The Chancellor introduced the Budget as an emergency Budget intended to deal with the national deficit, seen by the Coalition Government as an unavoidable legacy of the previous government. Although the deficit will be reduced primarily through a reduction in public spending, the increase to the main rate of capital gains tax (CGT) for higher rate income tax payers could have implications for the financial services industry especially when considering the most suitable tax wrapper for their clients.

This article sets out the main changes to tax rates for individuals and trustees. I will be covering pensions and CGT in more details over the next few days.

Hang on to your hats folks because it’s going to be a rough ride!

Income Tax

Few changes were announced to the income tax regime, with the previously announced  changes (the 50% income tax rate and the withdrawal of the personal allowance for high earners) remaining untouched.

• The main personal allowance will remain at £6,475 for 2010/11. However, from 6 April 2011, the personal allowance will increase to £7,475. Over the longer term, the intention is to gradually increase the personal allowance to £10,000.
• The basic rate limit (currently £37,400) will be reduced so that higher rate taxpayers do not benefit from the increase in the personal allowance. The exact figure will be confirmed when September’s Retail Prices Index is known.

Capital Gains Tax

The most widely anticipated change was an increase to the rate of CGT, which could have resulted in a maximum CGT rate of 40% or possibly 50%. To the relief of many, this change did not materialise, the Chancellor instead opting for a 10% increase in the rate of CGT for higher rate income taxpayers.

From 23 June 2010:

• the main rate of CGT for those who pay income tax at the basic rate or below will remain at 18%. For those individuals whose income and gains exceed the higher rate tax threshold, the main rate of CGT will be increased to 28%; and
• the lifetime limit on gains that qualify for entrepreneurs’ relief will be increased by £3 million to £5 million.

In addition:

• the annual CGT exemption for individuals will remain at £10,100; and neither indexation allowance nor taper relief will be available to reduce chargeable gains.

Corporation Tax

In an emergency Budget we would expect to see spending cuts and tax increases. Contrary to this expectation and the repeated warnings issued by the Government and the press, companies seem to have come out of this Budget relatively unscathed, perhaps even better off.

• The main rate of corporation tax will be reduced by 1% to 27% from 6 April 2011. It will then be gradually reduced to 24% by 1 April 2014.
• The small companies rate will also be reduced by 1% to 20% from 6 April 2011.
• However, companies didn’t have it all their own way, due to the announcement that the amount of capital allowances that they are able to claim each year will be reduced:
• The annual investment allowance will be reduced to £25,000.
• Writing down allowances will be reduced from 20% to 18% (the main pool) and 10% to 8% (the special rate pool).

Inheritance Tax

• No changes to inheritance tax were announced in the Budget speech.

VAT

• The main rate of VAT will increase to 20% from 4 January 2011.
• Items such as basic foodstuffs and children’s clothing (which are zero-rated) are not affected by this change.

Pensions

Restrictions on pensions tax relief:

• There is still to be reform of higher rate tax relief on pensions. However, the complexhigh income excess relief charge scheduled for 6 April 2011 may be replaced by a significantly reduced annual allowance. It is currently set at £255,000 in tax year 2010/11. The Government will discuss the changes with interested parties but provisional analysis has suggested that the level of a reduced annual allowance may be in the region of £30,000 to £45,000.
• The pensions anti-forestalling provisions currently in place which affect high income individuals (broadly those with relevant income of £130,000 or more) remain the same for the current tax year.

Changes to pension requirements affecting those reaching age 75 on or after 22 June 2010:

• The Government intends to end the effective requirement for pension scheme members to purchase an annuity by age 75.
• The intention is to introduce this change in tax year 2011/12 and a consultation on this will be published shortly.
• In the meantime the requirement to buy an annuity will be put back to age 77, but it appears that individuals will still have to take a pension commencement lump sum before reaching age 75.

Basic State Pension:

• From 6 April 2011 the basic state pension will be increased by the higher of prices, inflation and 2.5%.

