It is essential to have a grasp on calculating your income and comprehending the deductions involved to manage your finances effectively. This article will delve into some of the steps that can assist you in navigating this process and gaining an understanding of your take-home pay.

Comprehending Gross Income

Gross income refers to the amount of money you earn before any deductions are made. It encompasses your salary or wages, commissions, bonuses, tips, and any other sources of income. The figure for gross income may differ depending on factors such as whether you're employed on a salaried basis, self-employed, or possess additional sources of revenue like rental properties or investments. Paystub service providers can shed more light on the details of gross and net income.

Determining Net Income

Net income represents the amount of money you receive as take-home pay after all deductions have been subtracted from your income. These deductions may include taxes, healthcare premiums, retirement contributions (e.g., 401(k) or pensions), Social Security contributions, and various other factors that depend on your employment status and relevant laws.

To accurately calculate net income, it is crucial to understand the types of deductions that might be applicable in your specific circumstances. Every deduction you make lowers your income and has a significant impact on the amount of money you'll ultimately receive in your paycheck.

Different Types of Deductions

The following are the common forms of deductions that usually apply:

#1 - Taxes:

Taxes are a deduction that is taken out of every individual’s paycheck. The specific tax rates applied depend on factors such as your filing status (filing jointly, etc.), the total taxable wages earned during the year, and the federal and state tax laws that apply. It's important to keep in mind that tax rates may change annually due to updates.

#2 - Social Security Contributions:

Social Security is a government program that provides benefits like retirement or disability payments to individuals. A portion of each paycheck is allocated towards funding these Social Security programs through payroll taxes known as Federal Insurance Contributions Act (FICA) taxes.

#3 - Medicare Contributions:

Similar to Social Security contributions, Medicare is another government program funded through payroll taxes. This contribution supports healthcare for individuals aged 65 and over as well as certain disabled individuals.

#4 - Health Insurance Premiums:

If your employer offers health insurance, a part of your paycheck may be used to cover the cost of premiums. The specific amount deducted can vary depending on the insurance plan chosen and the determination made by either you or your employer.

#5 - Saving for Retirement:

Saving for retirement by contributing to a retirement plan such as a 401(k) or pension is a step toward securing your future. Many employers even match your contributions up to a percentage of your salary. Understanding these deductions is crucial for calculating your income and effectively managing your budget.

#6 - Factors to Consider for Self-Employed Individuals:

Self-employed individuals face considerations when transitioning from gross to net income. Unlike employees who have deductions automatically taken from their paychecks, self-employed individuals need to account for both employer and employee contributions when calculating deductions. For instance, self-employed individuals are responsible for paying self-employment taxes that include both the employers’ share of Social Security and Medicare taxes in addition to their employee share.

#7 - The Significance of a Post-Production Strategy:

While finding a photographer who understands and aligns with your style is crucial, it's equally important to discuss the production strategy with them. The editing process plays a role in shaping the look and feel of your wedding photographs; therefore, it's essential to ensure that the photographer can deliver the desired aesthetic.

During discussions or meetings, make sure to inquire about the photographer’s editing process. Do they have an editing style that matches your preferences? Can they show you examples of photos before and after editing? Discuss any changes you would like to see in your pictures, such as enhancing colours, adjusting exposure levels, or applying filters.

Remember that sometimes less is more when it comes to editing. Let them know if you prefer edits that look natural or if you are open to a unique approach. A skilled photographer will know how to find the balance between improving the images and keeping them authentic.

Conclusion 

When it comes to calculating your net income, it's important to understand the deductions that apply to your unique situation. Being aware of how each deduction affects your earnings can help you make decisions about budgeting and financial planning. Factors like taxes, Social Security contributions, health insurance premiums, retirement contributions, and other relevant aspects based on your employment status should be considered. By doing so, you can have control over your finances and work towards achieving financial well-being.

But for those willing to explore further, they offer unique opportunities for generating passive income. One such method, often overshadowed by its more flamboyant counterparts, is selling options. Let’s delve deeper into the intricacies of this approach and see how it can become a stable income source. 

What Are Options?

Before diving into the world of selling options, it’s important to have a foundational understanding. Options are financial instruments that grant the holder the right, but not the obligation, to buy or sell an asset at a predetermined price within a specified timeframe. There are call options (right to buy) and put options (right to sell). You can learn more about the basics of options selling from James Cordier.

The Appeal of Selling Options

Why would you want to sell options?

Immediate Premiums

The most immediate benefit is the upfront premium received by the option seller. This premium is essentially the price that the buyer pays for the potential future transaction. It’s a win for the seller regardless of whether the option is exercised. 

