Monday 26 January 2015

PENSION FUND ON DEATH CAN BE GIVEN TO ANYONE NOMINATED AS BENEFICIARY – WITHOUT TAX!

Under current rules if you die and want to leave the remaining value of your pension to your spouse or your estate, the fund will suffer tax at 55%. Under the new rules from the 6th of April, if you die before age 75, you can leave the pension fund to anyone you nominate and they will receive it free of tax – and if it involves an income, that income will be free of tax! Under the new rules, if you died aged 75 or older, then the person receiving the pension fund or pension benefit would have to pay tax on it based only on the level of their income tax – up to a maximum of 45%.

This gives a genuine incentive to save, as you will be able to pass the pension savings on in a very tax efficient way.

Recommendation: Ensure you complete a Nomination of Beneficiary form and lodge it with your pension provider, and review it regularly in case your wishes change as regards to whom you want to give it.

DO CON TACT US IF YOU NEED ASSISTANCE IN UNRAVELING THESE NEW PENSION RULES. FURTHER RULES CAN MAKE IT SEEM EVEN MORE OF A MYSTERY BUT THE RE WILL BE SENSIBLE TAX -EFFICIENT WAYS TO TAKE ADVANTAGE OF THESE NEW RULES .





Monday 19 January 2015

UNLIMITED ACCESS TO YOUR PENSION FUND

Assuming the rules receive final approval, from the 6th of April 2015 those aged 55+ will be able to take unlimited amounts of cash from their pension. The first 25% will usually be tax-free and the rest will be taxed as income. It will be added to any other taxable income received during the tax year (e.g. your salary) and subject to tax at your highest rate. This new pension option is being call a “flexi-access drawdown”.

Note: Those with Final Salary Pensions (i.e. those based on the number of years you have worked and your salary when you retire) will not have the same unlimited access based on the proposed rules – unless they transfer their pension to a Money Purchase Scheme, i.e. one with a cash value.

Pitfalls to avoid:
1. Taking out too much, too quickly.

If you take it all out, you will have nothing to fall back on and you could pay high levels of tax. You can keep the tax low by taking amounts out annually at a level which keeps you from paying a higher rate of tax.

2. Once you start taking it out, you will severely limit how much you can then put into an existing or future pension.

Instead of  being able to contribute up to £40,000 a year into a pension, you will be limited to only
£10,000 a year. However, careful handling can enable you to gain some access to your pension fund while also being able to contribute up to the maximum of £40,000.





















Wednesday 7 January 2015

The December 2014 Autumn Statement:


If we focus on the changes taking place in April 2015, we have the following tax changes:


1. The Personal Tax Allowance is increased from £10,000 to £10,600.

2. The Basic Rate Tax Band is slightly down from £31,865 to £31,785. This means that from 6 April 2015, with the first £10,600 earned being subject to no tax, you will not start paying 40% tax on earnings until they exceed £42,385. This is marginally better than last year’s £41,986.

3. The Individual Savings Accounts (ISAs) annual limit goes up to £15,240 and all of this can be put into cash or into stocks and shares.


The Chancellor also announced a major change in the way Stamp Duty is charged on property purchase. Under the old rules the Stamp Duty was calculated at a single rate based on the band into which the purchase price fell. Now you will pay only the rate of the tax on the part of the property price within each tax band – like income tax.


The tax bands are as follows:

£125,000                                      nil


£125,001 to £250,000                  2%


£250,001 to £925,000                  5%


£925,001 to £1,500,000              10%


£1,500,001 and over                    12%


Examples of the new calculations for the tax versus the old calculation:


Purchase Price              Tax under                      Tax under
                                        old rules                         new rules


£125,000                           nil                                    nil


£275,000                           £8,250                            £3,750
average family home       



£510,000                           £20,400                          £15,500
average London home


This should give a boost to property purchases.