Pensions

Pensions

Your Guide to Tax Year Planning

Financial Planning, Investments, ISA, Pensions, Savings, Tax Planning
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We all need to pay our taxes however according to Unbiased UK taxpayers are expected to give away around £4.6 billion in unnecessary taxes.

Yet there are legitimate opportunities to help you reduce your tax bill. You may be unaware of the opportunities,  how to take advantage, or simply not had the time to take action.

With the end of the 2016/2017 tax year fast approaching we wanted to highlights some key tax planning opportunities.

Download Your Guide to Tax Year Planning

2016/17 Your Guide to Tax Planning

There is no doubt that Tax is a complex area. If you have multiple sources of income and/or run a business. However many end up paying more than they should out of fear of paying too little tax .

The most common areas where we find tax planning opportunities are:

  • Tax -efficient Savings
  • Retirement planning
  • Inheritance tax
  • Capital gains tax

A good independent financial adviser or an accountant will help you identify tax planning opportunities. Even small tax planning steps can add up to a significant saving in the long term.

If you would like to explore the options available to you in preparation for the 2016/17 tax year end, please contact us on the number below:

Call 02886 440475 to book an initial consultation now

Please note that the Financial Conduct Authority does not regulate some forms of tax advice.

What you need to know about the Autumn Statement 2014

Financial Planning, General, Investments, ISA, Pensions, Savings, Tax Planning
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What you need to know about the Autumn Statement 2014

On 3rd December 2014 George Osborne gave us his Annual Autumn Statement which for reasons best known to someone else is in December.  But that’s not important right now and if you’re like me it will be googled later.  Anyway here are some of the main points relevant to your personal financial planning broken down into relevant headings.

Income

The income tax personal allowance will rise to £10,600 in April 2014 which is £100 higher than expected. The higher rate tax threshold will also increase to £42,385 in April, again £100 more than expected.

Anyone in receipt of Universal Credit will find their benefits frozen for the coming year.

Savings

The ISA limit has been raised to £15,240 in April.  The chancellor has also said that with immediate effect when the saver dies their spouse will inherit the ISA and be able to maintain its tax free status.  This could be very interesting for future IHT planning.

Pensions

As expected the Chancellor announced that if you die prior to age 75 in receipt of a joint life annuity pension your dependents with receive the dependents income tax free.

This brings joint life annuities in line with flexi-access drawdown but there was no mention of final salary schemes dependents pensions so watch this space.

There were no changes to the tax relief through pensions either before or after age 75.

The single tier state pension is expected to start in April 2016 at £151.25 per week.

Property

As usual the Government wants a headline maker in the Autumn Statement and this year it’s stamp duty.  The stamp duty system has been revamped from a stepped to a tiered charging system as show below.

[table width =”100%” style =”table-striped table-bordered table-hover” responsive =”true”] [table_head] [th_column]Purchase price[/th_column] [th_column]Stamp Duty[/th_column] [/table_head] [table_body] [table_row] [row_column]First £125,000[/row_column] [row_column]0%[/row_column] [/table_row] [table_row] [row_column]£125,001-£250,000[/row_column] [row_column]2%[/row_column] [/table_row] [table_row] [row_column]£250,001-£925,000[/row_column] [row_column]5%[/row_column] [/table_row] [table_row] [row_column]£925,001-£1.5m[/row_column] [row_column]10%[/row_column] [/table_row] [table_row] [row_column]£1.5m+[/row_column] [row_column]12%[/row_column] [/table_row] [/table_body] [/table]

For example if you buy a property for £275,000 you will pay a total of £3,750 in stamp duty which equates to 1.36%. Under the old regime you would have paid £8,250 at 3% on the whole lot.

When should you start preparing your company for Auto-Enrolment?

Auto Enrolment, Business, Pensions
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When should you start preparing your company for Auto-Enrolment?

Whether you want to set up pensions for your employers or not, Auto-Enrolment is here to stay.  The question is not if but when should you start preparing to set up a workplace pension for you company.

The Pensions Regulator (TPR) recommends that companies should start preparing with 18 months to go until your staging date. So far with the companies I’ve spoken with it looks like more and more are waiting to the last minute.  Business is tight and there seems to be no time to spare for the inevitable.

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The simple answer is the sooner the better.

The more time you have to prepare the better your pension solution will be. Remember automatic enrolment is more than a pension problem.  It is likely to involve your accounts department (or Accountant) and HR before you even get to the pension solution.  I’ll stick to the pensions issue for now.

If you take the time to prepare and analyse your workforce properly you may be able to save a small fortune by categorising your workforce appropriately.  Ultimately though my experience so far is that many employers are going to try and save a few pound by going down the DIY route by playing eeney meeney miney mo with pension providers.