ISAs

• From 6 April 2011, the annual ISA subscription limits will be increased in line with RPI

Like I said earlier I will be adding more meat to the bone over the coming days once all the boffins have scrawled through every minute detail and offered their considered opinions.

William George, Independent Financial Advice on BBC Radio’s Fred MacAulay Show.

Fred MacAulay and Karen McKenzie talk about ISA’s on Wednesday 5th May 2010 with Independent Financial Adviser, William George.

Covering topics such as getting money into your ISA and the recent changes in the rules for Cash and also Investments ISA’s. 

• Limits for Investments ISA
• Limits for Cash ISA
• Married Couple limits for ISA
• Cash ISA
• Investment ISA
• Stocks and Shares ISA
• Benefits for ISA
• Tax benefits
• When can I take money invested in an ISA
• The best deals and best rates for ISA
• New ISA and transferring an ISA

Click below to listen to the radio broadcast.
William George IFA on BBC Radio Scotland Financial Advice

Hi all,

Just a short one today folks, but it’s very important…

I received an enquiry from someone concerned about their pension mortgage having been advised by their bank to take one of these vehicles out some years ago.

It really is two separate products though and therein lies our first problem. A pension is designed to create an income for you when you choose to retire whilst a mortgage is obviously a debt that will need repaid at some point.

Pension mortgages are designed so that the tax free lump sum is supposed to pay off the outstanding debt that has been taken out on an interest only basis. Like endowment mortgages there is an obvious risk with this in that it depends a great deal on your investment performance. If the funds under-perform then it makes it unlikely that you will have enough to pay off your debt at the end of the chosen term.

Not very nice.

However there is also another often unforeseen problem in that many of these may have been written only to age 50 as this was the earliest you could access your pension (except in some rare instances).

Changes to pension law mean that from April this year the earliest you can access any monies from your pension is age 55. In other words if you are not 50 before April this year then you will have to wait five years till you are 55 to access your pension. This would obviously have a serious effect on your financial planning for retirement.

If this relates to you, then you will need some urgent advice. Please just drop me a line and I’ll be only too happy to help guide you through what must be done as soon as possible.

Call me right away on 0800 321 3508

2009 Year of the ‘Baby Gloomers’

So much happened with regards to pensions in 2009 it’s difficult to know where to start. In a year dominated by one financial crisis after another, headlines included:

• Reductions in the size of defined contribution pots due to falling share prices
• More companies looked to reduce their defined benefit liabilities by closing or restructuring their schemes
• High earners were hit with a reduction in the tax relief on their pension contributions
• Bank employees pensions were bailed out by Government using public money
• The gap between private and public sector pension provision became ever wider
• The UK state pension was frequently described as ‘the worst in Europe’ when it was once right up there amongst the best.

The constant stream of bad news meant that the much mentioned Baby boomers became very worried. They worried about how falls in their retirement income will affect their ability to support their elderly parents and their children. So worried are they that a new phrase emerged… ‘baby gloomers’.

But it hasn’t been all doom and gloom…

Pensions reform – now to 2012

Auto-enrolment for millions…

Industry bods like me eagerly awaited the release of draft regulations dealing with the finer details of pensions reform, including the new employer duties due to start from 2012. As mentioned in previous articles these new duties will, for the first time in UK pensions history, require employers to automatically enrol millions of eligible employees in a workplace pension scheme.

However it’s not just about Personal Accounts.

To aid with this reform a new pension scheme, currently known as ‘personal accounts’, is also being created. Almost daily, both the financial and popular press run stories about whether this scheme will go ahead or not in its current form.

One of the unfortunate aspects resulting from such press coverage is that new employer duties are being closely linked with personal accounts, thus giving the false impression that auto-enrolment might not happen. If there’s one lesson to be learned from 2009, it’s that auto-enrolment has support right across all the main political parties. Personal accounts however may not. Consequently auto-enrolment is far more likely to happen.

