THE AUTUMN STATEMENT!

There was not much announced in the Chancellor’s October statement that was new, but it is

worth taking note of the key tax changes from the 6th of April 2019.

Personal Tax And Benefits Changing From 6 April 2019

• The Personal Allowance (the amount that you can earn before you have to start paying any tax)increases from £11,500 to £12,500.

• The amount you can earn over and above this Personal Allowance and pay only 20% tax increases

to £37,500. This means that in the new Tax Year you will only pay 40% tax on earnings you make in

excess of £50,000 per annum.

• Earnings you have in the new Tax Year above £150,000 will be subject to 45% tax, the “Additional Tax Rate”. (Note: if you earn £100,000 or more, your entitlement to the £12,500 Personal Allowance will be lost progressively until it is gone completely for those earning £122,000 or more.)

• The Individual Savings Account (ISA) contribution limit will remain the same at £20,000. This includes the total of all payments in the year to any ISA.

• The Capital Gains Tax allowance increases from £11,700 to £12,000.

• The Inheritance Tax Allowance nil-rate band remains the same at £325,000. For those married or in a civil-partnership each can claim this allowance, so effectively, their joint estate would have to be worth more than £650,000 before Inheritance Tax would have to be paid. However, for those with residential property that they are leaving to direct descendants there is also the additional “Residence Nil-Rate Band” which increases in the new Tax Year from £125,000 to £150,000. This is a rather complicated calculation and you should take tax advice regarding it. The Inheritance Tax rate remains at 40%.

• The Pension Lifetime Allowance will increase from £1,030,000 to £1,055,000.

• We understand that the Rent-A-Room relief will continue at the level of £7,500 per annum so those
renting up to two rooms in their own home can earn up to this amount without a tax liability.

FINANCIAL BASICS

It is worth keeping a check on your Financial Basics:

• M ost important! – ensuring more money comes in than goes out

• Building up some cash reserves in case of an emergency (putting this cash into an ISA

   is a good plan for most)

• Life assurances kept at an adequate level (basic life assurance is inexpensive for most and

   we are happy to provide quotes)

• Build up some long range savings or investments, e.g. pension, property, stocks and

   shares (there are many options; feel free to discuss the options with us)

• Keep your credit in good shape by always making payments on time (setting up a Direct

   Debit helps ensure you do not forget)

• As you move into your 60s, look into taking out a Lasting Power of Attorney

• Make a Will

TAX MATTERS – AFTER APRIL 2016!

1. The Personal Tax Allowance (what you can earn before you pay any tax) goes up from £10,600 to £11,000.

2. The Basic Rate Tax Band goes up from £31,785 to £32,000. This means that from the 6th of April, with the first £11,000 earned being subject to no tax, you will not start paying £40,000 tax on earnings until they exceed £43,000. This is marginally better than the previous year.

3. We understand that the annual ISA allowance will remain the same at £15,240. The new Help to Buy ISA will become available from the 6th of April. This is for First Time Buyers only. For full details search “Help To Buy ISA” at www.gov.uk.

4. From 6 April 2016 the Rent-A-Room relief rises from £4,250 per annum to £7,500. That is a very attractive tax-free source of income for those with spare rooms they can let.

5. If you have saved in a deposit account which is not an ISA, you will be familiar with the fact that the Bank or Building Society would automatically deduct 20% of the interest as tax (unless you were a non-taxpayer and filled out the appropriate form). This will change from next April. Deductions will no longer be made. And, in fact, there is a new Personal Savings Tax Allowance which will mean that for a basic rate taxpayer, the first £1000 he earns in savings interest will be tax-free. For higher-rate taxpayers this allowance reduces to £500 per annum.

HELP TO BUY ISA’s

The Chancellor has announced that their Help to Buy ISA will be available from the 1st of

December 2015. This can enable First Time Buyers to obtain a Government bonus of up to £3000

if they save up to £12,000 in the Help to Buy ISA. Note: the level of contribution will be limited to a £1000 one-off donation initially and then a maximum of £200 per month thereafter.

LOW RISK INVESTMENTS

Savings in cash are safe but they are also giving a very low return – 2% to 3% maximum.

This is tempting us to look for better returns. To cater for those with a low risk requirement investment providers are bringing out some investments with guarantees that protect your capital or protect the income.

The guarantees do come at a cost but it does mean that you can seek a better return without risking large parts of your savings. Do contact us if you would like more information on these options. 

