As Tax Year End Approaches

Streets Financial Consulting Plc

It may still seem a long way off but tax year end will be with us in only 10 weeks. There are various allowances and reliefs that can help minimise tax liabilities by using good planning:

Top Up Your Pension Contributions

The annual allowance for pension contributions in 2011/2012 is, depending on your earnings and profits, up to £50,000. Contributions paid by you are paid net of basic rate tax so your pension fund receives £100 when you only pay £80. The £20 basic rate tax relief is paid by HMRC direct to your pension fund. If you are a 40% or 50% taxpayer, you may also be able to claim additional tax relief at your highest rate, via your tax return.

You may be able to use Carry Forward to make contributions above £50,000. Carry Forward can be used to sweep up contributions and the tax relief that accompanies them, which you may have chosen not to use or been unable to use in the previous restrictive pension legislation. Carry Forward can provide the potential opportunity for you or your Company to make total contributions up to £200,000 gross. At tax year end, you will lose access to any Carry Forward Allowances you may have available from the 2008/2009 tax year.

Protecting Your Pension Funds from a Reduction in the Lifetime Allowance

The Lifetime Allowance sets the upper limit on the tax-efficient overall value of your pension benefits from all sources. At the moment, the allowance is £1.8M but at tax year end it is being reduced to £1.5M.

To make provision for individuals who have based their planning on the current limit of £1.8M, HMRC are offering protection for the funds, as “Fixed Protection”.

Fixed Protection can apply to pension savings up to £1.8m and places restrictions on what can be done with the funds. Once the protection is in place no further benefits can be accrued or contributions paid, or the protection will be jeopardised. An application for fixed protection must be made before 5th April 2012. If you are concerned about your funds, please do not hesitate to contact us.

Using Annual Gifting Allowances

Effective Inheritance Tax planning could save your family significant tax bills. Currently, Inheritance Tax is charged at 40% on your assets over £325,000 when you die (£650,000 for married couples or registered civil partnerships). There are a number of gifting allowances which are available per tax year, which means you can gift sums to people which are exempt from Inheritance Tax. Using good planning over a number of years can be an effective way of passing assets down the generations.

Individual Savings Account (ISA) – Annual Allowances

Often, ISAs are overlooked because the allowances appear relatively low; £10,680 overall per tax year, including a cash maximum of £5,340. However, people who have utilised their allowances over the years and going back to the previous incarnations of TESSAs and PEPs, could now have potentially amassed funds well into six figures which can provide tax efficient growth and income.

To discuss any tax year end planning in more detail, please do not hesitate to contact us on 01522 536108 or by email at enquiries@sfcplc.co.uk.

IMPORTANT NOTES:
Streets Financial Consulting plc is authorised and regulated by the Financial Services Authority. The Financial Services Authority does not regulate tax planning.
The value of your investment and the income from it can go down as well as up and you may not get back the full amount you invested.
The value of tax reliefs depends on your individual circumstances. Tax and pension laws can change.
Pension planning, investment planning and IHT planning are all long term planning strategies. It is particularly important that you review your objectives and options on a regular basis.
Pensions are a long term investment. Your eventual income may depend on the size of fund at retirement, future interest rates and tax legislation.