Limited Risk

Options have defined parameters, meaning the risks are also defined. For instance, when you sell a call option, you know the maximum amount you could potentially need to pay if the option is exercised. This contrasts with some other trading strategies where losses can be magnified. 

Strategies for Selling Options

There are multiple strategies for selling options, each tailored to different market conditions and risk appetites. 

Covered Calls

Perhaps the most beginner-friendly approach, a covered call involves selling a call option while holding an equivalent number of the underlying shares. This strategy can provide additional income on a stock that’s already part of your portfolio. 

Cash-Secured Puts

In this strategy, you sell a put option while you have enough funding in your account to buy the underlying shares if the option is exercised. It’s an effective way to potentially buy a stock at a discounted price or simply earn the premium if the option expires worthless. 

Vertical Spreads 

A bit more advanced, this involves selling one option while simultaneously purchasing another. The goal is to capitalize on the difference between their premiums, ideally with limited risk. 

The Potential Pitfalls

While selling options offer numerous benefits, it’s crucial to remain aware of potential pitfalls. 

Opportunity Cost

One risk is missing out on potential profits. For instance, if you sell a covered call and the stock price skyrockets, you might miss out on some of the potential upside. 

Assignment Risk

There’s always the possibility that an option you sold gets exercised, meaning you’ll need to fulfil your end of the bargain. This can be problematic if not anticipated and planned for. 

Embracing a Mindset of Caution

Selling options requires a careful balance between seeking profit and managing risk. It’s not a guaranteed ticket to wealth but, when approached with research, patience, and a bit of strategy, it can be a valuable tool in an investor’s arsenal. 

The Importance of Market Research

A successful option seller keeps abreast of market news and trends. Economic indicators, company earnings reports, and geopolitical events can all influence market movements. Staying updated ensures that you’re not caught off guard and can make informed decisions. 

Plus, utilizing technology can give you an edge. There are various software and platforms designed specifically for options traders. These tools can assist in tracking, analysing, and even predicting potential market shifts, giving you a clearer picture of the playing field. 

Diversification

Just as with other investment strategies, diversifying your options portfolio can help manage and spread risk. This means not concentrating on a single stock or sector but having a mix to buffer against unexpected market downturns. 

Another form of diversification is selling options with different expiration dates. This staggers potential obligations, ensuring you’re not overwhelmed at any particular time. 

Building a Support Network

Engaging with a community of fellow options traders can be invaluable. They can offer insights, share their successes and failures, and provide different perspectives. Forums, webinars, and local investment clubs can be excellent resources. 

Along with this, it’s sometimes beneficial to seek advice from professionals. Financial advisors or mentors with experience in options trading can provide guidance, critique your strategies, and offer suggestions for improvement. 

The financial world is vast and diverse, with a wide range of avenues for generating income. Selling options stand out as a method combining the appeal of immediate premiums with strategies tailored to individual risk tolerances. While it’s not without its challenges, for those willing to invest the time and energy, the art of selling options can indeed be a pathway to passive income. 

Many of these are from passive revenues, which are defined as assets that make money while you work on other projects. While they may take some time and effort to set up, passive income is the key to increasing your wealth. Below, we give five ways in which you can earn it. 

Become a Landlord

When you own and rent out a property, you earn money in two ways. First, you gain a rental income from your tenants. This produces a monthly yield. Second, over the long term, your property will mature and allow you to earn money as it appreciates. All you need is the right type of property. 

Being a landlord does take more work than people think. It involves knowing the local laws, documenting all transactions, collecting rent, and maintaining the property. All these can be found in Honeycomb Insurance’s tips for first-time landlords, which goes into much more detail on getting the process correct. You will also find helpful tips on choosing the right tenants and creating watertight rental agreements to avoid any conflict later down the line. Follow these rules and the process should be a lot easier. 

Invest in Dividend Stocks

When you invest in dividend stocks, you will receive a payment at regular intervals. This is determined by how many stocks you own and the amount of profit made by the company. It is an extremely passive form of income. Investopedia has a list to help with the hardest part of the process, which is choosing the right stocks, which can go up and down in value daily.

Create a Course

Throughout your life and career, you will have accumulated skills that people want to learn. They may relate to business or your hobbies and interests. You can turn them into courses to be sold on websites like Coursera and Udemy. 

This takes some initial outlay. To attract buyers, you need high production values, so it may be worth investing in the correct equipment or a company that can do it for you. From here, you will have to design and build the course materials. It is best to have a mix of videos, written content, and images to use so it caters to a range of different learners. 

