Do you need to worry about Making Tax Digital?

0:02Lee Boyce: Welcome to This Is Money podcast sponsored by Trading212. Download the Trading212 app today and open a cash ISA with promo code TIM to get the 12-month bonus promo rate for 4.51%. Terms apply. I'm Georgie Frost and joining me and Simon Lambert and it's Lee Boyce. And coming up, tax just got a little bit more taxing. Or at least time consuming. Making Tax Digital has arrived, meaning hundreds of thousands of people need to make their first quarterly report this week. And of course, it's during the summer holidays. Great timing. We cover what you need to know. Also today, continued warnings that the government's inheritance tax rate on pensions next year will undermine faith in retirement savings.

0:44Lee Boyce: Premium bond winner scoops the jackpot with a bond bought just six months ago. and heading off on holes, Lee gives you all his top tips to ensure you're not ripped off when it comes to spending abroad. Don't forget your step-to-step for the latest breaking money news. Just go to thisismoney.co.uk or download the app. But first, it was meant to make record keeping easier for us and reduce the tax gap by making tax reporting more accurate. The new Making Tax Digital regime was up and running this week. Sole traders and landlords earning more than £50 ,000 from their self-employment and property had until Friday to make their first quarterly report to HMRC.

1:23Lee Boyce: Now, it's being rolled out over the next couple of years, those income thresholds dropping each year and dragging hundreds of thousands more people into this new bureaucratic net. So what exactly is it? Would it affect you? And how can you avoid any fines? Simon Lee, welcome Lee, making tax digital. I feel like we've been talking about this for a very, very long time but here it is at last why was it introduced what's it meant to do

1:52Georgie Frost: oh georgie we have been talking about this for a while and now we're here it's um essentially hmrc are attempting to modernize uh the way people uh report their income and doing it in this quarterly fashion uh it says will make it easier for people and will make it easier for it to keep on top of kind of what's going on if you are someone that's going be affected by this. We had some stats that so long ago, it's meant to be 864 ,000 sole traders and landlords in scope for this in this first wave. That's according to its estimates. As of a month ago, 387 ,000 had signed up. So that's quite a big gap between who should be doing it and who's actually done it so far.

2:36Georgie Frost: That figure would have gone up.

2:38Lee Boyce: Lee, just to be clear, is it sort of like a mini self-assessment every three months? You just report that you don't pay. You still get the big self-assessment at the end where you pay your money. But this is just like little mini ones. Yeah?

2:52Georgie Frost: If you're earning over£50 ,000. Yeah, exactly. So it's a good way of putting it, Georgian. It's for sole traders and landlords. They're the key people.

3:00Lee Boyce: So not limited company directors or anything like that?

3:03Georgie Frost: Sole traders and landlords. And this first wave is for people over£50 ,000. And then, as you say, the threshold starts to reduce in subsequent tax years. So more people will get dragged into it. And by the end, it's going to affect a fair few million people. And actually, HMRC always describes people as customers, which I always find quite odd. I don't know if anyone's a tax bank customer. It sounds a bit strange. But the first deadline is due today, 7th of August. And it will mean recorded income and expenses between the 6th of April and 5th of July. what's going to happen is if you miss this deadline and you are someone that should have done this and and it's going to affect a huge range of people electricians plumbers landlords personal trainers photographers hairdressers consultants i hope it's a vast thing um if you do miss it they're going to be working on a penalty points kind of system similar to i would say a driving license where you get three points on your license potentially for you speed and that kind of thing now you can get up to four points so for each one that you miss over the quarters you'll get one point and then after that if you get four points you get fined 200 pounds and those points sort of stay on your kind of record so you won't be able to just keep doing that you will get fined uh for for not reporting and getting involved in it it does also involve having to use external software and it's quite a confusing list of um sort of places that are offering this and where to where to do this but you know three million people are going to have to upload their income and expenses each quarter as i say hmrc argues that it will make things easier and it will keep record keeping more accurate um and it will help it kind of make sure that tax isn't lost that's its argument for doing this and just bringing it up into a kind of more modern era more digitally focused era those only between 30 000 50 000 will follow in april 2027 and then the expansion further to 20 000 in 2028 as i said that'll be about three million people so it's a huge amount of people that are going to be affected by this and i think it's one of those areas where i would not be surprised if quite a lot of people were buried their head in the sand think i'll do that later as you say slap bang in the summer holidays uh quite a few people i reckon have either forgotten uh i've chosen to forgotten or i've just completely not heard about this read about this or digested this at all because they either a think it doesn't affect them or b they just can't really be

5:39Lee Boyce: bothered to try and figure it i love the idea lee of you choosing to forget something for the car

5:45Georgie Frost: Well, there's so many things I would choose to forget in my life if I had a choice.