It should be remembered that this feature is just one part of a pension reform package that includes fundamental changes to the basic and state second pensions.

What the future holds for employers

In the coming year, employers will need to know what auto-enrolment means for them.

They’ll need to…

• Be aware of the impact that their new duties will have on their business.
• Analyse current pension provision to ensure that it at least meets the minimum requirements. If there is no scheme in place, they will still be required to auto-enrol their eligible employees into a suitable plan and in doing so will have to decide if they want to set up their own private workplace pension scheme, or use the basic personal accounts scheme.

Where Independent Financial Advisers (IFAs) fit in

The problem is pensions are complicated and employers will need help. The good news is that there is a group of professional people who have all the knowledge and expertise to help them. They’re known as IFAs. If you want anymore information on any of these topics just drop me a line because I’ve been one for over seventeen years now! You can call me free on 0800 321 3508

Until next time, have a prosperous beginning to 2010.

Hi everyone,

I hope you’re one of the lucky ones to have dodged the snow so far, (friends of mine down South have been snowed in big time!) because I’d like to think this article this will give you a little warm feeling a week before Christmas… or at least warn you about some of the treacherous financial black ice that is very definitely underfoot just now.

First things first, watch out for an increase that’ll quietly catch pretty much all of us with the return of 17.5% VAT rate (yep it’s been a year already since it was dropped to 15%).

To sidestep it is impossible but you can be proactive and still stay standing like this – firstly budget an extra 2p or 3p in each pound you spend to cover the rise. Secondly and quite urgent if you do want to truly ‘beat it’ – if you have a large purchase you wish make, try all you can to order and pay for it before the start of the New Year. Getting to those early “January” Sales running directly after Christmas could be a wise and urgent priority for you depending on what you’ve got your eye on.

Now a little bit of pre-Christmas cheer (or how to get another 2.5% back again)…

The basic state pension goes up by 2.5% in April 2010. This means up £2.40 to £97.40 weekly for a single basic rate pension and up £3.85 to £156.15 a week for a couples’ basic rate pension.

Oops! Now we’re onto the ice again…

National Insurance contributions rise by 1% in April 2011 – for those earning over £20,000 whether employed, employer, or self employed. Next onto aspiring homeowners…

Freedom from having to pay Stamp Duty for those who purchase a property for less than £175,000 will end and the threshold will return to £125,000 after the new year Budget.

Ah, but at least shady bankers will get their come uppance will they not – do I hear you ask? Well, not quite, but Alistair Darling just announced in his Pre Budget Report that there will be a one off tax of 50% applied to all discretionary bank bonuses over £25,000; income tax is applied as normal… the Bankers themselves just squeezed out of that one.

However, if you like a laugh with friends at the bingo – you get 2% back yourself; Bingo duty is down 22% to 20%.

Meanwhile the Chancellor continued with some cold blasts of his own – the Inheritance Tax Threshold will be frozen at £325,000 until at least 2011.

Next here’s a slippery slope for those who earn “too much” – anyone earning £150,000 a year or more including employer pension contributions will find their Pension tax relief slashed from 40% to 20%, but it won’t affect those earning less than £130,000 per annum.

And… because we all love the Internet sooo much – we’ll all be throwing 50p a month into the tin to fund super fast broadband if we have a landline.

On the other hand if you’re worried about keeping a roof over your head in 2010 then hope may be at hand for a little longer – those who are facing repossession can take advantage of The Mortgage Interest Scheme for another six months, which is how long it’s been extended by. Hopefully, by summer it may be a little warmer then.

Keeping warm also gets a boost with an extra £150 million going into the Warm Front scheme for those families on low incomes to make their homes properly habitable with new heating and insulation. Low income families can also look forward to a new boiler when the Government introduce their “Boiler Scrappage Scheme” in April 2010 which gives the neediest £400.00 towards a new, fuel efficient boiler.