Create an App

Of all the ways to make passive income, this one requires the most financial outlay. However, it can also be one of the most lucrative models if you hit on a great idea. Your concept could be a game or other form of entertainment, or it could be something that helps people in their day-to-day life. 

Mashable has a fantastic list of websites where you can pay to get it built. Once complete, you then need to decide how you will generate a profit. Some apps offer free models that have ads built in to create revenue. They may then add a tiered model with no ads. 

As your app grows, you may need to add extra features and make improvements. This will cost more money but should yield a good return on investment. The only downside to an app is that you are entering a crowded marketplace. There is a whole range out there with big budgets behind them, so you need to find a unique proposition. 

Rent Out Space

If you have space on your property, you may be able to rent it out. This could take the form of garages for storage, or even parking spaces. If you are not using it, then someone else probably will be able to and will pay. Going even further, you may even convert rooms in your home to rent to tenants. 

Business data from the Office of National Statistics showed that a total of 100,835 businesses in the UK closed in the third quarter of 2021, a 50% increase from closures in the third quarter of 2020. To protect themselves against global crises and other unexpected events, businesses need to learn how to manage their finances wisely. That means staying on top of payments, organising cash flow, and optimising business expenses. So, with that in mind, the following tips can help small to medium enterprises manage their money.

Step 1: Monitor Income And Expenses

Every business should have a good handle on where its money goes. As we mentioned in ‘7 Ways to Cut Your Business Expenses’, keeping track of income and expenses helps you identify whether you are allocating your resources wisely. Understanding your expenses can help you figure out how to cut down later on.

Start by saving all receipts, both digital and physical. From there, find a place to store transactional data. Less tech-savvy businesses tend to use spreadsheets, but those that want to streamline the process can use cloud accounting software, such as Quickbooks, Freshbooks, and Xero. High-quality accounting software can integrate with your bank accounts to automatically import your transaction history into a comprehensive bank feed.

Step 2: Create A Budget

Once you’ve identified key spending areas, it’s time to make a smarter spending plan. Here’s where budgeting comes in. According to AskMoney’s guide to budgeting, the first step to building a business budget is to use historical income data to create accurate revenue forecasts. Once you’ve estimated how much you might make each month, figure out which expenses you can cut down to maximise profit.

Be sure to be realistic about reductions — if you resort to lower-quality services just to save, you might end up losing more money in the long run. For example, a restaurant that sources cheaper but lower quality appliances might have to spend more on replacements or repairs later down the line.

Step 3: Control Spending

Making a spending plan is one thing, sticking to it is another. Fortunately, many modern banking apps come with features that help you control spending according to your budget. The online bank Monzo, which won the award for Best British Bank in 2022, has a feature called Tax Pots. Monzo’s Tax Pots tool lets you divide income into dedicated expense categories — such as a pot for payroll, a pot for operating expenses, and a pot for taxes. By creating separate cash reserves and giving each a clear purpose, you can allocate revenue effectively and prevent overspending.

Step 4: Put Savings Back Into The Business

Once you’ve controlled your spending, it’s time to figure out what to do with all your extra cash. The smartest business move would be to invest in growth. Put your savings into things that can help your business make more money in the future. A delivery business, for example, can use savings to buy new delivery vehicles, which expands their capacity to take orders.

You can also use savings to diversify your business income. Place money into stocks, bonds, or other securities. This way, if unexpected events cause operations to slow down, the business has extra income to turn to.

At the end of the day, it’s important not to let poor money management prevent your business from reaching its full potential. Through expense tracking, budgeting, spending control, and investment, businesses can take their income further and make a bigger impact.

The data collected shows that consumer debt amongst those on low incomes is growing at the fastest rate since the financial crisis in 2008.

This is specifically the case for low-income households. Overall debt levels have remained the same prior to the financial crisis (approximately 15% of total income) but for the poorest households, the level of consumer debt was approximately 62% of total income.

This represents a rise of 9% between 2016 and 2019 which is also higher than prior to 2008.

High-income households also affected by growing debt

Households with higher levels of income have also been impacted by growing consumer debt and are representing a higher amount of debt overall.

However, this is more likely to include mortgage debt and this is usually not the case for low income households.

In addition, those with mortgage debt are more likely to benefit from high levels of competition with mortgage lenders. This is alongside the fact that mortgage rates have remained low since 2017.

Consequently, falling mortgage costs means that overall debt has reduced for many high-income families, and something that many low-income households have not been able to benefit from.

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Higher rates on different types of debt

Mortgage rates have remained reasonably low but other kinds of debt have increased. This has notably been the case when it comes to credit card debt and borrowing from direct lenders in the last two years. For example, the average credit card annual percentage rate has risen by 2.1% since 2017.