5:49Lee Boyce: Do you know what the problem I have with it? I mean, I have a few problems with this. It is a ball ache to do your tax. There's no question about it. You can't get around it. The idea of making something digital, you'd think, yeah, brilliant. Absolutely right. That's what we should be doing. The issue I have is someone who has to do VAT. And I always think when I think about money and time, I think of Lee talking about how quickly two years goes by when you're looking to remortgage. if you're looking at a two-year fix. Imagine how quickly three months goes by. Honestly, every time I get that email from my accountant, my heart sinks and I think, oh God, we're here again.

6:23Lee Boyce: And that's not even a huge amount of effort that I need to do. If you have to do VAT on top of this, you are looking at what, nine sort of returns a year. Another issue I have is, and I may be alone here, I think it would make sense to make a payment every quarter because I know you have things like payments on account where you split how much you pay oftentimes. But that self-assessment at the end of the year can be a big, whacking tax bill. But also, you have to use an external software, like Xero or QuickBooks or something into it, which I think I pay maybe£400. I might have got that wrong, but it's a fair whack of money.

7:03Lee Boyce: And then, of course, you have your accountant's fees if you want them to do this for you too, if you want to get this right. it's taking a lot of time and a lot of money from people who when it goes down in 2028 there'll be 20 000 pounds i believe that's not a lot of money and yet it's taking a lot of time and money from people who just want to get on with their jobs simon i agree with you and i think that you know

7:28Simon Lambert: the key element in there is the bit where you said you've got an accountant and so obviously you have to give this information to your accountant and even that is onerous but your accountant is theoretically doing most of the work and for people who do need to do making tax digital then if they have an accountant then their accountant should be looking after this making tax digital software element of it for them however it may be that their accountant then passes on a fee for doing that and the problem i think with the software element is basically people are having to pay for software or there are some free options and i'll come on to the some free options in a bit but the paying for software thing is my wife's in a similar position she's self-employed she's a sole trader she's not a limited company but she's paying an accountant but she also has to pay for zero because her accountant says you need to have zero in order to update the information that you need to update so i can then do your accounts Now, when she signed up to Xero, which brings me on to the free software point, Xero was very cheap.

8:37Simon Lambert: I mean, it might have even had a free starting period, but it was certainly very cheap. But those fees for Xero have ratcheted up over the years, and she's now paying a substantial amount for Xero, and her income from employment is not huge. I mean, it's good, but it's not huge. and this is the issue with some of this stuff is the way the software model works is you offer something either freemium where there's a free version and then you charge more for extra features or you start off with trying to grow your business by offering it for free or at a very low cost and then once you've got customers at a critical mass because your service is good for example then you start putting the fees up and so it might be that there are services that will do this for free and some people can actually get free services to do this through their bank as well but you don't know that that service will always be free once you're locked into the service and you're used to using the service you've got that kind of sunk mental cost of like oh god it's going to be so much hassle to switch to another one now and how do i know that this other one that's cheaper or free now that the price of my one has gone up is going to be any good and i don't understand why this has been a long time in the making i don't understand why the government didn't build a system to do this so you could do it for free you could have the option of doing it through your software provider you could do it for free through the gov.uk self-assessment tax filing system which for all its faults has come on leaps and bounds in recent years is relatively simple to use.

10:17Simon Lambert: People listening to this who do self-assessment tax returns will know that it is relatively simple to use. Often the answer it gives you is completely baffling and you cannot understand how you can possibly owe that money seeing as all of your money comes through employment and you're like, but how? How do I owe you money? How are you not already taking this off me? And then it like spits out this da-da-da and you're like, yeah, still makes no sense to me. I'm just going to have to give you the money, aren't I? the answers might be baffling but the system in order to upload the information is pretty simple and works pretty well why didn't they build this into it it's almost as if this has gone in the completely opposite direction of travel to everything else they've done and i cannot

11:01Lee Boyce: understand that you're right simon you're right but they didn't so here we are before we get into the practical lee of how you would you know what you need to do blah blah blah i just want to talk about this tax gap right so the government reckons we've got around about 60 billion in what's not collected between what they theoretically suggest is due and what is actually collected now i don't know if you've got the sort of workings of how they get that

11:33Simon Lambert: theoretical part but i don't know it's like it's like it's like your tax it's like when you do yourself assessed with tax return. You put in the information, then it spits out, you owe us 60 billion.

