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Antony Devine
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Fine-n-dandy, living in Thorpe Bay Essex nr. Southend with lovely wife, daughter & son + small dog.
Fine-n-dandy, living in Thorpe Bay Essex nr. Southend with lovely wife, daughter & son + small dog.

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High Earners – Time is Running out to Maximise Pension Funding and Guarantee your Tax Relief.

http://bit.ly/1TIey4D
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High Earners – Time is Running out to Maximise Pension Funding and Guarantee your Tax Relief.

http://bit.ly/1TIey4D
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We are whole-of market (i.e. fully independent) advisers based in London SW1 (Victoria) and Southend-on-Sea Essex, and our clients are mainly from around Greater London and Essex.
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We are whole-of market (i.e. fully independent) advisers based in London SW1 (Victoria) and Southend-on-Sea Essex, and our clients are mainly from around Greater London and Essex.
Devine Financial Management
Devine Financial Management
london.cylex-uk.co.uk
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The Money Advice Service have some decent short videos on the basics of financial planning. 
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July 2015 Budget – what this means for you

The following is reproduced by kind permission of Standard Life’s technical consulting team. I’m holding a week of free consultations Monday July 27th-Friday July 31st, so if your finances need some analysis and guidance, give me a call on 0345 013 6525 to set up an appointment:

Two bites at AA as PIPs are aligned with tax years from 2016

As a small step towards re-simplification of the pension rules, from 6 April 2016 all pension input periods (PIPs) will be aligned to the tax year. And it won’t be possible to change them.

But related transitional rules potentially create an extra £40k annual allowance (AA) for the 2015/16 tax year, giving some savers two bites at the AA cherry this year.

As ever, the devil is in the detail. Look out for our article and case study for insight on how to help your clients make the most of this change.

AA cut for high earners from 2016 – get it while you can

Those with ‘adjusted income’ over £150k will have their annual allowance (AA) cut from the 2016/17 tax year, creating a ‘get it while you can’ pension funding window this tax year.

The standard £40k AA will be cut by £1 for every £2 of ‘adjusted income’ over £150k in a tax year. The maximum AA reduction is £30k, giving those with income of £210k or above a £10k AA. Carry forward of unused AA will still be available, but only the balance of the reduced AA can be carried forward from any year where a reduced AA applied.

The ‘adjusted income’ the £150k test is based on is broadly the total of:

the individual’s income (without deducting their own pension contributions); plus
the value of any employer pension contributions made for them.
The reduced AA won’t however apply where an individual’s net income for the tax year plus the value of any income given up for an employer pension contribution via a salary sacrifice arrangement entered into after 8 July 2015, is £110k or less.

Pension tax framework under review

The Government has kicked off a fundamental review of the pension tax framework to ensure it remains fit for purpose, and sustainable, for a changing society. In a consultation launched today, HM Treasury is seeking views on a range of very open questions around what changes (if any) would:

reduce complexity and increase transparency;
make best use of available tax reliefs;
increase engagement and aid retirement planning.
This welcome consultation raises the prospect of radical reform to restore the vision of a genuinely ‘simplified’ retirement saving framework. The consultation closes on 30 September.

Jamie Jenkins, Head of Pensions Strategy, comments ‘Pensions tax relief was ripe for review.
Despite some suggesting that the industry was resistant to any change in this area, quite the contrary, we have been calling for a more fundamental review rather than constant tinkering. This consultation provides us with a great opportunity to simplify the pensions tax system once and for all.‘

Other pension news

Lifetime allowance: The proposed reduction in the lifetime allowance from £1.25M to £1M will go ahead as planned from the 2016/17 tax year. It will be indexed in line with CPI from 2018/19. Details are awaited of a new transitional protection option for those with existing pension savings already over £1M who would otherwise face a retrospective tax hit.
Death tax: As promised as part of the ‘freedom and choice’ reforms, all pension lump sum death benefits paid after 5 April 2016 in relation to a death at age 75 or above will be taxed as the recipient’s income (removing the flat 45% tax that applies in the 2015/16 tax year).
Salary sacrifice: Despite wide pre-Budget rumours, there are no changes to salary sacrifice rules. The Government will, however, be monitoring the growth of such schemes and their impact on tax take.
Transfers: To improve consumer access to ‘freedom and choice’, the Government will consult about how to improve the pension transfer process and, potentially, cap charges for over 55s.
Annuities: The ability for pensioners to sell their annuities will be delayed until 2017. This allows more time to ensure the related consumer safeguards are in place. More details will be announced in the autumn.
State Pensions: The Chancellor has reaffirmed the Government’s commitment to retaining the ‘triple lock’ State pension increase promise, giving more security to older people.
Individual tax allowances

Both the personal allowance and higher rate income tax thresholds will increase over the next two years as follows:

2016/17:

Personal Allowance increases to £11,000;
Higher rate threshold increases to £43,000.
A basic rate taxpayer will be better off by £80. Higher rate taxpayers will be better off by £203.

2017/18:

Personal Allowance increases to £11,200;
Higher rate threshold increases to £43,600.
A basic rate taxpayer will be better off by a further £40, and higher rate taxpayers by £160.