As long as you fulfil your Auto-Enrolment obligations, right?.. Wrong!

In 5-10 years most of the Northern Ireland workforce will have been auto-enrolled into their company pensions. At first many won’t have a clue what they have got and many of them won’t care.  After a few years workers will get educated, not only with what they have got but what their friends have got at your competitor down the road.

If you want to be the company everyone wants to work for, a good pension scheme is going to be high on the list of criteria.

Check out our 5 Top Tips For Employers On Auto Enrolment.

If you would like to make sure your company remains ahead of the competition then give us a call on  02895 815000.  We will work with you and your team to make sure you get the best workplace pension solution for your company’s future.

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The End is Nigh… well the end of the tax year that is

Business, Financial Planning, Investments, ISA, Pensions, Savings, Tax Planning
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The End is Nigh… well the end of the tax year that is

Last minute tax planning is less than ideal but it’s better than no tax planning.  Every year we all get our tax allowances and every year we get the same warning before April 5th… use it or lose it.

The End is Nigh_1038x460

What are the tax allowances for this year?

I’m going to limit this post to the main two tax allowances, Pensions and ISAs. Simply because for most of the population these are more than enough to cover our financial planning needs.

ISA Allowances 2013/14 & 2014/15

Up to the 5th April 2014 you can invest up to £11,520 in ISAs of which £5,760 can be invested in a Cash ISA. Remember there is now carry forward of unused allowances with ISAs.  From 6th April your annual ISA allowance will increase to £11,880 with a maximum of £5,940 in cash.

For those who have a little more to invest and want to create a fund for their child there are allowance for Junior ISAs and Child Trust Funds as detailed in the table below.

2013-14

2014-15

Individual Savings Account (ISA) subscription limit
   Overall limit  £        11,520  £        11,880
   of which cash  £          5,760  £          5,940
   of which stocks and shares  £        11,520  £        11,880
Junior ISA subscription limit  £          3,720  £          3,840
Child Trust Fund (CTF) subscription limit  £          3,720  £          3,840

Pension Allowances 2013/14 & 2014/15

Up to the 5th April 2014 you can invest up to the lower of 100% of your gross earnings or £50,000 in a registered pension scheme.  From 6th April your annual pension allowance will reduce to £40,000 however carry forward is allowed under certain rules.

Although it won’t affect most of us it’s important to remember that there is a lifetime allowance to consider.  This is being reduced from £1.5m to £1.25m from 6th April 2014.

Again for those with a little more to invest there are children’s allowances available.

Beware the Tax Dog

Remember that just because it is tax efficient doesn’t necessarily mean it’s the most suitable investment for you or your objectives.  Think carefully about what you want to achieve before making any investment.  Obviously as a Financial Planner I am going to recommend getting advice but if you are in any doubt on how to proceed then get in touch on 02895 815000.

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What you need to know about the Autumn Statement 2013

Business, General, Help To Buy, Mortgages, Pensions, Savings
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What you need to know about the Autumn Statement 2013

Income

The income tax personal allowance will rise to £10,000 in April 2014 as expected and will rise in line with inflation from 2015/16.  Inflation will be measured by the Consumer Prices Index (CPI) in this context.

From April 2015, a new transferable tax allowance will be made available for married couples and civil partners who are basic rate taxpayers.  This will enable people to transfer £1,000 of their personal allowance to their respective partner.

Benefits

A new welfare spending cap is to be introduced in 2014, although this will not include the cost of providing State pensions or Jobseeker’s Allowance.

Those claiming benefits aged 18-21 will need to demonstrate basic English and Maths, take skills training or they will risk losing their benefits.

Benefit claimants who are out of work for longer than six months will have to start a traineeship; do work experience or a community work placement rather than risk losing their benefits.

Some change is always good

Pensions

The Basic State Pension will rise by £2.95 per week in April 2014, meaning a single pensioner will now receive £113.10 per week.

Plans were announced to increase the state pension age to 68 in the mid-2030s and to 69 by the late-2040s, based on the latest life expectancy figures.

For those with sizeable pension pots there has been no change to the way GAD rates are calculated for Income Drawdown.

Savings & Investments

The Annual Allowance for Individual Savings Accounts (ISAs) will rise to £11,880 in 2014/15 of which £5,940 can be invested in cash.

Junior ISAs and Child Trust Fund (CTF) limits will also increase to £3,840 per annum.

In a drive to encourage funds to locate in the UK, Exchange-Traded Fund (ETF) stamp duty will be abolished.  This could save investors 0.5% on domiciled ETFs next year.