11:45Lee Boyce: Well, quite, quite, quite. But, you know, I think we could all suspect that there is probably a bit of a gap there. I would suggest some is misreporting. And we can't, we can't deny that. But the government reckons that most of it is just carelessness, like people are just not taking reasonable care. That's what they suggest. I don't know if they're just saying that because it sounds a bit nicer than saying you're all gaming the system. Now, what I'm trying to ask you is, is making tax digital really going to close this gap? Or will it just get more and more people into a system where they are liable to be penalised?

12:26Georgie Frost: Yeah, I have the same question actually, Georgie, I must admit, when I was editing this article and looking at it earlier this week, I kind of was trying to get my head around how reporting quarterly i don't know if it's what what they're getting at and what potentially might happen is doing it annually gets that point where you are kind of rushing through it potentially forgetting things years obviously a long time you know it can be a bit messier i guess than having a quarterly where you might be a bit more on top of it you might give it a little bit more care and attention because you're not completely just going through the motions of just trying to get this done and over the line it's more of a kind of regular thing that you get used to and i guess what they're kind of thinking and hoping is that people will do it in a kind of more proper fashion but i have to agree i the 60 billion figure i i kind of scratched my head out i don't know how that's worked out i don't know if there's certain pockets certain industries how they've worked that out and where they think that's coming from if they can really close that tax gap if it's that large because that is a huge huge amount of money and very hard to track down and i think it's probably pie in the sky to think in five years time that that 60 billion pounds that they're claiming uh is the gap will be clawed back from using this this system there's two main

13:45Simon Lambert: things that i think on that the first one is that actually there are already things happening that are making it much harder for people to avoid small amounts of tax that they would otherwise do. So for example, you might not declare your savings interest, but your bank is reporting to HMRC and HMRC might then come after you and say, actually, you know what, you have some tax on that savings interest because you're over the personal savings allowance. The same goes, I think lots of people think they could probably get away with not declaring some capital gains or declaring some dividends. But the digital world in which we live in and the reporting that's going on by major platforms banks building societies etc back to hmrc is to a degree now eating into that and it's only going to eat into that more to the point where people can't really get away with it you're still going to obviously have the cash in hand economy and stuff like that or the cash in strange number of shops on your high street that sell things that you wouldn't think would justify the number of shops but apparently operate with complete impunity also there might be the element where some of the tax gap could be being triggered by the tax system being overcomplicated and seemingly unfair.

14:58Simon Lambert: We have created an increasingly complicated tax system in order to avoid putting up the simple main rates of tax. And we continue to create an increasingly complicated tax system and we'll see what happens in the budget. Will we keep doing that or will we have a reversal? John Healy, Andy Burnham, if you're listening, please could we go for the reversal and the making it simpler option not more complicated one the other thing is i think the unfairness element of it and i would raise here that thorny thing that we talk about often the 60 tax trap the personal allowance removal on people earning more than a hundred thousand pounds that hundred thousand pound threshold hasn't budged since it was introduced if it had done it would now be like 160 something or whatever but it creates a 60 tax rate now do you think that someone who has gone through that so by the time they get to earning 125 140 pounds their tax rate goes back down because their personal house is all gone so someone who has had a 60 tax rate on 25 000 pounds of their earnings so their tax rates gone 40 60 and then back down to 45 do you think they are more or less likely to want to play fair on their tax return at the end of that.

16:13Simon Lambert: I'll just throw that question out there.

16:15Lee Boyce: Right. Lee, just a really quick roundup of how you would go about doing this, how you'd work out if you're in this net, because as you said, there's about half a million people who didn't come forward to do this. Just give us some quick pointers.

