Property investment glossary

Ill-Health Benefit


A person in the UK diagnosed with conditions that prevent them from working may be forced into early retirement, meaning that they can take their pension benefits early (subject to meeting eligibility criteria and the rules of the individual’s pension scheme).

Income Drawdown


An income drawdown is a way of taking income from your pension fund while leaving the remainder of your fund invested for further potential growth. Even if you have a large pension fund and other assets or income, income drawdown depends very much on the risks you’re prepared to take and how actively you want to manage your retirement fund and income.

Income Tax


Tax levied directly on personal income, both earned (wages, salaries and commission) and unearned (dividends, interests and rent). The rate of Income Tax payable is dependent on how much of your taxable income is above your Personal Allowance within the tax year. The three tax brackets in the UK are:

  • Basic rate (20%)—taxable income above your Personal Allowance is between £0 to £31,865
  • Higher rate (40%)—taxable income above your PA is between £31,866 to £150,000
  • Additional rate (45%)—taxable income above your PA is over £150,000

Income Tax Marginal Rate


Marginal income tax bands mean that individuals only pay the specified tax rate on the segment of earnings or benefits that fall within that income tax band, with the lower segment charged at the individual’s standard tax rate.

Independent Financial Advisor (IFA)


An IFA is a professional who offers independent and impartial financial advice to clients. You may want to consult an IFA able to recommend suitable financial products to suit your individual retirement needs.

For more details about how to find an IFA: http://www.findanadviser.org/find-an-adviser.aspx

Individual Savings Account


Individual saving accounts (ISAs) are a scheme which enables individuals to hold cash, shares and unit trusts, without being subject to tax on the likes of dividends, interest and capital gains. Up until now many preferred ISAs to traditional pension schemes, as passing on assets after death to dependants, spouses or civil partners was more effective, as it typically isn’t subject to Inheritance Tax. ISAs have commonly been used as tax wrappers.

Inflation


Opposed to deflation, inflation is the rate at which the general level of prices of goods and services is increasing within an economy over a set period of time. So when prices are growing, each unit of a currency buys fewer goods/services.

Inheritance Tax


The tax paid when a beneficiary receive a person’s estate that is worth more than £325,000 upon their death. Below the Inheritance Tax threshold of £325,000 the tax does not apply.

Interest-Only Mortgage


A style of buy-to-let mortgage where you only have to pay interest every month as an alternative to a standard repayment mortgage. However, when the loan matures, the mortgage-holder will have to pay full cost of the property.

Interest Rates


The proportion of a loan charged as interest to the borrower, normally conducted as a percentage of the outstanding loan amount.

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