THINKING AHEAD!

We cannot stress enough the importance of thinking ahead when you get to the age which qualifies as ”older”. This is very much a personal matter but if we are blessed with a long life, it is likely that the time will come when we will need help – whether that be physical help or help in looking making decisions about finances. We would recommend that those reaching retirement age look into Lasting Power of Attorneys (LPAs). These allow you to appoint who you want to help you, should the time come when you need help.

In thinking ahead, making a Will is also a vital action, but that should be done really as soon as you start a family or acquire assets that you would want to pass down to specific people.

NEW TAX ALLOWANCES

Here are the new tax allowances effective from 6 April 2018:

• Personal Tax Allowance (the amount you can earn before paying any tax at all) goes up to £11,850 per year;

• Basic Rate Tax Band goes up to £34,500 per year (so a person would have to earn in excess of £11,850 plus £34,500, i.e. £46,350, before they would start having to pay 40% tax);

• Capital Gains Tax (the amount of profit you can make on a transaction such as sale of shares before you have to pay tax) goes up to £11,700;

• Inheritance Tax nil-rate band (the amount that an estate has to be valued at before an Inheritance Tax/Death Duty has to be paid) stays at £325,000 but the extra allowance, which can be achieved by leaving the main residence to direct descendants, goes up to £125,000;

• The ISA (Individual Savings Account) limit remains at £20,000;

• Rent-a-Room Scheme tax allowance remains at £7,500 per annum (this is from the letting out of furnished accommodation in your home).

PENSIONS USED AS LIFE ASSURANCE OR INHERITANCE PLANNING

The new Flexi Pension Plan rules have opened up new opportunities for pension plans to help with life assurance and passing the pension down to beneficiaries in a tax-efficient way. If you have a personal pension plan (these rules generally do not apply to Final Salary/Defined Benefit Pensions), you can nominate anyone you want to be the beneficiary. If you die before age 75, the value in the pension can pass to the beneficiary with no tax at all (!). If you die after age 75, it still passes to the beneficiary but would be taxed at the beneficiary’s tax rate. The beneficiary can also opt to set up his own flexi-pension with the monies and would be able to take money out when he chose, or even leave it to a beneficiary of their choosing.

WORKPLACE PENSIONS/AUTO-ENROLMENT

Those with a pension in their workplace will have an enforced increase to their pension contributions

from the 6th of April. Instead of both the individual and the company putting 1% of their salary into

the employee’s pension, it increases to 3% by the employee and a minimum of 2% by the employer. Someone earning £20,000 could find his monthly contribution going up from £14.00 or so per month to £40.00 per month. While that may not be a welcome extra cost, do remember that the increase also means more from the employer and, taking into account the additional amount the Government has to put in, that £40.00 per month taken from the employee would end up with them getting £83.00 in their pension – over 100% return on their money. Not bad!!

PENSIONS UNDER THE GUN

The Government, as it comes under pressure to make savings, continues to eye the tax advantages that pensions have – particularly as regards the tax-free cash that can be taken out. If you are looking to take your pension benefits, you might want to look to do that sooner rather than later. The same is true if you are looking to top-up your pension. Depending on your income currently you (or your company on your behalf) can put up to £40,000 per annum into your pension and get tax relief on it. For a basic rate taxpayer that means by contributing £32,000 he can get £8,000 from the Government to boost it up to the £40,000. A 40% taxpayer could end up with the £8,000 from the Government to boost it up to £40,000 and also get a further £8,000 in tax relief. It is worth reviewing your pension

planning. We can assist.

MORE FIRST-TIME BUYERS

While the amount of Buy-To-Let buying has gone down, there has been a definite increase in first-time buyers looking to get onto the property ladder. Lenders are looking to keep interest rates as

low as possible to continue to attract these new buyers, and are trying to be as flexible as they can in finding solutions such as involving parents in the transactions in one way or another. This can be by means of providing a deposit or acting as guarantor or even going onto the mortgage itself.

BUY-TO LET SLOWING DOWN

The Government’s actions of increasing the Stamp Duty on buying a second property, and also making letting less attractive tax-wise, has slowed the property market down. Those looking to start or continue letting need to become familiar with the new rules so as to make sure the activity remains profitable.