The research has also revealed that there has also been an increase in the number of low-to-middle income households with no savings.

This poses a concern, as it means that low-income households with no savings are more likely to be reliant on high-cost financial products including credit cards, overdrafts and rent-to-own products, and are also more susceptible to financial shocks if they occur.

Kathleen Henehan, Policy Analyst at the Resolution Foundation, said: “Britain is a long way from the levels of debt that drove the financial crisis, despite repeated claims to the contrary. Falling mortgage costs have also reduced the costs of debt for many, mainly higher income families. However, the use of often high-cost consumer credit has risen over the past decade, particularly among low-income households.

“Access to new credit can be hugely beneficial for low-income families, but with many also reporting that they have no savings to fall back on, these high debt repayment pressures are a sign of stretched living standards.

“The risk is that this leaves them far too exposed to future financial shocks, reinforcing the need for policy makers to focus on the living standards of those on low and middle incomes.”

According to the Internal Revenue Service (IRS), 1099 means “information return.” You are also required to report the received information on your tax return. There is more than one 1099 form and they are specifically made for different types of income that are different from the one your employer provides you with. Whichever form of 1099 you receive, you should know that they all contain your social security number and the IRS will be notified if you don’t report that 1099 income on your tax return. We’ll be giving you a brief guide that can help you discern which types of income are reported on 1099 forms.

1099-MISC

Independent contractors and freelancers are usually the people who receive 1099-MISC forms constantly. As independent contractors provide their services based on a contract between them and individuals, corporations, or organizations, income should be documented in a 1099-MISC form. Whether a freelancer receives a 1099-MISC or not and as long as he/she was paid for the job, income tax should be paid. Sometimes the 1099-MISC form can be confusing as it’s filled with many calculations, and a useful 1099 generator can really help with all the calculations needed. These generators are easy to use and ensure that you don’t make any mistakes or costly errors when filling a form.  It’s always better to stay accurate when you’re filling MISC forms.

1099-A, B, and C Forms

These three 1099 forms are reserved for the identification of taxable income generally obtained from the cancellation of debt. 1099-A is usually received when your mortgage has been cut or completely canceled. The canceled mortgage debts are taxable as the IRS considers them as income. The 1099-B form is received due to the sale or bartering of securities and amenities. It’s usually sent by websites as most people who barter in person don’t need a 1099 form. Debt consolidation and settlements require a 1099-C form as whatever your lender or bank removes from your debt. It’s still taxable income in the eyes of the IRS.

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1099-G and R

Any money received from the government, whether it’s the state, local municipality, or the federal government triggers the issuing of the 1099-G form. Usually in the form of credit cuts and tax refunds or even unemployment checks. If you received any income from pensions, retirement plans, the IRA, or any profit-sharing program you might be due for a 1099-R form. The 1099-R form is usually at a tax advantage and sometimes even exempt, so it can be also considered book-keeping at best.

1099-LTC

LTC is short for long-term care, so the 1099-LTC form is reserved for long-term care insurance payments. The insurers usually send the form. Life insurance policies are also included as some payments related to death benefits can be given in advance.

While there may still be a few types of 1099s out there, these are the most important and common ones. Sometimes 1099 isn’t required, but it’s always better to stay on the safe side and keep track of them to stay on the safe side. Always remember to pay your income tax even if an expected 1099 form didn’t arrive.

These days, financial stability really sounds like an elusive subject. We indeed have bills to pay, and a life to lead. But, if we don't take a seat, analyze, and create a financial bucket list, then we risk living within the shackles of our obligations. Here are eight financial tips that can help anyone secure their financial future and enjoy financial stability.

Create a passive income

Financial stability is a result of hard and creative work. And if you want to enjoy it, then you need to get creative too. That said, we cannot always control our expenses and bills, but what we can actually control is how much income we realize. Generating more revenue to offset any financial obligations one may have been an excellent way to go. A passive income is any income you generate from a job or task you are not actively working at. There are many ways to get this done, and the most popular ones are through websites, rental properties, small online businesses, freelancing, online trading, and affiliate programs.

Live without debt

Debt is one of the many obligations capable of ruining anyone's shot at financial stability. If you are still living in debt, it is almost impossible for you to be stable financially, let alone secure your financial future. Do you have credit card debt, personal loans you are paying off, or mortgage to attend to? All of these are going to hinder you from leading a financial future and becoming stable financially. Hence, you have to be rid of any debt you may have before you look to become stable financially because, without that, financial stability will continue to elude you. There are different ways to tackle one's debt, depending on the terms and duration of the debt. From the traditional debt consolidation method to the highly effective IVA scheme, debt of any kind can be addressed and resolved.