16:28Georgie Frost: Well, I think you've got to know what your income is. I mean, you should know whether or not it's going to be over that threshold or you're roundabout on that threshold so first of all it's kind of knowing where where you're at with that i think just sort of blindly saying i didn't think i was going to be involved it's probably not going to be a good enough excuse i would suggest um we talked about the software element of this um as i said you can check with your bank to see if they're offering the software if you've got an accountant you probably as we already mentioned probably got the software already um and hmrc does have a software finder tool uh on its website uh suggesting which options that you can have obviously a lot of them do charge a fee and all that kind of thing also it brings to the point of keeping very good uh records and very good digital records and i reckon you know i it will be the minority but there are i reckon still some sole traders some business owners that are quite old school and keep records paper rather than digitally especially if you're an owner of a business that's been going for a very very long time and i could speak in experience of that of uh my wife's grandfather was running a business up until a few years ago well into his 90s never used a computer in his life uh he wouldn't have a clue uh about how to do any of this all the records were uh basically paper uh and it was a complete nightmare when the when the business was wound down also i should shout out here the end of this article is a question that says can i get an exemption from using make in touch digital i did smile a little bit of this so it says you can apply for an exemption if you think you're digitally excluded this means it is not reasonable for you to use the software to keep digital records or submit them there are different reasons why this might apply to your circumstances but this could be done to your a disability health condition or location stops you from using a computer tablet or smart smartphone um i just um some of those just i kind of can imagine quite a few people just going i don't use a smartphone or computer so i didn't want to do it um i don't know how hrc are going to treat it by a case-by-case basis and how they decide uh you can get away with not doing it

18:39Lee Boyce: like just one quick reminder because when we talk about income we're often reminding people that income includes your pension income your savings income all of these sorts of things but actually it's very clear that this is not included. Is that right? Yeah, this is. So capital gains not included, dividends not included, the PAYE obviously not included.

18:57Georgie Frost: Exactly, yeah. It's sole traders, landlords, and it's really the income that's made from that.

19:01Lee Boyce: So it's your wages, basically. Which is confusing, right? Because sometimes income means everything, sometimes it doesn't. It is quite confusing.

19:08Georgie Frost: I agree with you. Yeah, because there's lots of facets to people's finances, whether you're a justice owner or not.

19:13Lee Boyce: Absolutely right. All right, then. Talking of pensions, let's go there. We know, we know because we talk about it enough, that we are not saving as a country enough for retirement. So you would think that the government would do everything in its power to encourage us to engage more with our pensions. Alas, a measure that's been brought in to make the system fairer by stopping rich people from stuffing their pensions to pass on inheritance tax freeze, because currently you're allowed to do that, may have terrible unintended consequences, consequences, i.e. a loss of faith in the entire pension system altogether, which means people don't want to save into it, which could detriment them massively when it comes to retirement.

19:53Lee Boyce: So this is according to a new survey from Standard Life, which is showing the ripple effect of the new rules that are coming in next April. Now, the retirement giant is worried people who overestimate the impact of a future inheritance tax bill could harm their financial prospects if This deters them from saving into a pension. Firstly, what exactly is changing? This is not a pension tax, is it? It's a change to inheritance tax that includes pensions. Right.

20:22Simon Lambert: At the moment, unspent pension pots. So this does not include defined benefit pensions, i.e. final salary or career average schemes where they promise to pay you a certain amount every year in retirement for the rest of your life. Those are not included. So people in the public sector aren't affected by this and those with old school company pensions aren't affected. Most people don't have those pensions anymore. They have defined contribution pensions where you pay some money in, your company pays some money in, you invest the pot to build up some money for retirement and then you have to turn that into income.

20:52Simon Lambert: Or you might have a self-invested personal pension, for example, where you're just paying in similar thing. Those pots unspent at death will now be included for inheritance tax from next April. prior to then they are excluded from inheritance tax so if you have 200 000 pounds in your pension pot and you die today it won't be included in your estate for inheritance tax purposes now the financial advice industry the financial planning industry talked lots about how people were using this to pass on wealth that is not a widespread problem most people use their pension pots to live in in retirement they are not using their pensions as an inheritance tax dodge.

21:32Simon Lambert: But the government decided that either that they decided it was a big enough problem to pull them into the inheritance tax net, or they decided that it was convenient smokescreen in order to just pull some more money into the inheritance tax net, knowing what I just said. They will be included in the inheritance tax net from next April. The important thing to remember about this is that despite all of the talk about pensions being a very tax efficient way to pass on your wealth. If you die after the age of 75 and leave someone a pension, when they take money out of that pension, that income is taxed at their marginal rate, i.e.

