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Use it or lose it - Tax planning opportunities!!!

Posted on February 17, 2016  


Do you know that significant changes are forecast to be announced in the forthcoming Budget on Wednesday March 16th and some may take place with immediate effect?

In the following few weeks you should consider your position in the light of the forthcoming changes in the pensions and investment arena.

Pensions 1:
Proposed Changes in pension tax relief: the introduction of a flat rate of pension tax relief for all investors of between 25% and 33%.

RESULT: Good news for basic tax payers. Bad news for higher rate tax payers!

ACTION: All Higher Rate Taxpayers should bring forward their planned pension contributions to before the Budget announcement and save themselves a lot of money.

ACTION: All Basic Rate Taxpayers should wait to contribute into their pension plans UNTIL AFTER the Budget announcement to obtain a more valuable possible enhanced level of tax relief.

Pensions 2:
Reduction in the Lifetime Allowance Cap from £1.25 to £1 million

RESULT: Bad news for any prudent saver ( this will also affect and punish middle managers, like senior nurses, small business owners etc.) who have assiduously put aside funds for a later more comfortable retired life.

ACTION: important to assess your various pensions and apply for Fixed Protection if you think your total invested pension pot will higher than £ 1 million by the time you retire.

Pensions 3:
Reduction of annual Allowances to between £40,000 and £10,000 depending on your tax rate. All investors currently have an annual £40,000 cap on the amount they can invest into their pension. From April, those earning from £150, 000 to £210,000 will have a gradually reducing allowance down to £10,000.

ACTION: Those high earners should try to make use of their current £40,000 annual allowances and any additional allowances for the last 3 years.


JUNIOR ISA: £4,080

ACTION: Make USE of your annual tax allowances.

Dividend Income:
From April 2016, the government is changing the way dividend income is taxed. How will this affect you?

What's changing?
From 6 April 2016, the 10% Dividend Tax Credit is being scrapped and will be replaced by a new Dividend Allowance of £5,000. This means the first £5,000 of any dividends will be tax-free for all investors, except trustees, with any amount over this being charged at the following rates:

Non-taxpayers: 0%
Basic rate taxpayers: 7.5%
Higher rate taxpayers :32.5%
Additional rate taxpayers: 38.1%

ACTION: This will definitely affect all the following:

  • Business owners paying themselves dividends from their company
  • Investors holding UK stocks directly that receive dividends
  • Individuals and trustees invested in mutual funds that provide dividend income

An urgent assessment of your derived income is necessary!

Do please give us a call if you feel you are concerned about any of the areas raised above and would like to discuss them.

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