating.

If your application for a new credit card is not successful, this information will be passed on to a credit reference agency who will add it to your credit rating.

Once you have filled in your application for a new credit card, you will be anxious to know how long will take before you know you have been successful.

Credit Card Application Processing Time

The amount of time it takes to process your credit card application varies according to providers, and the amount of detail that they require. Not only will the credit card provider want to satisfy themselves that the details you have provided are correct, they will also need to access your credit history from various credit rating agencies.

Average Credit Card Application Processing Time

The average time is that you are likely to wait for your application for a new credit card to be processed is four to 12 working days. However, decisions about the success of your application are likely to be given very quickly if you apply for your credit card online.

Before you proceed with your credit card application, make sure you have all the above information to hand. You must be honest and truthful with all the information you provide. By doing this, you will increase the chances of being successful with your new credit card application and it not be too long before you can go out and start spending!

Capital Gains Tax

Capital Gains Tax

Capital Gains Tax (CGT) is a tax on profits made on the disposal of assets, including property and shares. Spouses and civil partners are taxed separately on their own gains and, where an asset was acquired before April 1982, the asset’s cost is deemed to be the market value at 31.March 1982.

Disposals for Capital Gains Tax

A disposal usually relates to the transfer of ownership of an asset from one person to another. The most basic example of this would be selling an item to another person and includes:

  • Selling an asset
  • Giving away an asset (including gifts into trust)
  • Destroying an asset
  • Receiving money for giving away the rights of an asset e.g. selling an endowment policy where the original policyholder would no longer benefit on the death of the life assured

Where an asset is sold, the date of the disposal is the date the contract for sale becomes binding, which could be before the seller receives payment.

Disposals at Death

There is no CGT on the disposal of assets on the death of an individual. The beneficiaries of the estate are deemed to acquire the assets at their market value on the date of death.

Disposals Between Spouses or Civil Partners

A disposal from one spouse to another is an effective tax planning tool where one partner has not used their annual exemption and the other has; and where one partner is a higher or additional rate taxpayer and the other either a non or basic rate taxpayer.

A disposal between spouses or civil partners will not give rise to a chargeable gain if:

  • Its value will be what it was when the original partner bought it when the asset changes hands. If the second partner later sells the asset their purchase price is deemed to be the original purchase price, not what it was worth when they received it.
  • Where assets are held jointly, each partner is taxed on the gain in accordance with their share of the asset.
  • The couple must be living together at some stage during the tax year.

Disposal Consideration And Valuation

The consideration for the disposal of an asset is usually the sale proceeds. The date of disposal is taken as the date any contract for sale becomes binding. The CGT bill could arise before the seller actually receives the money from the sale.

Where the disposal is not a sale made on a fully commercial basis, the disposal consideration is deemed to be the market value of the asset.

Disposals ‘Not At Arms Length’

A disposal ‘not at arm’s length’ is any disposal between individuals with a close connection, such as close relatives.

Where a transaction does not take place on a fully commercial basis, it is called ‘not at arms length’ and, for CGT, it is the market value that is used instead of the actual proceeds, if any. This applies to both sales and gifts.

Market value can also be used instead of the actual sale price in disposals between unconnected parties, e.g. on a deliberate sale at an undervalue or a gift between friends.

Exempt Disposals

Some disposals are exempt from CGT, either because the asset itself is exempt or because the gain is wholly relieved from tax. Where a disposal is exempt, no allowable loss can be claimed. The following are all exempt from CGT:

  • National Savings Certificates and premium bonds.
  • Government and most corporate bonds, and government-guaranteed securities, owned by individuals.
  • Decorations for valour disposed of by the original owner.
  • Foreign currency for personal use outside the UK.
  • Compensation or damages for a wrong or injury suffered in a profession or vocation.
  • Assets held in new individual savings accounts (NISAs), Junior ISAs and child trust funds.
  • Shares in Venture Capital Trusts.
  • Cash backs given by providers of goods or services as an inducement to purchase those goods or services, e.g. by mortgage lenders.

Capital Gains Tax Losses

  • Losses on disposals can be set against any gains in the same tax year. Once claimed, losses can be carried forward indefinitely.
  • One spouse’s loss cannot be set against the other’s gains; because spouses are taxed independently. The same goes for civil partners.
  • Losses must be claimed within four years of the end of the tax year in which they were made. This is a requirement whether or not the loss is used in that period.
  • The amount of the loss must be offset against any gains made in the same tax year before applying the annual exemption.
  • A loss need not be reported to HMRC unless the disposal proceeds of the asset are more than four times the annual exempt amount, or the taxpayer wishes to set the loss off against chargeable gains (or both)

Entrepreneurs’ Relief

Entrepreneurs’ relief can be claimed on the first £10 million of lifetime gains made by an individual on the disposal of all or part of their business. Assets must have been owned for 1 year before the date of disposal in order to qualify for relief.

The individual must have a qualifying interest in the business being sold. For sole traders and partnerships this means they must own the business.

For shares and securities in a trading company, the individual must be an officer or employee of the company and own at least 5% of the ordinary share capital.

Inheritance Tax and Trusts

Gift With Reservation In Discretionary Trust

If you want to avoid a gift put into a discretionary trust being treated as a gift with reservation for inheritance tax purposes, you should exclude yourself from any benefit in the trust.

HMRC has stated that if the donor is a potential beneficiary under a discretionary trust, or even under a power of appointment trust where someone else has an interest in possession, it will regard this as a reservation of benefit.

The standard advice for clients using these trusts is to make sure that they cannot themselves benefit in any way by excluding themselves from benefit in the trust. The donor can still be a trustee, but he or she should not be able to benefit from any trustee charging clause. HMRC does not regard an interest-free loan on its own, or the retention by the settlor of a reversionary interest in a gift to the trust as a gift with reservation, but neither of these answers represent the best advice to a client who is setting up a trust.

Annual IHT Exemption For Lifetime Transfers

The annual inheritance tax exemption for lifetime transfers is £3,000. Any unused exemption from the previous year can be rolled forward giving a total exemption of £6,000.

Any unused balance is lost if it is not used in the next year, and that year’s exemption must be fully used first. It cannot be carried forward to year three.

Transfers Without IHT And CGT

The main IHT/CGT advantage of transferring an asset directly to someone other than your spouse or civil partner, rather than transferring it via a trust, is that there is no lifetime charge on direct transfers over the nil rate band.

A direct transfer (outright gift) is a Potentially Exempt Transfer for IHT. The main advantage of a PET is that there is no lifetime charge of 20% on transfers over the nil rate IHT band. However, if the donor does not survive the seven-year Potentially Exempt Transfer period, IHT will be payable on the whole of the excess.

It is also important to consider any CGT consequences of direct transfers: a gift to a spouse or civil partner will not be a disposal, whereas a gift to any other person will be. In contrast, chargeable gains on transfers into and out of trusts may be subject to an election for CGT holdover relief.

In some circumstances, this may be a reason to make a chargeable transfer rather than a PET.

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