ACT TODAY - MAKE SURE YOU USE YOUR TAX ALLOWANCES

In the run up to the end of the tax year, it's important that you consider all the tax-relief/exemptions and allowances that the Government offer. Please remember, many of these will be lost if you don't act before the tax year ends, on 5th April 2014.


You can manage your finances in a more tax-efficient way through:


- Savings - using tax efficient ISAs;
- Pensions - carrying forward any unused allowances;
- Investments - using up capital gains tax (CGT) exemptions and income tax personal allowances;
- Estate planning - inheritance tax (IHT) allowances and exemptions.


Do get in touch with us.

ARE YOUR SAVINGS SAFE?

Remember that your cash savings are protected by the Financial Services Compensation Account, but only up to £85,000 for each saver for each of his accounts with different financial institutions. The thing to be aware of is that some savings institutions are part of the same banking group, and your protection is limited to £85,000 for all of your accounts with that group. It is a good idea to check and make sure. And remember that accounts held jointly with a spouse are entitled to twice the £85,000 protection, i.e. £170,000.

OTHER OPTIONS FOR INCOME IN RETIREMENT

While pensions are traditionally the way most people will provide for themselves in their later years, they are not the only option. Many people have greater faith in property and will build up a portfolio of residential investment properties producing a net rental income and the possibility of an increase in the property values. Mortgages for Buy-To-Lets have become very competitive and still can be done on an interest-only basis in order to maximise the income produced. Please contact us if you require any further information about Buy-To-Let mortgages. Other savings such as Individual Savings Accounts and stocks and shares generally can also provide an income in retirement. The return on cash investments is not very good currently but has been better in the past. The income from shares in the way of dividends can provide a very useful source of retirement income, for those who understand the risks and are willing to take them. Pretty much a last resort for income or a lump sum in retirement are Equity Release Plans. They are available from age 55 (note: for a couple the qualifying age is determined by the younger of the two). Interest rates and costs for these options have been going down, so they are worth reviewing if needed. We would be happy to provide quotes and clarify the options for you.

The end of the Tax Year

We are approaching the end of the Tax Year and it is a good time to ensure we are all taking advantage of all of the tax allowances available, including the Personal Tax Allowance, the ISA (Individual Savings Account) allowance, the Capital Gains Tax allowance, etc.


Use your Capital Gains Tax Allowance if you have investments that have gone up in value. You can realise tax-free profits of up to £10,600. As with your ISA allowance, you cannot carry this forward. Use it or lose it!

Maximise your pension contributions where possible. In the current Tax Year you can put a maximum of £50,000 into your pension, and even more if you have not used up your pension payment allowance in the preceding three years. In the new Tax Year this maximum reduces to £40,000. We would be pleased to assist.

Review all of your cash deposit accounts

We are approaching the end of the Tax Year and it is a good time to ensure we are all taking advantage of all of the tax allowances available, including the Personal Tax Allowance, the ISA (Individual Savings Account) allowance, the Capital Gains Tax allowance, etc.


Review all of your cash deposit accounts. Find out what interest rate you are receiving. You may be shocked to find interest rates of 0.10% for monies held in a savings account with the glorified name of “Gold” or “Platinum” savings account. Look for better rates.

Use your Cash ISA allowance

Cash savings will almost always do better in a Cash ISA. Generally the interest rates are better and, of course, you get the interest free of tax. Since you can arrange to have immediate access to the cash in an ISA, it makes virtually no sense not to have as much of your cash savings as possible in Cash ISAs. In this Tax Year (2012/13) each individual can put up to £5,640 into a Cash ISA. If you do not use this year’s ISA allowance, you lose it. It cannot be carried forward.

PERSONAL TAX CHANGES

There were some useful improvements to individual tax benefits – although some of these were just future promises. The following were the immediate changes, which we felt were most significant for individuals:


• The increase in the Personal Allowance from 6 April 2013 to £9,440. This represents the amount an individual can earn before he starts paying any tax and is the largest ever such increase in one tax year. The current level is £8,105.

• The increase in the Individual Savings Account (ISA) from £10,680 per year to £11,280 from 6 April 2013. Half of this (£5,640) can be put into a Cash ISA.

• The reduction in the maximum rate of income tax from 50% to 45% from 6 April 2013 (for those earning in excess of £150,000).

• The increase in the Basic State Pension from £107.45 per week to £110.14 per week.

