Finance
Andrew and Lucy Kings
Andrew and Lucy have been married for 5 years and have two young children who are 4 years
and 2 years old. Andrew is 50 years old while Lucy is in her early forties. They live in a
fashionable area of Coventry close to the University. Andrew has a younger sister while Lucy
has two older brothers.
Andrew
Andrew is a qualified medical doctor. His salary in the 2020/21 tax year amounted to £70,000.
Andrew is enrolled in his company’s defined benefit pension scheme and he contributes 9%
of his annual salary, a contribution rate which is matched by his employer. Andrew’s pension
scheme also includes insurance cover representing 3 times his annual salary. Andrew pays
an annual subscription to his professional body which in 2020/21 amounted to £400.
Lucy
Lucy is self–employed practicing as a project manager on part time basis. In the tax year
2020/21, Lucy earned £19,000 and her 2021/20 earnings are likely to be similar. Lucy is not a
member of any pension scheme as she believes pension provisions are consistently changing,
thus, she cannot trust pension providers to have her best interests.
Household expenditure
Andrew and Lucy live glamorously and spend almost all their disposable income financing
their expensive life style. As a result of this, they find that they are not in a position to put any
money into savings on a regular basis. Andrew have a gym membership family subscription
that they rarely use.
The couple enjoy yearly luxurious holidays. They spend £7,000 yearly for this purpose.
Andrew and Lucy also enjoy eating out after their weekly visit to the cinema. They regularly
spend a combined £180 weekly for this purpose. They shop for premium groceries which are
3 times more expensive than prices in ASDA. Lucy likes designer clothes and accessories
and regularly shop around for these, sometimes using (store) credit cards provided by the
retailers.
Jan
Jan is Andrew’s younger sister who recently became separated from her husband. She has
proposed to come live with Andrew and Lucy for 6 months while trying to sort her life out. Lucy
is open to the idea as she believes that they benefit from the rent–a–room relief provision by
the government. Andrew is not aware of such provision and he is sceptical about the potential
benefits of Jan coming to live with them.
Property
Andrew and Lucy own a 3 bedroomed town house which they bought 10 years ago for
£250,000 and on which they have a mortgage of £230,000. The mortgage is a 30–year
repayment mortgage. They are currently on a 4–year fixed rate mortgage deal with their
mortgage lender at an annual rate of interest of 4%. There are currently 30 months to run on
this fixed rate mortgage and there are penalties for early repayment of the mortgage within
the first 36 months of the fixed rate deal. Andrew is aware that property prices in their area
have increased by 43%. They are considering the purchase of a larger property in the same
area to accommodate their growing family.provide a report to Andrew and Lucy Kings addressing
1.Calculation and explanation of Andrew’s taxable income and tax liability for the 2020/21 tax year.
2. Calculation and explanation of Lucy’s taxable income and tax liability for the 2020/21 tax year.
3. Calculation and explanation of Andrew’s and Lucy’s NI contributions for the 2020/21 tax year.
4. Advice regarding the benefits of personal financial planning including the dangers of not planning
in view of their current lifestyle.
5. Calculation of the inheritance tax liability on Philip’s estate.
6. Andrew wants to know the practicality of writing a will so that he can explain it to his parents.
7. Andrew wants to be clarified about the rent–a–room relief.
8. Explanation of the reasons for changing pension provisions to Lucy.