Create a 3-month emergency fund

Whoa, that's a lot of money! Once you are done breaking the shackles of debt around you, the next thing is to start preparing for the future. And a 3-month emergency fund would be a great place to start. Emergency funds are there for the rainy days, which is why you need to have one today if you really want to enjoy financial stability. Think about it, instead of going to get a loan to deal with an unforeseen event; you can dip into your emergency funds.

Open a money market account

Preparing for the future doesn't necessarily mean preparing for the next few decades ahead; instead, your future could be tomorrow. And if you don't have a robust financial platform to rely on, you may find it absolutely difficult to attend to your existing financial obligations and emergencies. In that light, having a money market account is another vital requirement for anyone interested in experiencing financial stability. A money market account is quite similar to a standard savings account, albeit with higher returns and better access to your money. Checking with your local bank is a great way to research the ideal account for you.

Create a vacation account

The best time to visit your dream country is while you are on holiday. But how many people can fulfill this dream? And how many of those who eventually achieve this do so without getting into debt? Don't be one of them! Visit your local bank and create a separate account where you can stash little cash every month for your next vacation so that your next holiday wouldn't break the bank.

Improve your Credit and FICO Score

That you don't run a business today doesn't mean you may never be entrepreneur, and the fact that you have some cash in your emergency funds doesn't mean you will always be able to resolve every financial emergency that comes your way. Hence, it is always great to have a good Credit and FICO Score as you never can tell when you might need to obtain funds from external sources to either finance your big business idea or resolve your unforeseen emergency. Your FICO Score determines what sort of risk a future creditor is willing to take on you. Having a high, and above 700 FICO Score is quite feasible if you pay all your existing debt as at when due, keep credit card balances low, and pay your bills on time.

Have a retirement plan

Start saving for retirement today with a 401k or an IRA plan. You should talk to your financial advisor to determine which plan is best suited to your needs.

Authored by Uday Tank.

Uday Tank has been working with writing challenged clients for several years. His educational background in family science and journalism has given him a broad base from which to approach many topics. He especially enjoys writing content after researching and analyzing different resources whether they are books, articles or online stuff. 

Besides, sometimes you have to take a step backward to move forward. The most practical way of dealing with bankruptcy and moving back to solvency is by establishing a saving plan. Saving is an essential aspect of wealth creation. With the right mindset and correct information, individuals can create wealth post-bankruptcy by adopting and neglecting certain behaviors.

Take Advantage of the Pre-discharge Credit Counseling

Bankruptcy comes with a lot of emotional and psychological strain. However, getting help from credit counselors can help you get through. Involving your legal advisor will help you find an approved agency to counsel you through the process. The counseling platform offers valuable financial advice to help you wisely manage your finances in future. It also focuses on income, expenses and strategies to save. Consequently, it covers financial literacy on budgeting and debt management. Budgeting your finances is essential if you want to achieve your saving goals. During bankruptcy, individuals learn to live without credit. Therefore, this experience should be used to your advantage by trying to operate with no debt post-bankruptcy. In case you access credit-cards, it is essential that payments be made before or on dates when they are due. 

Increase Your Income Streams

After being declared bankrupt, sourcing for new income streams may be difficult at first. However, individuals can work with what they have, to achieve what they hope to get. For example, monthly income paid to unsecured creditors before being declared bankrupt can help you build up on your savings by depositing it into your savings account. Individuals can also start a business. Not all business ventures require capital to start. For example, Dave Ramsey began a financial advice group in his church after he was declared bankrupt which later became the successful Ramsey Show. Using your experience to educate others can create business opportunities for you, and you can even document your experience by writing a book. You can also take up a second job and save income from that job.

 Work on Improving Your Credit History

Although debt is the last thing, you should think about post-bankruptcy, working on developing a good credit history is essential. Bankruptcy records show on your credit score for up to seven years. However, improving your credit scores in three years could make you qualified for a loan. Lenders often look at payment history, hence having years of consistent payments to your savings account shows reliability and commitment. Consequently, a good credit history improves your credit score allowing you to qualify for loans with lower interest rates which also makes it easier for you to save.

Dealing with bankruptcy can be exhausting. However, accepting and working towards financial stability can make it bearable. Personal financial evaluation can help you know where to start on your journey towards normalcy. Adopting better financial habits like living within your means is also good to ensure you remain financially stable.