At the same time an extra 500,000 children from low income families will get free school meals and the child component of Children’s Tax Credit also goes up by £65.00. Additionally inflation-linked benefits go up by 1.5% in 2010. This includes Child Benefit, Guardian’s Allowance, Working Tax Credit (except things relating to childcare), Working Tax Credit will not be taken into account when calculating Housing Benefit and the disability elements of Child Tax Credit. 

There we have it then – a quick trip out on the ice and back, hopefully you’ll enjoy the skating and remember it’s one way to beat the winter blues. For the eagle eyed among you, today’s picked out some of the key things of note arising out of Alistair Darling’s Pre Budget Report 2009 last week… which reminds me, there’s one last thing for you; consider it an early Christmas present from Mr Darling himself…

The ISA Allowance will go up to £10,200 for all savers (with a £5,100 Cash ISA maximum) from 6th April 2010
but if you are over the age of 50 then you can take advantage of this increased limit right now.

As ever, if you need to talk about anything just give me a call on 0800 321 3508

Hi everyone,

just thought I’d let you know I’ve uploaded a 12 Page 2009 Budget PDF for you to download. It gives you a great information on the following in a really easy to read/understand format.

Some highlights include…

• ISA limits
• Capital Allowances
• Business trading losses
• Tax relief on pension contributions
• Top rate of income tax details
• Personal income tax allowance details

It also covers…

• PERSONAL AND TRUST TAXATION
• CAPITAL TAXES
• BUSINESS TAX
• VALUE ADDED TAX (VAT)
• MISCELLANEOUS ISSUES – including Tax Avoidance
• NATIONAL INSURANCE CONTRIBUTIONS (NICs)
• FINANCIAL CALENDAR – to keep you in sync with important fiscal dates

There’s a whole lot more in there but it’s all easy to access and understand, so download it to your desktop if want it. Just click the download link below…

Budget Summary 2009

I hope it helps clarify your Tax issues in 2009.

Bye for now…

]]> http://www.williamgeorgeifa.co.uk/2009/04/30/2009-tax-budget-essentials-pdf/feed/ 0 http://www.williamgeorgeifa.co.uk/2009/04/24/budget-2009-key-points-snapshot/ http://www.williamgeorgeifa.co.uk/2009/04/24/budget-2009-key-points-snapshot/#comments Fri, 24 Apr 2009 12:59:20 +0000 William http://www.williamgeorgeifa.co.uk/?p=221

Leaving aside all the politics of the latest budget (described as the most important for decades) the following is a brief summary of the main aspects from the perspective of an Independent Financial Adviser.

Here goes then…

A big increase in ISA limits, a dramatic hike in income tax for the highest earners and a radical revision of macro-economic forecasts are probably the key points from today’s budget. 

The Chancellor is billing it as targeted support for the economy while continuing sustained fiscal consolidation from 2010-11 when the government forecast the economy will be recovering and able to support a reduction in borrowing. 

Here are the main points and some initial thoughts:

ISA limits increased
An increase in the annual investment limit for Individual Savings Accounts (ISAs) to £10,200, up to £5,100 of which can be saved in cash.  This will make ISAs more attractive – tax free roll up and accessibility. 

Income Tax increase for very highest earners
From April 2010, an additional rate of income tax of 50 per cent will apply to income over £150,000, and the income tax personal allowance will be restricted for those with income over £100,000. So a year earlier than originally announced and 50% not 45% with the announcement on personal allowances an extra sting in the tail. 

Pensions
From April 2011, tax relief on pensions contributions will be restricted for those with incomes of £150,000 and over, and tapered down until it is 20 per cent.  This means salary sacrifice becomes more attractive for high earners. Firstly, the rises in National Insurance announced in the Pre Budget Report are not being postponed.  Secondly, using salary sacrifice to increase pensions and bring income levels below either the £150,000 or the £100,000 limit must now be an attractive feature of tax planning. 

