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Alan Kendrick: Personal Finance Column - 16/02/10
MANY aspects of financial planning are on a tax year basis, and as with typical British eccentricity our Tax Year runs from the April 6 to April 5, which leaves approximately five weeks to ensure that you do not miss some opportunities.
MANY aspects of financial planning are on a tax year basis, and as with typical British eccentricity our Tax Year runs from the April 6 to April 5, which leaves approximately five weeks to ensure that you do not miss some opportunities.Pension contributions are on a tax year basis, so if want to maximise your pension contributions and the tax relief on them then you should seek to do so now. Pension contributions were "simplified" about four years ago but have now been complicated again especially for those on high incomes.
Another aspect of pension planning is that currently it is possible to take most retirement benefits from the age of 50, but from April 6, 2010, this is increased to 55. If you fall within the age range of 45 to 54 and you were planning to take pension benefits within the next five years, then you may need to bring your plans forward.
Directors of private companies should be considering whether to take bonuses or dividends and in what proportions.
Spouses should be considering transferring assets between themselves so that higher rate tax is avoided on investment income. This is most effective if done for a full tax year but it can be put in place now ready for the next tax year. There could also be advantages for those who are entitled to age allowances.
For capital gains tax purposes, assets are better in joint names as there would be two annual exemptions available to offset against the tax liability. If you are planning to sell substantial assets this year then there is very little time to do this, but it would be in place for future years.
If you already have incurred Capital Gains Tax charges then consider the use of Enterprise Investment Schemes to defer the tax. This can be backdated to the 2007/08 tax year and there are other considerable tax advantages. Venture Capital Trusts have different tax advantages but could also be well worth considering.
If you do not use the ISA allowance in full before April 5, then it is lost forever. Incidentally, cash ISA interest rates have generally fallen considerably and it could be worth shopping around for better rates. Be careful not to close ISA accounts but to transfer them.
For inheritance tax planning, there are a number of annual exemptions available such as the 3,000 annual gifts exemption plus the 150 small gifts exemption. In themselves these only "nibble away" at the potential tax liability but over a number of years the relief can build up to a substantial amount. If linked with life assurance, there can be a substantial Inheritance Tax saving.
Use of trusts can also have advantages for Inheritance Tax purposes.
The above is only a very brief summary of what is possible, but some of them can be technically complex so do seek advice from an accountant or financial adviser. Doing some of the above in the wrong way can be worse than not doing them at all.
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Wednesday 23 May 2012
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