The high street is reeling after a winter of ill health. Toys R Us, Maplin, House of Fraser, Claire’s: it seems that even stalwarts of the retail landscape aren’t immune to rising rents, the burgeoning ecommerce market and wavering consumer confidence. Below Finance Monthly gains special insight from Andrew Watts, Founding Partner, KHWS, The Brand Commerce Agency, on the impact behavioural science can have on high street performance.

Many other household names appear on the brink of crashing. The question must now be, is the high-street blight another blip or could it this time be terminal?

Nowhere are the symptoms more obvious than casual dining chains like Prezzo, Carluccio’s and Jamie’s Italian. These eateries and others like them have enjoyed the benefits of the booming experience economy in recent years, but not anymore.

Their current troubles are based in low consumer confidence which started with the financial crash almost a decade ago. As real-term income has dropped, and the cost of raw materials increased, consumers have become even more selective about how they spend their disposable income. Retail therapy is no longer proving the consumer tonic that it once was, and even the experience economy is under pressure. A nice experience is no longer enough; spending must result in a clear benefit and value for money.

The homogenised nature of casual dining is a sound example. The majority of chains are backed by private equity, so scale and profit are a key part of their basic business strategy. As a consequence, each brand offers similar mediocre food and a mirror-image dining experience. It’s become harder to charm consumers into splashing out and coming back. Add rising prices to the mix, and people can be forgiven for dining out less.

What’s unfolding in casual dining is symptomatic of a wider malaise on the high street, but this trauma needn’t be fatal. In casual dining, we can see the possible remedies that can be used to salve other areas of retail - a natural downsizing of the market coupled with stronger brand differentiation.

Understanding consumer behaviour is of fundamental importance to succeeding in this landscape. Establishing how and why spending decisions are made will empower brands to tailor their marketing messages accordingly. Behavioural science-led marketing techniques are now enabling brands to do just this, something that has not previously been possible.

Working in partnership with Durham University Business School, we examined the hardwired short-cuts – known as heuristics – that everyone uses to make decisions. We then identified and reframed the nine most relevant to purchase decisions; we refer to them as Sales Triggers.

For casual dining brands, there are two Sales Triggers that are particularly relevant and could prove the cure for the current problems ailing them: Brand Budgeting and Less Means More. This means using marketing messaging to demonstrate real value in a crowded marketplace (Brand Budgeting) and also offering something different or exclusive that enhances the experience when dining (Less Means More).

Despite the seemingly dismal outlook on the high street, some retailers are bucking the trend. Grocery discounters like Aldi and Lidl are triumphing because of their successful use of the Brand Budgeting and Less Means More Sales Triggers. There are some success stories in fashion retail, too. FatFace and Ted Baker have done well in the past quarter, posting robust Christmas sales. This is down to two things: a good product range and a strong reputation. This demonstrates their use of two Sales Trigger. FatFace uses Choice Reduction to simplify information and choice, so people don’t suffer from overload and default to their current behaviour. Ted Baker utilises the obvious truth, communicating well-held positive views of the brand’s heritage, to provide people with information that they are unconsciously seeking to confirm their beliefs.

Flourishing retailers are those who invest in understanding the key Sales Triggers that inform the purchasing behaviour of their customer base, and tailor their service output, products, tech and shopping environment accordingly. High-street brands seeking to replicate and sustain such successes can then use these insights to inform their marketing strategy. This differs from sector to sector, but can be clarified by a behavioural science-led approach which can inform marketing and ultimately present an offering and point of difference that will boost retailer longevity.

There’s no quick fix, but with the right sort of changes, the current retail retrenchment doesn’t need to be a terminal issue for the high street. Gaining a deeper understanding through behavioural science of how shoppers could help cure the pressures on the high street.

Bitcoin is becoming a pretty normal currency in transactions worldwide, and it hasn’t failed to infiltrate paychecks either. So, if a salary is paid in part or in full in bitcoin, how is the income taxed? And how is tax applied to transactions anyway? Fiona Cincotta, Senior Market Analyst at City Index, clarifies the matter for Finance Monthly.

Bitcoin is a virtual currency, that can be generated by mining or bought using cash, credit card or a paypal account. Bitcoin began in 2009. At the start, one of the advantages of bitcoin was the fact that is wasn’t regulated and could be used in transactions to avoid tax obligations. However, tax authorities caught on and since then tax authorities across the globe have been trying to introduce and advance regulation on the bitcoin.

Whilst the cryptocurrencies exist on a global network, tax regulations in general differ for each country around the world. However, broadly speaking most tax authorities are on the same page when it comes to the treatment of the bitcoin.