22:09Simon Lambert: is added to the rest of their income and then they're taxed at the highest rate that that would be. If you die before the age of 75, the money can be taken out income tax free. The ONS has confirmed to me that the average age at which people die in this country is over 75. So basically, if you die before 75, you die early. Never usually considered a win, even for tax purposes, dying early. So actually, most of those pension pots were having tax on them. It was just income tax. And in fact, that income tax could potentially be lower than inheritance tax, because it might be 20%. But if you take any meaningful sum of money out of a pension, and you already have other income, it's probably going to be 40 % and in many cases 45%.

22:55Simon Lambert: But the government in its wisdom has decided to make this change but it hasn't removed that income tax element. So actually people who die over the age of 75 will now face not just their pension falling into the inheritance tax net but also as a knock-on effect of that having double taxation. The inheritance tax of 40 % and then income tax when the money is taken out. So potentially 60%, nearly 70 % tax rates on the money being taken out. There's been a huge kerfuffle about this. It's only raised the profile of inheritance tax. I was talking to a financial advisor yesterday based in the north of the country who said to me, you would not believe the amount of conversations I'm having with people who are really worried about inheritance tax, despite the fact that they have no inheritance tax liability whatsoever.

23:41Simon Lambert: They don't even get anywhere close and yet they're petrified about inheritance tax. And he said that that has stepped up dramatically since this announcement was made. I would argue that in itself is an own goal before we even get on to what Standard Life are saying is another own goal for the back of it.

24:02Lee Boyce: I have experienced the same thing of the financial advisors that I've been interviewing. Slightly different take, but they said that the one question people are asking the most without fail, and obviously if you're going to financial advisor, Charles Tsar, you might have inheritance tax or your estate might have inheritance tax to pay, but that is the one thing that is occupying people's minds at the moment is this inheritance tax on pensions. And Nelly Boyce, as Simon spoke about, the own goal. Who is Standard Life? What are they saying?

24:35Georgie Frost: Standard Life are one of the big pensions giants in this country and have some of the biggest experts and a lot of people who, like you guys are the same, will be asking questions over what this means for them. And actually, they had a survey out. 22 % said they had less faith in pensions, learning that unspent pots will become liable for death duties from next year as we're saying yeah we should point out here that 49 said it didn't change their view of pensions whatsoever but it's still one in five who are saying that they've lost faith which is a real shame because as we always say on this podcast it's the bedrock of anyone's retirement is your personal pension you know you have tax relief you have the long-term gains from compound interest and you've got the employer contributions for eligible employees so all of those things mixed together it is an incredibly great way to save over many decades it's going to hopefully give you a very good retirement but you start throwing this into inheritance tax purposes and people like a lot of financial products if you start kind of mucking around with them people start to panic or start to believe that they're going to fall into the net of this and actually we should point out here that at present inheritance tax affects around about four to five percent of estates it's believed that that's going to rise to seven percent in the next tax year and it will trickle higher than that probably one in ten i would suggest within the next few years i don't think it's a great strategy when you know on one hand we don't know what the future of the state pension is going to look like and we are being told to save hard into our private pensions to make sure we have the retirement that we want.

26:14Georgie Frost: And on the other hand, saying, actually, this is now going to be included in estates. And as Simon said, really, it's just to make a little bit more money. It does feel like a bit of an own goal. But what I would say is if you're listening to this, don't panic too much about this. Keep saving for your retirement, keep saving into your private pension. And at the end of the day, when you hit retirement age, and however you end up taking your pension, I think it will just sharpen people's minds and focus. And there are a lot of older people in this country that I would suggest also come into retirement age and they've got a nice retirement pot and they they're quite thrifty they don't really spend their pension pot and are kind of very sensible with it which is of course a great thing but also could be to the detriment really now especially with these new rules and I think there probably will be a bit of a case of spend a little bit more enjoy your retirement and I know you guys last week spoke about the sort of care crises in this country and the expense of uh you know later life care is vast i mean i've had some emails laying on my desk this week and some of the monthly outlay for care is absolutely astronomical and really does cut into retirement depending on how many years if you end up in a home um it's absolutely incredible so all those factors at play i think older people especially people in their sort of 60s 70s now late 60s 70s now i you know are probably looking at this and i think it just pays to have a very careful plan of what you're going to do if you if you are someone in that boat that has a sizable retirement pot but again as simon says this is going to probably affect people more in the decades to come rather than one of those things that's going to hit people straight away of course some people will get swept into the net but it will become i think a bigger issue in the decades to come.

