John Millican, Chairman
Posted in Pensions & Retirement, Lifetime Limit on 29.01.09

Tax Planning

There are several issues arising from the Pre-Budget Report of 24th November 2008 that are worth highlighting in case their significance has been overlooked given all that happened in the run up to the end of last year.

Income Tax and National Insurance

There will be a new 45% rate of income tax from 2011/12 for those earning over £150,000 and at the same time an increase of 0.5% in National Insurance contributions.

As yet we don’t know whether it will be possible to secure 45% tax relief against pension contributions after these changes.

Pension Lifetime and Annual Allowances

The Lifetime Allowance is to be frozen in 2010/11 for the next five years at £1.8m. The Annual Allowance is to be fixed at £255,000 for the same period.  While these restrictions may not be a pressing problem today or tomorrow they could be in future years bearing in mind the penal tax rates if the limits are exceeded.

Trust Taxation

From 6 April 2011 the income tax rate for trustees of discretionary trusts will increase from 40% to 45% and the dividend rate from 32.5% to 37.5%.  These rates will apply to all income.  As a result trustees may need to consider more growth style funds given the rate of Capital Gains Tax is now 18%.  There may also be opportunities to distribute income to non-tax paying beneficiaries who could reclaim higher rate tax (but not the 10% tax credit on dividends).

Change in Intestacy Rules

The following changes take effect from 1st February 2009. There is to be an increase in the amount that a surviving spouse, or civil partner, can receive from the estate of a person who dies intestate, the amount increasing from £125,000 to £250,000 (in addition to any personal chattels). If there are no children that sum goes up from £200,000 to £450,000. Of course, it is essential planning to ensure we all have a Will which is up to date, so there is no dependency on the Intestacy Rules.

If you would like to know more about how we as Financial Advisers can help you set, plan and achieve your financial goals then financial planning section of  our website: Financial Planning or send us email at: [email protected]

The information contained in our website is for guidance only and does not constitute advice which should be sought before taking any action. The information is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. Accordingly, no responsibility can be assumed by Fiducia Wealth Management Limited, or any associated companies or persons, its officers or its employees, for any loss occurred in connection with the content hereof and any such action. Professional financial advice is recommended for every case.

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John Millican, Chairman
Posted in Pensions & Retirement, Lifetime Limit on 29.01.09