Spring 2016
End of year tax planning This year, there are good reasons to take action before the tax year ending 5th April 2016, as some opportunities will be lost after that date. Pensions tax relief changes From 6th April 2016 pension input periods will be aligned with tax years. The transitional rules for this current tax year may have created an opportunity to pay more into your pension. The rules are complicated so you should seek advice. You can also carry forward unused tax relief from the previous 3 tax years, remembering that you can’t contribute more than 100% of your pensionable earnings. This restriction does not apply to employer contributions so it is a particularly attractive opportunity for owner-managed businesses with surplus retained profit to invest. From 6th April 2016 the tapered annual allowance will affect high earners. £1 of annual allowance is lost for every £2 earned over £150,000 until the minimum tapered annual allowance of £10,000 is reached. There is an opportunity for high earners to make
substantial pension contributions before the new rules take effect. The lifetime allowance will reduce from £1.25 million to £1 million on 6th April 2016. Two new protections will be available and if you think you may be affected you will need to review your options and possibly take a decision before 6th April. Higher rate taxpayers might also experience some bad news in 2016, with the Government due to report back on a consultation over tax relief. Action – review your pension arrangements and consider making a pension contribution Child benefit tax planning
2
Child benefit claimants who are set to lose some or all of their entitlement for the year should consider taking action to reduce their adjusted net income. Adjusted net income is, broadly, taxable income (it should be noted that this includes all rental income, bond gains and any other taxable income). Certain deductions are allowed, such as the gross value of personal pension contributions, gift aid and trading losses. Action - consider making a personal pension contribution before 6th April
Inheritance tax Every year you have an annual exemption for gifts of up to £3,000, which if not used, may be useable in the next. Pension funds can now be left to loved ones in a tax efficient way which may be a reason to re-think how you view your financial future. It is important to check the position with your pension provider and take advice on the new options available. It is important that you have an up to date will in place, which takes into account the most up to date inheritance tax rules. Action - consider reviewing your will and making gifts or pension contributions for a child or grandchild
VCT investments offer tax relief of 30 per cent of the amount invested, with a limit of £200,000 in any tax year. Action - consider making tax efficient investments Contact us If you wish to discuss the content of this brief in more detail please contact Louise Eedy directly on 02920 855 244 or e-mail ifa@thomas-carroll.co.uk Why Thomas Carroll? We have the honour of being named ‘The Chartered Financial Planners of the Year1 by the Personal Finance Society – the body which grants Chartered status to IFA firms and individuals.
Tax efficient investments If you don’t make use of your ISA allowance of £15,240 by 5th April it is lost. ISA’s are a tax efficient way to maximise the investment return of your chosen investment portfolio. Junior ISAs can be used by grandparents to gift money to their grandchildren as part of an inheritance tax planning strategy. Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs) provide valuable tax benefits. However, the underlying investments are usually considered to be high risk. EIS schemes provide 30 per cent tax relief in 2015/16 on investments of up to £1,000,000. Investments can be carried back by up to one year provided the limit in the previous year was not reached.
Our title demonstrates the excellence, commitment to professionalism, training and development of our people which our clients and professional colleagues have come to expect from us. We have recently been awarded Corporate Financial Planning Firm of the Year2 and Retirement Planning Firm of the Year3 by Bankhall Group, the UK’s largest distributor of financial services. Tax and legislation are liable to change. This information is based on our current understanding of UK law and HM Revenue & Customs practise and legislation we believe may apply in the future. No guarantees are given regarding the effectiveness of any arrangements entered into on the basis of these comments. 1. Awarded by the PFS in 2009 2. Awarded by Bankhall Group in 2012 &2014 3. Awarded by Bankhall Group in 2010 &2011