These increases are on the way to meeting government pledges to raise the personal allowance to £12,500 and the higher rate threshold to £50,000 during this Parliament.

New dividend allowance

The system of dividend tax credits will be abolished from April 2016. It will be replaced by a new tax free dividend allowance of £5,000. Dividends in excess of this allowance will be taxed at the following rates, depending on which tax band they fall in:

Basic rate – 7.5%;
Higher rate – 32.5%;
Additional rate – 38.1%.
This means that from April 2016, a basic rate taxpayer could have tax free income of up to £17,000 pa when added to the personal allowance of £11,000 and the new ‘personal savings allowance’ announced in the Spring Budget of £1,000. Higher rate taxpayers could have up to £16,500 (as the personal savings allowance is restricted to £500 for these individuals).

Certain individuals may also have savings income falling into the £5,000 savings rate ‘band’, currently taxed at 0%. There is no mention of any change to this band, in which case certain individuals may have tax free income of up to £22,000, depending on the sources of their income.

Making full use of these new allowances can make savings last longer in retirement and potentially leave a larger legacy for loved ones. And strengthens the case for holistic multiple wrapper retirement income planning.

Inheritance Tax: family home nil rate band – but not yet

The Government will introduce a new IHT nil rate band of up to £175,000 where the family home is passed to children or grandchildren. This is in addition to the current nil rate band of £325,000 which has been frozen since 2009 and will remain frozen for the next 5 tax years, until the end of 2020/21.

Who will benefit
The extra nil rate band will be fully available to anyone who:

passes the family home to their children or grandchildren on death; or
or had a family home, then downsized (passing on assets of equivalent value to children/grandchildren); and
has an estate below £2M.
However, the full £175,000 won’t be available until 2020/21. The allowance will first become available in 2017/18 at £100,000 and increase to £125,000 in 2018/19, £150,000 in 2019/20 and £175,000 in 2020/21. It will then increase in line with the Consumer Price Index (CPI).

Like the existing nil rate band the new property nil rate band can be transferred between spouses or civil partners. This means a married couple could pass £1M in 2020/21 to their children tax free on death provided the family home is worth at least £350,000, saving £140,000 in IHT.

Who may miss out
But not everyone will benefit from the additional IHT free allowance. Anyone with a net estate over £2M will begin to see their property nil rate band reduced until it is completely lost once the estate is over £2.2m (2017/18) £2.25m (2018/19), £2.3m (2019/20) or £2.35m (2020/21).

It will only apply to transfers to children and grandchildren. Meaning those without children will miss out. And it is not possible to use the exemption for lifetime transfers which may discourage some clients from passing on their wealth during their lifetime.

Clients who could benefit from the property nil rate band may need to revisit their existing wills to ensure they continue to reflect their wishes and remain as tax efficient as possible.

ISA changes

Replacing withdrawals
The proposed changes to ISA, allowing savers to dip into the savings and replace them without it affecting their annual subscription limits, will go ahead from 6 April 2016.

The new contributions would have to be paid within the same tax year as the withdrawal for it not to be counted. These new flexible funding rules will only apply to cash ISAs and any cash element within a stocks and shares ISA. However, it is now possible to move ISA holdings between cash and stocks and shares without restriction, so clients in stocks and shares will be able to benefit provided they move into cash first.

Help to Buy ISA
First time home buyers will get help from the Government when saving to get their foot on the property ladder. The Help to Buy ISA will be available from 1 December 2015.

The scheme will provide 25% tax relief on savings up to £12,000. So someone saving the full £12,000 would see the government add a further £3,000 to their savings, giving them £15,000 towards the purchase of their first home. This tax relief isn’t given at the point of saving in the same way as a pension contribution, but is instead added when the saver buys the home.

The new scheme will be a form of Cash ISA and, in line with current rules, it won’t be possible to subscribe to two separate Cash ISAs (Cash & Help to Buy) in the same tax year.

Savings will be limited to a maximum single initial premium of £1,000 and regular savings of £200 each month. And to get the Government bonus, property values can be no more than £250,000 (£450,000 for properties in London).

Non Doms – deemed domicile after 15 tax years, applies to all taxes

‘Non-doms’ are individuals who, although resident in the UK, can legally claim that another country is their home (‘domicile’). This means that they can access some tax benefits not available to those who are resident and domiciled in the UK.

New rules apply from April 2017 to restrict this. Individuals will become ‘deemed domicile’ (taxed in the usual way that UK domiciled residents are taxed) more quickly – after 15 tax years spent in the UK instead of 17. And ‘deemed domicile’ will apply to more taxes – income tax, CGT and IHT, instead of just IHT.

Excluded Property Trusts used with offshore bonds can continue to benefit from an advantageous IHT treatment. But individuals with their affairs set up to take advantage of the remittance basis may wish to review their investments to ensure this will still be tax efficient under the new regime.

Source: Standard Life Technical Consulting – “Our team of technical experts has more than 300 years experience in the financial services industry. This experience, along with relevant qualifications, ensures we have the skills and knowledge to deliver this invaluable service to you.” 
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