Read full schedule of tax and NI rates here

Business 
The Chancellor announced he was extending the enhanced loss relief for an additional year and expanding HMRC’s Business Payment Support Service, increasing capital allowances for new investment to 40 per cent for one year, and establishing a £750 million Strategic Investment Fund to support advanced industrial projects of strategic importance. 

For one year the rate at which capital allowances can be claimed on plant and machinery will be increased from 20% to 40%. There will also be an extension for one further year to the ability to carry back trading losses against profits of the previous three years. 

Homeowners and homebuyers
The Chancellor announced a £600 million funding package of measures to build more homes through unlocking sites currently sitting as dormant, and an extension of the stamp duty holiday for all houses costing up to £175,000 until the end of the year. 

VAT
It was confirmed that the reduction in VAT to 15% would continue to the end of the year. The rate will return to 17.5% on 1 June 2010.

Alcohol and cigarettes
The Government targeted alcohol and cigarettes putting around 7p on a packet of cigarettes and 6p on a pint of beer. 

Fuel
Fuel duty will increase by 2 pence per litre on 1 September 2009, and by 1 penny per litre in real terms each year from 2010 to 2013; 

Car scrapping bounty 
Car buyers will get a £2,000 bounty for scrapping vehicles more than 10 years old. 

The environment 
The government announced a range of measures to encourage energy efficiency and low-carbon growth. 

One question before we close – what’s your perspective on the Budget? Is it really a Budget for Jobs as was announced in the video below? I’d be intrigued to hear your thoughts. You can also check out the Government’s own Treasury Budget Microsite here to help you make up your mind.

Hope this helps – and as ever if you need friendly help to further understand how the 2009 Budget will affect you and your finances going forward.

Call me on 0800 321 3508

Until next time…

]]> http://www.williamgeorgeifa.co.uk/2009/04/24/budget-2009-key-points-snapshot/feed/ 0 http://www.williamgeorgeifa.co.uk/2009/04/01/end-of-tax-year-checklist/ http://www.williamgeorgeifa.co.uk/2009/04/01/end-of-tax-year-checklist/#comments Wed, 01 Apr 2009 15:13:51 +0000 William http://www.williamgeorgeifa.co.uk/?p=213

According to unbiased.co.uk British taxpayers will waste over £10bn in unnecessary tax in 2009. With the end of the tax year nigh, time is rapidly running out if you want to curb your tax bill and maximise allowances.

So what should you be doing if you want to take advantage of tax regulations and save a few bob?

ISAs

Now ten years old ISAs allow people to keep cash as well as assets such as property, stocks and shares in a tax-free wrapper. Up to £7200 can be invested every year, with up to £3600 of the full amount in cash. Although interest rates are at an all time low, good offers are still available in the competitive savings market. If you are thinking of maximising your ISA allowance then you better move very quickly as applications will probably need to be in by Friday at the latest.

Pension Contributions

Each year, UK residents under age 75 can pay in pension contributions equal 100 per cent of earnings, subject to a maximum of £235,000, or £3,600 for non-earners. If you don’t use it you lose it.

If you are within a year of retiring then you can pay in as much as you want, however if you exceed your lifetime allowance of 1.65 million then you will be subject to a healthy tax on the excess.

One very important change taking place in the pension world is that the cost of buying back missed National Insurance contributions will rise on April 6th 2009 so people with missing years might want to buy them now.

Women who have less than ten qualifying years of N.I. contributions do not qualify for a basic state pension but as soon as they reach ten years they are entitled to 26% of the full basic state pension.

The cost of buying back this one year (assuming you already have nine qualifying years) has been calculated at £421.20.

If you were to buy a pension of £23.58 a week on the open market it would cost you £35,240 (for 60 year old woman, single life). This represents a staggering return on investment of up to 8,300%. The price of buying back is set to jump by some 50% in the new tax year.