Mortgages

It was announced that two more lenders, Aldermore and Virgin, are expected to join the Help to Buy scheme in December 2013.

Businesses

From April 2015 employers will no longer have to pay employer National Insurance contributions for 16 to 21 year old employees, a potential saving of £500 for each employee on £12,000 per annum.

The business rate relief scheme for small businesses will be extended for a further year and end in April 2015. Additionally, the planned rate increase for all business premises will be capped at 2% from 2014.  A discount of £1,000 will be available for some small businesses and a 50% business rates discount will be available for those taking on vacant units.

Taxes

Importantly for commuters the planned fuel duty rise next September of 2p a litre was cancelled, that’s as good as we can hope for in terms of fuel duty.

From April 2015 foreign residential property owners will pay capital gains tax (CGT) future gains on the sale of UK property.

We already mentioned the removal of stamp duty on the purchase of ETFs in the Savings & Investments section.

The Autumn Statement also contained a package of five measures to address tax avoidance and tax evasion.

5 reasons business owners should consider a SIPP to buy commercial property

Business, Pensions, SIPP
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5 reasons business owners should consider a SIPP to buy commercial property

A Self Invested Personal Pension or a SIPP can purchase almost any form of commercial property depending on your SIPP provider’s own rules. The most common commercial property to be placed inside a SIPP is a Business Owner or Owners trading premises.  SIPP providers are particularly keen on this type of property as the business owners are also the tenants they have a vested interest in the property.

There are plenty of good reasons to consider SIPPs for your commercial property purchase but here are 5 of the best:

 SIPP Owned Commercial Property

1. To Save Tax

No-one wants to pay tax and there are plenty of good legitimate ways to reduce your tax bill, one of which is using a SIPP to purchase your trading premises.  Once the property is held within a SIPP the company will pay a market rent to the SIPP which is a tax deductible expense.  Within the SIPP itself the rent is received free of income tax.

When you sell the commercial property there will be no CGT payable and potentially no IHT on death and this makes buying your trading premises through your Self Invested Personal Pension incredibly tax efficient

2. Ability to raise funds

Getting commercial finance is not a straight forward process and requires a minimum deposit of around 30%. This leaves a loan-to-value of 70% and would still be considered quite high risk especially in Northern Ireland given the last few years.

A SIPP can borrow up to 50% of net scheme assets, so if you have £200,000 in your SIPP you can therefore buy a commercial property for around £285,000 after expenses (£100,000 of which would be a mortgage). In this circumstance the mortgage is restricted to 35% which makes the commercial mortgage quite low risk for the bank.

Not only that but SIPPs are not restricted in who they borrowing from, only that this must be on commercial terms, as such you can borrow the extra funds from a Business Angel, a friend, a family member even your own Business.  This affords you a lot of flexibility in terms of your borrowing.

3. Pooled Investments

SIPPs can club together with other SIPPs held with the same provider, businesses and/or individuals to purchase commercial property. This provides added buying power, for instance a combination of 10 SIPPs, businesses or individuals with £100,000 each could buy a property for £1.5 million (£500,000 mortgage)

4. Future Development

The funds within the SIPP will build up over time from both contributions and on-going rental and along with investment growth this could lead to a considerable pot of money.  Not only can the SIPP pay for development and improvement works to the commercial property, it can also be registered for VAT to claim the VAT costs back.

5. Asset Protection

We all know someone whose business has gone bust in the recession and it certainly brings home the risks involved with running your own business.  If your commercial property is owned by your SIPP then it is ring fenced from creditors in any future Bankruptcy proceedings giving you an extra layer of security.

 

Disadvantages

Of course there are disadvantages to investing in a commercial property through a SIPP and these must also be considered before making a decision.  As such here are 5 disadvantages of investing in commercial property through a Self-Invested Personal Pension:

  1. As the Property will be legally owned by the SIPP, business owners can feel they have a lack of control
  2. The property cannot be used as collateral for future loans to the company
  3. As the company are will be the tenants it will have to pay a market rent
  4. On retirement of the investor and if the SIPP wishes to raise finance the property will need to be valued incurring additional costs for the SIPP
  5. The SIPP will lack diversification if the property represents the main asset of the SIPP

Image courtesy of VGB Studios on Flickr

THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE COMMERCIAL MORTGAGES.

THE FINANCIAL CONDUCT AUTHORITY DOES NOT PROVIDE OVERSIGHT OF TAXATION. LEVELS AND BASIS OF TAXATION MAY CHANGE AND ARE DEPENDENT ON PERSONAL CIRCUMSTANCES.