28:05Lee Boyce: All right, then let's go on to something a little bit more uplifting, maybe, because some people have all the luck, don't they? You can hold a premium bond for half your life and not make a bean out of it. Or you can hit the jackpot with one you bought only six months ago, which is exactly what happened to a 1 million winner from Kent, Garden of England.

28:26Georgie Frost: what happened oh georgia we do love it i do love a premium bond story you know i love a story i think it's one of those fascinating things in british life where you get a lot of people that say i've held premium bonds all my life and i've never won a bean as you say and then you find out they've had like a one pound bond from like the 1960s or something and you think well with average luck of course she's not one i think dear but this most recent draw someone has won a million quid from a bond that was bought in February and it got me thinking that's fast I wonder how many more have been that quick well you only have to go back to the June draw and someone won a million pounds also with a bond bought in February so that was only four months and then I was thinking I wonder if NS &I hold the data on how many people have had quick wins in terms of basically not holding the bond that's won for very long and they do 42 winners of the one million pound prize since it was created in 1994 have held the winning bond for six months or less and the two quickest have scooped the million quid after holding it for just 59 days uh one of those was in surrey in 1997 but more recently a bedfordshire winner in march 2018 so they bought the bond 59 days later boom of won a million quid now when you buy premium bonds you have to sit the first month out they're not they don't they're not included until the following month so you have to hold premium bonds for a full month before they're eligible so 59 days is pretty much i think the fastest you could possibly do it but there have been 13 jackpot winners who've won in the second month of buying a bond that's an incredibly jealous inducing kind of statement to make you only have to look in the comment section of this with people saying i've helped my bonds well it's so long and you know i'm gonna cash out of them it's absolutely ridiculous that people are winning this quickly but it's just luck of the draw isn't it georgie you know you've got to be in it to win it uh every single bond has as much chance of winning as another bond of course if you hold the maximum amount of 50 000 pounds your odds become slimmer because you've got more bonds in the draw but it's a fascinating snapshot whenever we write about premium bonds and people saying that they've been holding onto bonds for a very long time.

30:42Georgie Frost: I'd love to hear from people. Either people that have held bonds for a very short amount of time and have won sizable amounts, and or people that have actually held quite a large amount of bonds for a long time and have held out and have actually won not much. Please get in touch. I'd love to hear from you.

30:58Lee Boyce: I've only had a very brief flirtation with premium bonds. I think I only lasted about six months with them and then I just got rid of them. I feel like I ask this a lot, but I do want to ask. are they sort of a bit of false hope a bit of a waste of money unless you've got a whacking

31:14Georgie Frost: great sum in there they are a false hope georgie but the thing is though i would say that you cannot put all your eggs in one basket of premium bonds so if you're someone that doesn't have a huge amount of investments or savings i would argue that premium bonds aren't the right choice for you other than um they are quite good gifts i i believe this is my impersonal opinion for children because you do get aunts, uncles, grandparents that will buy children absolute rubbish. It's much better for 25 quid to go in premium bonds. That's just my viewpoint. You know, and it's quite a nice way to sort of slowly build up a nice little pot in there for as children, you know, get a bit older.

31:53Georgie Frost: I think that's quite a nice way of doing it rather than putting it in a faceless investment account or a savings account. At least you know it's going into something and it's there. The likelihood of winning in it, very slim, but I still think it's a good thing. I hold premium bonds, but they are well down the pecking order of my financial wealth building commitments, you know, after my pension, after my stocks and shares ISA, after having an emergency savings pot elsewhere. They make up a couple of percent of what I do with my finances. But, you know, it rolls around to the draw at the start of every month.

32:29Georgie Frost: And there is that kind of element of, oh, I wonder if I've won anything this month on the bonds. It is quite nice to get that email. And then you click through and you've won 25 quid and you go, that's a bit disappointing, isn't it? I was hoping for at least 50 grand or 100 grand.

32:44Lee Boyce: It's so different. I'm like, yay, I've won. I could win 50p and I think it would be the most exciting thing ever. It's funny that Lee mentioned Simon about his emergency funds because am I right in thinking your emergency fund is your premium bonds? Or did I make that up?