Inheritance Tax (IHT)

Each person is allowed to give away £3000 a year and this will not count towards your total estate. You can carry this over but for one year only. In addition, gifts of up to £250 a person (small gifts exemption) are also exempt from IHT but you cannot use the two together. If a gift is regular, comes out of your income and does not affect your standard of living, then any amount can be given away and ignored for IHT purposes.

Income Tax

You are allowed to make a gift to your spouse. You can make use of his or her personal allowance, of £6,035, and a basic/lower rate band, £34,800, for 2008/09.

Venture Capital Trusts (VCTs)

With these investment vehicles, income tax is available at a rate of 30% up to an annual limit of £200,000 for subscriptions for shares in a VCT as long as you hold them for 5 years. This is a quoted company holding at least 70% of it’s investments in shares or securities in qualifying unquoted companies trading wholly or mainly in the UK.

These are just a few suggestions as we come up to April 5th. As ever you should seek expert advice before making any decisions. Call me on 0800 321 3508. Good luck paying less tax… legitimately of course!

]]> http://www.williamgeorgeifa.co.uk/2009/04/01/end-of-tax-year-checklist/feed/ 0 http://www.williamgeorgeifa.co.uk/2009/02/23/browns-new-tax-investigation-terror/ http://www.williamgeorgeifa.co.uk/2009/02/23/browns-new-tax-investigation-terror/#comments Mon, 23 Feb 2009 15:15:40 +0000 William http://www.williamgeorgeifa.co.uk/?p=195

Gordon Brown has announced that he intends to take a tougher stance on the world’s biggest tax havens. He seems to be particularly fixated with Switzerland, whilst Barak Obama made similar comments relating to The Cayman Islands during his Presidential campaign. Speaking at his monthly press conference, the Prime Minister said…

“We want the whole world to take action. That will mean action against regulatory and tax havens in parts of the world which have escaped the regulatory attention they need. The changes we make will have to apply to all jurisdictions around the world.”

HM revenue and customs reckon that the amount of company money being taken out of the system could be anything between £3.7bn and £13bn which is the kind of money our government clearly needs as it tries to spend its way out of recession.

Other members of the G20 lose similar amounts which means, that the world’s main industrialised countries could be losing well in excess of £100bn a year. Mr Brown said yesterday he was “more confident now having talked to [other] world leaders that we are in a position to take action on this matter”.

This is seen as the next step in dealing with this problem. Last year I did an article highlighting EU Governments efforts to track down individuals who avoid taxation in this way. It’s still very relevant to read today, especially if you have money salted away offshore. Whilst it has been moderately successful it only scratches the surface because if you want go right to the heart of it you have to deal with the tax havens themselves. That is why Brown is desperate to get international agreement.

The plan will have three key elements:

• Focusing on big corporations that use tax havens.
• Clamping down on individuals who avoid tax.
• Tightening the regulation of the markets

Britain believes that billions of pounds in transactions take place between international banks without so much as a reporting mechanism in place never mind regulation.

So how do you feel about Gordon Brown’s latest initiative? Is it right that the UK Government now has special powers (see my last article on HMRC Tax Investigation) to rifle through the bank accounts of individuals here or even the accounts they may hold privately offshore?

As I reported previously, the Inland Revenue paid an informant £100,000 to get hold of secret data on British citizens with offshore accounts held in Lichtenstein. Was the securing of that stolen data for money really an ethical act by HMRC?

On the other hand is it right that companies and individuals should salt away billions in offshore accounts causing the rest of the tax burden to rest on the shoulders of the 99% of law abiding honest tax payers?

I’d be curious to hear your thoughts on this one – do you see what I’ve raised above as Tax Evasion? Or would you see it as simply ‘Wise’ Tax Planning ie (supposedly still legal?) Tax Avoidance to use an offshore account? What do you think?

As usual feel free to comment on the above article. I’m always interested to hear your opinions.

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