As a general rule, buying a bitcoin anywhere in the world is not a taxable operation in itself. However, taxes are likely to occur when you sell that bitcoin, or possibly spend the bitcoin, and make a profit in the process.

How much you would be taxed on the transaction would then depend on several factors:

• The amount of gains;
• How long you were holding the currency for;
• If the country in question has capital gains tax.

Again, generally speaking, most countries do not consider virtual currencies to be “currencies” from a tax point of view. Instead they are treated as a property or capital asset. This means that any gains are taxed as capital gains in the year that they are realised.

As with property, capital gains tax is liable on profits, meanwhile should an investor realise a loss from a bitcoin transaction, the investor would be able to deduct any losses and therefore reduce the tax bill.

Realization happens when the bitcoin is exchanged for any other type of other property. This could be cash, services or products. Essentially almost any transaction which involves the bitcoin is in fact a realisation event and therefore gains are taxable. The following transactions could be taxable events:

• Selling a personally mined bitcoin to a third party;
• Selling bitcoins bought from someone to a third party;
• Using personally mined bitcoins to buy goods or services;
• Using bitcoins bought from someone to buy goods or services.

Scenarios which involve mining of bitcoin followed by either selling or exchanging for goods or services afterwards, will mean that the value received for the bitcoin is taxed as personal or business income, after subtracting any expenses incurred from mining eg cost electricity.

Meanwhile the other two examples, taker the bitcoin as an investment asset. Gain are taxed regardless whether the bitcoin was exchanged for money or goods or services. To cement this point let’s consider the following example. Should you own bitcoins that have increased in value, it is impossible to use them with realising a gain. Using the bitcoin to purchase a service or good, for example, is considered to be two transactions. One, selling out or realising the gain on the bitcoin and the second, being the purchase of the service or product. Few tax authorities would allow such a blatant loophole, as to not tax the transaction and ascension of wealth.

However, the implication of this is that every transaction involving the bitcoin is taxable. This in itself raises questions over the effectiveness of bitcoin as a medium of exchange, if the user has to calculate the tax liability after every transaction. So, the possibility now exists that over taxation of crypto currencies, could lead to their death.

As mentioned at the beginning tax implications can vary from jurisdiction to jurisdiction. The IRS in the US has a fairly standard approach to bitcoin taxation. The UK’s HMRC takes a more personalised approach and has has specifically said that it considers tax on bitcoins on a case by case basis. Whilst such a personalised approach is fine now, should the bitcoin increase in popularity HMRC may find its resources strained.

Keith Bedell-Pearce, Chairman of 4D Data Centres, here looks at what’s hot in savings and investment FinTech and makes six forecasts for the future.

Financial technology, an ugly duckling with modest beginnings in the back offices of fund management and insurance companies, has now emerged as the black swan called FinTech.

Covering everything financial from pay-as-you-drive insurance (and, scarier, pay-how-you-drive) to crypto-currencies, FinTech is now one of the hottest properties for VCs from Silicon Valley to Shoreditch’s Tech City.

FinTech is not just a single disruptive technology but an entire range of digital processes that are set to transform the historically staid world of financial services.

There are three aspects of FinTech that promise to be disruptive game changers in the UK savings and investment market. Here’s an overview of what that market looks like:

Because of regulation that somewhat ironically came in on the heels of the deregulation of UK financial markets known as Big Bang 30 years ago, there are now high barriers to entry into the UK savings and investment market in terms of increasingly tough and rigorous regulation of the conduct of financial services businesses. This is coupled with equally rigorous capital adequacy requirements.

Big Bang brought about enormous change in how business in the City was done but in an area where God has always been on the side of the big battalions, after some innovation in the late 80s and early 90s, in the last 20 years there has been little real innovation. Product-driven marketing is still the rule in practice despite every provider protesting that the customer comes first. All this is now going to change.

Big players collaborate with FinTech start-ups

The first driver for change is the realisation of incumbent players that almost everything in their store cupboards is past its sell-by date. The nearly complete adoption of digital technology by everyone who has money to save and invest (and lots of people who don't but would like to) means that if the incumbents don't adopt a new approach, they will lose their share of the most profitable sector of the UK economy. The next generation of savers, today’s Millennials, don't have the money to save but when they do, they will expect to manage their money on a hand-held device and will naturally gravitate to the providers who will give them the app to do this.

Although they wouldn’t admit it publicly, many of the big players in the savings and investment market now recognise that they have neither the in-house culture nor the expertise to drive the revolution in the way they run their businesses required to continue to be a market leader in the FinTech digital age.