32:59Simon Lambert: No, that's true. my rainy day savings pot is basically in the premium bonds i've judged it to be a place where there's enough friction that i can't just take the money out straight away i can't take money out to spend it but i could get the money almost immediately probably next working day or maybe two working days if i needed it and it means that there's a reasonable sum in there that means that i i am in with statistically in with a chance of winning a prize and it's money that i'm you know happy to accept a lower return on and, you know, not invest, for example. The alternative would just be to put it in a savings account, but then if it was an easy access savings account, there's not the same friction.

33:39Now, finally, Lee, you start your newsletter this week.

33:43Lee Boyce: How can you sign up, by the way?

33:45Georgie Frost: You go to thisismoney.co.uk forward slash newsletter.

33:48Lee Boyce: Brilliant. So you start your newsletter this week with, overseas holidays should be as stress-free as possible. and yet for many and i suspect parents of younger children are in that i don't know i say that as a childless person but it can be anything but from panic packing forgotten passports airport queues all the way to surprise hotel building works that no one told you about the fight for the lounger by the pool i've seen the tiktok videos of people queuing by the door waiting for them to open i I couldn't think of anything worse. Arguments, tears, and that is just me, Lee. After all that, you need a holiday.

34:27Lee Boyce: But lastly, you cannot help us with most of the things I've just mentioned, but you can help us with spending our money. What are you talking about this week, Lee?

34:37Georgie Frost: Just to reiterate that, it was just so funny packing for a trip that we had in France last week with two young children and how seriously my wife takes packing, making sure we've got absolutely every single thing you can imagine and plan it out the wipes the nappies things to keep the children entertained this that and the other then i'm packing my bag in about two minutes and that typical bloke behavior of just the t-shirts enough pounds yeah two pairs of shorts yeah a toothbrush but you know you can buy these things france isn't in the middle of nowhere it does have supermarkets but that i i digress i'm not getting in an argument with the packing here i've been through it all already yeah spending spending money abroad now first of all i'm still as you probably aren't surprised bet old school and do like taking physical currency with me when i go away the reason for that uh things like taxis and kind of you know you have those kind of shops where they're kind of independent and you don't really know much about them and i kind of get a bit funny about sticking my bank card into places and term payment terminals of shops that i'm not too sure about and we have actually written extensively in the past about a paris taxi scam where basically drivers cover the screen up when you're putting your card in and add a couple of extra zeros onto the journey because it's a complete nightmare trying to get that money back we've also written extensively about a shopping scam in Telerife where basically people have their card details taken all that kind of thing so I'd like to take physical money I always order it online in advance preferably a few days before because you're going to lock in the best rate and one of the clearest examples of I realize that people might not necessarily know about that is that I went into the M &S bureau recently having ordered online already and there were two people in the queue that hadn't ordered and the people in the counter were saying you're going to want to order it online here on your phone and you can come and pick it up in one minute but you've got to do it through the phone if you want the better rate um and they were like that is so bonkers can't you just give me the better rate and it's like mate you've got to go through and pay through through the actual uh website so make sure that you are doing that if you don't end up doing that make sure you get it as better as possible so for example Sainsbury's you can get a better rate for using Nectar card and while it's a massive no-no to pick up money last minute at the airport it's very possible to order it on the way to the airport to lock in a much better rate than what you're going to get at the airport if you really have forgotten about it.

