Did You Know - Spring 2010

 

All Change in April 2010?.... Not much!

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.   

I have listed below some of the changes that will occur in the new tax year (2010/2011) 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 2011 to make your investment. The maximum investment allowed into ISAs is now £10,200 for all per tax year. You can split this allowance, making a contribution of up to £5,100 into a cash ISA and £5,100 into a stocks and shares ISA, or £10,200 into a stocks and shares ISA only. From 2010, the increase in the ISA allowance will be increased by indexation each year (Retail Prices Index/ RPI) with the first increase occurring in April 2011.

Please let us know if you require advice on a suitable ISA option for your financial planning.

Retirement Planning

The investment volatility experienced in 2009 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.

Some additional changes are the increase in the minimum retirement age to 55 from April 2010. Also, higher earners will suffer additional tax. For those earning over £150,000 per annum the new tax rate applied to their income will be 50% with little ability to offset this with pension contributions because of the Anti Forestalling Rules. More detail on this can be found on this link to the HMRC document (BN33), here.

Also, many are aware that the personal allowance for those earning over £100,000 per annum is being restricted, creating a greater tax liability on income.

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 £325,000 for the current tax year (2010/2011), with a joint allowance of £650,000, with the balance potentially taxed at 40%.

In the budget of March 2010, it was confirmed that this level on nil rate inheritance tax band will remain fixed for a further 4 years, to 2014. The effects of inflation will erode the true value of this allowance with the effect of reducing its value.

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 2010 (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 £10,100 for 2010/2011) in this tax year by realising gains made from qualifying investments. This is a valuable allowance because any gain above this level is taxed at a flat rate of 18% for basic rate tax payers and 28% for higher rate tax payers.

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.


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