The answer for the more innovative of these big players is to enter into collaborative arrangements with FinTech start-ups and specialist FinTech consultancies that do have the vision of innovative, low operational cost, customer-focused offerings. Examples are BNP Paribas linking its own Luxembourg-based incubator with ecosystem players Partech Shaker and Paris-based NUMA. Deutsche Bank has a partnership with startupbootcamp FinTech in New York. This is a trend with growing momentum. There seems to be more start-up link-ups and partnerships involving product providers in continental Europe and the US than here in the UK even though many of the start-ups and specialist FinTech consultancies involved are based in the UK.

For the start-up, such partnerships offer a slice of the main action which would be out of reach because of a lack of capital and regulatory know-how.

Blockchain morphs into DLT

The second major driver for change is the almost universal attempts of the world's major banks to harness the huge potential of blockchain technology. Except they no longer call it “blockchain” (presumably because of its association with crypto-currencies) but the much more respectable name of “Distributed Ledger Technology” or “DLT”. Such is the interest in the revolutionary potential of DLT, a global consortium of major banks has been formed in what is called the R3 DLT initiative.

Leaving on one side bitcoin, the original key application for DLT in FinTech was seen as so-called “smart contracts” focused on the front end of transactions in securities markets but it soon became clear that DLT could have relevance to the entire delivery chain of both conventional banking and the savings and investment market. For example, slow and inefficient back office functionality could be replaced by DLT- based processes resulting in major reductions in cost. This applies to fund management businesses as well as banks.

The defining characteristic of DLT is its inherent security of its self-reconciling, immutable distributed databases which also counters targeted cyberattacks and fraud on centralised digital ledgers. Another plus point is it operates in near-real time.

As well as the R3 DLT initiative, most of the major banks in the developed economies have major DLT projects. Some are now moving from the proof of concept phase to practical implementation. Examples are Calastone, a global funds transaction network, with its first phase proof of concept completed in June 2017 and BBVA who claims “first real life implementation” of Ripple’s DLT system.

DLT has the potential to bring about a revolution in the savings and investment market and many other areas of commercial activity as significant as the invention of the world wide web.

Open API the engine of change

The third FinTech driver for change is the Linux-based open Application Programming Interface, generally known as “Open API”, which enables third-party access to banks’ customer data. For the banks, this could be an opportunity to monetise their customer data although there is resistance from some banks, particularly in the US, on the grounds of security and confidentiality.

The technology will enable potential customers to access third-party services within the banking ecosystem. There would also be an opportunity for banks to provide white label offerings to third-party product providers and distributors to access the banks’ customer data.

A UK Open Banking Working Group has been created to facilitate open API. The Treasury is apparently supportive of this innovation and said it would legislate “if necessary”. The working group states “Open Banking will mean reliable, personalised financial advice, tailored to your particular circumstances, delivered securely and confidentially”. At present, giving advice with these characteristics involves long (and therefore costly) fact-finds and this process in practice is a major barrier in the UK to the seamless delivery of online savings, investment and pensions products. If Open Banking delivers what it promises, the effect on both product design and delivery will be as far reaching as the impact of Big Bang on the City 30 years ago.

These are already some implemented examples of open API such as (perhaps not surprisingly) Silicon Valley Bank’s open banking platform “Banking as a Service” and the German online bank, Fidor. There are a lot more known to be in the pipeline and for once, this a technology where Europe might have the edge on the US.

Six forecasts for the future

Our forecasts about the impact of FinTech on the savings and investment market are:

1. Core savings products for asset accumulation and income streaming will continue to evolve slowly until Open ABI goes mainstream.
2. Platforms will continue to play key role in selection of products and client retention with DLT progressively, enhancing speed and security.
3. Advice is key bottleneck in digital delivery; chatbots and robo-advice is likely to appeal to Millennials but they are not yet in the savings groove. Once they are in the groove, the killer app will be on a hand-held device.
4. Technological innovation with most front-end impact will be Open ABI but full implementation is probably at least 5 years away.
5. Open ABI once implemented will be a major catalyst for savings’ product innovation.
6. DLT will have very significant impact on back office costs, security and customer experience and be at a bank or fund manager near to you soon.

One final bit of advice, for those who are involved in savings and investments products, marketing or distribution, now is the time to start networking with the FinTech geeks. They hold the key to the future of this fundamentally important part of the UK economy.

People are paying more for their homes around the world, with average house prices up 6.5% in the last 12 months.

But, where have house prices grown faster than the average income?

Assured Removalists have combined data on average annual salary, income tax and house prices to produce a ratio that shows the measure of housing affordability around the world. The higher the ratio is, the less affordable the houses are.

How does your country compare? You can view the full data set here.