Budget 2013

George Osborne budget

George Osborne revealed his mid-term budget on Wednesday 20th. Here is our summary of the most relevant points for your future financial planning:

Inheritance tax – As mentioned in our blog recently, the amount of an estate that can be passed to the next generation tax free will remain at £325,000 until April 2018 (anything above being taxed at 40%). Another 5,000 estates are expected to become taxpaying estates by this time. If this is you, careful use of allowances today can reduce your bill.

State pension – this will rise by 2.5% to £110.15 per week. The Basic State pension and State Second Pension will be combined in April 2016 to a flat £144 per week (in today’s money). This should make it easier to plan for the future.

Pension drawdown – From Tuesday 26th March capped income drawdown rates will rise from 100% to 120% of GAD. While this could be useful for those of you that need more income, please be aware there is no guarantee your pension fund can sustain this. GAD is also set to be overhauled which should lead to good news in the future.

Capital gains tax allowance – the amount of gains that you can make on disposal of assets before having to pay tax increases to £10,900 for 2013/14. The rate remains at 18% for non and basic rate taxpayers, 28% for higher rate taxpayers.

ISA (tax free savings vehicle) – The stocks and shares ISA allowance will be £11,520 and the cash ISA allowance will be £5,760 in 2013/14. Please contact us for details of how you could use these depending on your circumstances. If you are yet to use your £11,280 allowance for 2012/13 contact us ASAP!

Income Tax – The personal allowance, currently £8,105, will increase to £9,440 in April this year and then £10,000 in April 2014.

Pension allowances will be cut next year – Personal annual contribution allowance down from £50,000 to £40,000 and lifetime allowance down to £1.25m.

Abusive tax avoidance – The Government will publish a report on how it will tackle tax avoidance and evasion this week. Needless to say, any tax mitigation strategies recommended by OAM are not abusive and are a key part of good financial planning.

That concludes our non-exhaustive list of points to be taken from Wednesday’s budget. The above points are based solely on our understanding of intended HMRC rules and should not be used to influence planning decisions on their own.

If you are a current client and require any clarification on how the above might affect you then please get in touch.

If you are not, then we would be happy to give you a second opinion on any aspect of your planning. There’s never been a better time to contact us.

Malcolm Stewart

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Working for the Government?

I had a friend that years ago had worked out that with his given rate of tax and National Insurance, he was effectively working for the Government until mid afternoon on a Tuesday before he made any money for himself.

Given our current levels of tax, I wonder what he’d make of things now?

He could well be working until late Thursday with top rates of tax being 50%.

We know that reducing the tax burden is one of the 5 key concerns of our clients and that this has never been more acute. I hear from people on a daily basis that they are looking for ways to pay less tax.

Interestingly, they always want to look to the esoteric methods rather than the tried and tested.

So please speak to your adviser and make sure you’re maximising your ISA allowance, pension contributions, CGT annual exemptions, IHT allowances – use a relevant life policy through your limited company if your able and save corporation tax on your life cover premiums.

If you want more, then certainly look at the improved tax breaks Venture Capital Trusts & Enterprise Investment Schemes offer since the last budget (be well aware of the higher levels of risk that might be involved here.)

In short, pay your tax but make sure you take full advantage of the ways you can pay less.

I’ll be discussing the ways you can use financial planning tools to save tax in more detail in the coming weeks.

Call me anytime to discuss this further or any other aspect of your financial planning needs.

Roland Oliver

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