36:56In terms of pay by card the rule of thumb is not to pay your credit card

37:00Georgie Frost: because you might end up with three percent fees on that unless you've got a specialist card. Big example of that is I don't I didn't use my American Express while I was away in France last week i used my debit card which has fee-free spending abroad so make sure that your debit card is a fee-free one there's lots of options for that chase first direct monzo starling um if you're not one of the customers of one of those it's quite nice to have a secondary account to budget while you're going overseas anyway so you can put your money in there and you know where it is now it comes to actually when you're spending money and you're paying by card in a restaurant or a shop or wherever you are make sure you pay in the local currency i think most people know that i think most people know that now otherwise you're at the mercy of nasty markups but this has become trickier to keep on top of which i realized last week when i was in france with the rise of contactless payments and especially with the rise of contact contactless payments overseas we're used to doing it here but we're not might not be so used to doing it overseas but lots of countries have caught up in the contactless world but check before you tap that you're getting paid in you're paying in local currency there is a new cheeky ruse uh that i've i've seen online about basically your payment terminal tricks you into making a mistake so you become used to selecting local currencies your option to pay but then some payment terminals abroad and i was reading that it's quite quite commonplace in portugal seems to be a real place for this i've introduced a second screen where it asks you to accept or reject the conversion most people's default would be to accept but if you tap this you've just been roughed house into doing the exact thing you didn't want to do you have to actually click reject here and which sounds bonkers but that is how it is a very very last of all tipping we're still in the world of a bit of confusion when it comes to how to tip and in france i liked having a bit of cash because i like to tip in cash i always like to tip in cash and if the service has been good the food has been good the experience has been good and you're deserving of a tip let's do it and i we've spoken about this in the past but i cannot bear these payment terminals that have come these ipad style ones that have come into britain um which i think a very american thing where it's got the 10 15 20 tip and then the tiny little no tip button uh at the bottom not not a fan of that at all um and france wasn't like that at all it was just nice just to carry some cash but i did write in my column actually about a first trip to new york uh georgie about 12 13 years ago we landed in new york first time there went to a swanky restaurant got completely swept up in it all we were on a table sitting next to the actor will forrell i was completely starstruck we had this lovely meal very very cold when we were there i paid the bill i stepped out into the cold realized i'd left my coat behind uh in the restaurant went back there was two or three waitresses moaning about how the british are terrible tippers and i hadn't tipped uh and then i very awkwardly got my coat and pulled out a 20 $20 note, Chris$20 note much to the delight of Mr Farrell who found the whole experience quite humorous probably thought all British people were basically like Mr Bean and I stepped out and made sure I tipped properly while I was in the States for the rest of my trip and for every trip since so make sure that you were clued up on all of that, a very very very last thing that I mentioned in this column Georgie Wednesday the 28th of October slap bang in the middle of half term we've got a budget coming.

40:20Georgie Frost: The budget is being mentioned on this podcast today because I want to mention it. 28th of October, John Healy's first budget. And it will make our summer holidays, our tipping, our fun and games feel like a distant memory.

40:34Lee Boyce: Well, that was a nice way to end there, Lee. Simon, can you cheer us up with your stat of the week?

40:39Simon Lambert: I can. Before I say that, though, what I should mention as well is that if you want a prepaid card rather than a bank account to go away with, then the sponsor of this podcast, Training212, actually has the best prepaid card it offers the best rates free obviously free spending abroad and everything like that but what the difference between the trading 2121 and other cards is that your bank and most other cards will give you either the visa or the mastercard rate which is set once a day and it's normally a little bit above the ecb exchange rates for example it would be a little bit above that the trading 2121 actually uses something called the interbank rate which is the genuine kind of exchange rate between banks and tends to be slightly lower you would need to spend thousands probably to notice a big difference but if you want the absolutely best deal then that one is the absolutely best deal and it also can give you um interest on the balance but you can also get it immediately if you sign up so if you're going on holiday next week and you go damn it i knew i wanted to open one of those bank accounts so i don't get charged for my spending you can

41:37Georgie Frost: actually go open it and get the card straight away uh stats of the week though uh diageo has

41:43Simon Lambert: announced a new plan today to get itself back up on its feet one of the things that it focuses on is the unbelievable guinness boom that is going on at the moment other things may be faltering but guinness is booming it's going to focus even more on that kind of amazing brand that guinness has But Guinness, 1 ,883 ,200 ,000 pints are sold every year. 1 ,883 ,200 ,000. I'm reading this off Guinness's website and it says hyphen, that's 1.8 billion to put it another way. actually Guinness is marketing people the way maths works and if you'll remember this from school that rounds up to 1.9 billion but hey what's that between friends does that mean that

42:34Georgie Frost: worldwide including every single adult on the planet we drink a quarter of a pint of Guinness

42:40Simon Lambert: maybe 10 million glasses are so enjoyed every single day and the number will be higher than the numbers i'm quoting here because the growth of Guinness is such that these figures will be out of date people will be drinking even more guinness there you go thank you very much and

42:56Lee Boyce: thank you lee and thank you for listening that is it for this week you can keep up to date with all the latest breaking money news just go to this is money.co.uk or download the app and if you have any comments or questions of the team or anything you'd like them to look into simon you can email

43:09Simon Lambert: us at podcast at this is money.co.uk or come to this is money.co.uk forward slash podcast to find or podcast pass. And as Lee said earlier, sign up to our newsletter. Every week, stuff you need to know and stuff we're going to be talking about and the message from Lee or myself or Helen, thisismoney.co.uk forward slash newsletter.

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