• Corporation Tax for smaller businesses does not change this year but it does remain very low at 20% and Corporation Tax for larger businesses will reduce from 24% to 23% in the new Tax Year.

There was also an announcement that will help many older people who have private Drawdown Pensions. The Government is reversing its previous position announced two years ago. This will allow individuals to draw a higher income from their Drawdown Pensions than before. This should mean that those with such pensions will be able to access approximately 20% more income than they can take currently. However, the Government has not yet announced a date from which this change is to apply so it is likely to take some months before we know when people will be able to take this higher income from their pension.

Advance Warning

Some significant changes in financial services are to come into effect at the end of 2012. The Financial Services Authority will be replaced by two(!) new regulators – the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). Along with this change are requirements for higher standards for financial advisers and a move away from commission being paid for investment advice to advisers charging fees. Firms of advisers also need to decide whether they will provide advice from the whole market and qualify thereby as "independent" or will work with a specified set of suppliers and then be termed as providing "restricted advice". We will continue to provide independent advice. Contact us on 01342 313302.

New “Buy Now” for your ISAs

With the beginning of the new Tax Year (2012/2013), there is the immediate opportunity for doing your new ISA savings/investment. You do not need to wait until the end of the Tax Year. In the case of a Cash ISA this gives you an extra 12 months of tax-free growth if you do it now. With a Stocks and Shares ISA you would be buying at what looks to be a low point in the Market and avoiding the end of Tax Year rush, which tends to drive up investment fund costs.

SAVINGS – SOME BASICS

Saving and investing money is a very important part of personal finances. Here are some tips:

1. For money you hold on cash deposits, keep watch over the interest rate. Banks and Building Societies, unfortunately, will not necessarily remind you when that lovely introductory rate that attracted you in the first place, drops considerably.
2. Take advantage of tax efficient savings. Your cash savings generally should be in Cash ISAs (Individual Savings Accounts) for both a good rate and so you do not lose part of the interest to the Tax Man.
3. Don’t use credit cards for long term borrowing. Take out a personal loan instead.
4. If you are saving for your children (or grandchildren), find out about the Junior ISA, and also look at the selection for children at the National Savings and Investment website.

Junior ISAs - New kid on the block

The Coalition Government has now confirmed details of the long awaited savings plan analysts had been expecting since the withdrawal of Child Trust Funds (CTF) last year. The Junior ISA will be launched in November and will extend to under 18s the same tax benefits which parents (and all adults) already enjoy. Their exact structure is subject to final legislation that may change, but this is the plan so far.

The Junior ISA will allow parents to open up a specific account in their child’s name, into which they, their family and friends can contribute a total of up to £3,000 a year. These contributions will then be invested in a chosen mixture of cash and/or stocks and shares and the benefits locked up until that child reaches 18. Anyone under 18 born before September 2002 or after January 2011 (i.e.: those who do not have a CTF) will be eligible for a Junior ISA (and for those with CTFs, the annual limits are expected to be brought in line).

The Junior ISA could provide a significant step up for children whose family and friends get together for their benefit. Final values are subject to growth rates but just to give you an idea, assuming an average of 5% pa (net of charges), that £3,000 pa could leave the lucky beneficiaries with a contribution of over £80,000 towards their world trip, first house or those hotly debated university tuition fees.

Reviewing Cash ISAs - Losing out to inflation

Low interest rates are great news for borrowers but for savers, they can have a devastating effect. With inflation currently running far in excess of base rates, even though the value of your capital may be safe, you need to keep a close eye on the interest rates you are earning to stop, or at least limit the rate at which the buying power of your money is being eroded. Nowhere is this more apparent than with Cash ISAs. In a recent survey for watchdog, Consumer Focus, over 80% of Cash ISA holders were found to be earning less than just 0.5% a year on their savings. In most cases, the attractive introductory rates which lured savers in had come to and end and been replaced by very low "standard" rates. In some cases this change had even gone unnoticed. Whilst it is true that, whatever the conditions in the market, most people should hold at least some money in an easy access, readily available deposit account, simply to make sure they can cover unforeseen emergencies and short term needs, any saver with longer term plans should be alarmed by findings like this. At the very least, you should do a review of the market and see if you can find an account paying more. In response to the findings, Consumer Focus suggested that: "...customers who have not switched their [ISA] savings may be losing one to two per cent in interest. In total this could amount to as much as £1.5 billion to £3.0 billion per year…” With those potential gains at stake, it is certainly worth shopping around.