Did You Know - Spring 2008 (HISTORICAL INFORMATION ONLY)
All Change in April 2008!
Financial planning is a constantly changing world. Many factors can effect change, such as investment returns, personal changes and proposals for legislative changes. It is this last factor that may have an effect on your financial planning over the coming months, especially as we approach the end of this current tax year (05/04/2008).
I have listed below some of the changes that will occur in the new tax year (2008/2009) and the proposals for changes to the Capital Gains Tax rules which may take effect shortly.
Individual Savings Accounts (ISAs)
A tax efficient allowance that many clients use is the annual ISA allowance. Again the allowance is available each tax year and if you haven’t taken advantage of your ISA allowance in the current tax year, you have until 5th April 2008 to make your investment. The maximum investment allowed into ISAs is currently £7,000 per tax year. From April 2008, new investment allowances will be granted which will allow investors to contribute £7,200 into a Maxi stocks and shares ISA and £3,600 into a Mini cash ISA.
UPDATE 2009
The Chancellor, Alistair Darling, has announced in his April Budget 2009, that the ISA allowance will increase to £10,200 for individuals from 2010/2011. For individuals over the age of 50, the increase applies in this tax year 2009/2010 from the 6th October 2009.
Please let us know if you require advice on a suitable ISA option for your financial planning.
Retirement Planning
The investment volatility experienced in 2007 has had both negative and positive effects for retirement planning. Some clients have seen the value of their funds fluctuate and others that have been considering annuity purchase may have seen slightly higher annuity rates available to them.
Other clients are considering alternatives to annuity purchase and these options can be highly viable in the right circumstances. This is a complex subject and one in which Churchouse Financial Planning Limited is well placed to provide the appropriate advice about. If you or your family need advice on this subject then please let us know.
One additional change that could affect both your retirement planning and your overall income is the adjustment in basic rate of tax from 22% to 20% from April 2008. This will mean that the rate of tax relief that will be provided at source for pension contributions is 20%, so potentially reducing the amount of contribution that you make overall. You will need to review your arrangement before this time if you wish to maintain the same contribution level.
UPDATE
The Chancellor, Alistair Darling, has announced in his April Budget 2009, that a new higher rate tax level of 50% will apply to those earning over £150,000 for the new tax year 2010/2011.
Also, they are consulting on reducing the level of higher rate tax relief on pension contributions over £150,000 in a tax year. They have also put measures in place to ensure that contributions of this level do not abuse the allowance in the meantime.
Inheritance Tax Planning
In the Pre budget report, Alistair Darling, The Chancellor, allowed couples to use both their nil rate inheritance tax bands, so potentially increasing the total allowance available to couples to £600,000. Some clients are pleased with this change, but others have found that it may have little effect because of their previous planning arrangements.
Inheritance tax planning is always an emotive subject and many simple changes can be made to planning objectives to try and minimise this tax. The current individual nil rate inheritance tax band is £300,000 for the current tax year (2007/2008). This is proposed to increase to £312,000 in 2008/2009. Joint allowance £650,000 and single allowance £325,000 for 2009/2010.
If you would like to consider this issue further and its effects on your estate and possibly your existing arrangements then we would be happy to provide you with advice and recommendations accordingly
Capital Gains Tax Proposals April 2008(CGT)
Proposals have been prepared for a change in the way that Capital Gains tax is applied. As an example, if you hold shares or unit trusts, this could affect you both before the end of the tax year and into the new tax year.
Many clients think about using their Capital Gains Tax allowance (CGT allowance is currently £9,200 for 2007/2008) in this tax year by realising gains made from qualifying investments. This is proposed to increase to £9,600 in the tax year 2008/2009.
UPDATE 2009
The Chancellor, Alistair Darling, has announced in his April Budget 2009, that the Capital Gains Tax allowance will increase to £10,100 for individuals from 2009/2010.
This time of year is important, taking into account the changes proposed, and taking advice is paramount. This may involve using a chartered accountant, if appropriate.
Summary
These changes and proposals will provide you with a flavour of how your financial planning could be effected in the coming months. We recommend that you take independent financial advice for your circumstances and we look forward to hearing from you.
For guidance and information purposes only and does not constitute advice or recommendation to invest. The value of funds can fall as well as rise. Please seek Independent Financial Advice before proceeding with any changes/new contracts. The Financial Services Authority does not regulate taxation advice.
