ASK TONY: Why does Halifax think I owe them £ 5,218 for a house that sold 13 years ago?
I sold a property in November 2008. When the final calculations were done, Halifax asked my lawyer for an additional Â£ 2,695 to close the mortgage.
We were in Australia, so my father-in-law, now deceased, gave the money to my lawyer and the sale was closed.
Over the years I have been told by several debt collectors that I owe Â£ 5,000, but each time my lawyer has assured me that he has taken care of it.
Historic debt: Reader is harassed by Halifax over mortgage debt on property he sold 13 years ago
On his advice, I contacted the financial mediator. Halifax then stated that my lawyer had not paid the extra money and was therefore still owed.
KA, Hilton, Cambs.
Tony Hazell replies: Your last mortgage payment statement from Halifax shows Â£ 2,695 payable.
A letter from your lawyers at the time suggested that it was a surprise and that they needed an urgent check.
But what happened next?
Halifax says it received Â£ 166,000 when it needed Â£ 168,012.50 to close the mortgage. He waived a small insurance premium, leaving a shortfall of Â£ 1,988.61.
He had agreed to waive a prepayment penalty of Â£ 3,230 if the mortgage was paid off in full by January 2009. But when that did not happen the amount owed rose to Â£ 5,218.61.
In December 2008, the mortgage was closed and the charge was waived on the sale.
Your lawyer claims Halifax wouldn’t have done this if he hadn’t received the money. But Halifax says that’s not how it worked. What really happened was that the debt was passed on for collection.
Halifax said if the lawyer could provide proof of payment, he would investigate further. There should be financial records and the money your father-in-law paid into a customer account.
But you’re telling me the lawyer says he can’t find any records and you should just tell Halifax to go away. This advice is neither professional nor in your best interest.
I returned to Halifax making a strong case that you were clearly caught in the middle and that he might be able to accept partial payment as a compromise.
But Halifax went further. A spokesperson said: “Looking at all the circumstances, we will do better and waive the entire amount and have notified the collection agency accordingly.” It really goes beyond that, so well done, Halifax.
Prudential’s tax threat on bond withdrawals
In October 2000 we invested Â£ 21,200 in a Prudential Prudence bond and completed Â£ 10,600 in May 2001.
We received 5 pc payments per year. Pru says if we continue our current level of withdrawals after October 30, we may have to pay additional income tax.
The only way to avoid this seems to be (a) to reduce the amount we take annually; or (b) not make any withdrawals in 2021-2, then make withdrawals every other year.
We both pay tax at the standard rate. The financial advisers we approached refused to accept us as clients because of our ages – 87 and 83.
Tony Hazell replies: Well, it’s good to know that your local financial advisors take their responsibilities seriously!
Clearly you don’t have enough money to make them feel your pockets are worth it.
Once I gathered more details about your income, I presented your issue to Danny Cox of Hargreaves Lansdown, who is extremely well versed in this kind of investing.
Your annual income of 5% over 20 years is treated as a return of your principal. The present value of the bond is Â£ 32,297, or around Â£ 16,000 in profit each over 20 years.
Neither he nor I see a barrier to you withdrawing as much as you want without paying additional tax. Profits are already taxed at the base rate within the bond.
When you decide whether an additional tax should be paid, the profits are spread over the number of years of investment.
You will only pay additional tax if the final figure pushes you to the top bracket, which in England and Wales starts at Â£ 50,000.
You tell me your only other income is your state pension, so you would have had to earn a lot over Â£ 16,000 over 20 years to face a tax bill.
Mr. Cox says that as long as you have no other income, you can continue to take your 5 percent tax-free.
But he adds: “Since their income is taxed at source in a bond, why not cash it out, put it in an Isa and not have to worry about tax on future income or earnings?”
Some links in this article may be affiliate links. If you click on it, we can earn a small commission. This helps us fund This Is Money and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.