It’s budget 2011 day (23 March 2011) and all things fiscal!

It’s budget 2011 day (23 March 2011) and all things fiscal will be on the agenda for many of us today.

For most, whether they be business owners or individuals, smoker or drinker, driver, low earners or higher earners, today’s announcements are likely to catch up with us all in some format in the near future. There is always much speculation of what may be changed, put in place, deferred or reduced, and sometimes this speculation is correct, but often not. It has to be noted that some of this speculation is driven by those that may have a motive for the success of their campaign to stop or reduce a tax, as an example.

Some of the headline taxes that many will focus on today may be:

Personal Taxes

• Income Tax


• Capital Gains Tax (Currently £10,100 in 2010/2011)


• Inheritance Tax (Current nil rate income tax band at £325,000/ £650,000 joint for married couples)

Business Taxes

• Corporation Tax (Details of this and the new tax year can be found at the HMRC website here: http://www.hmrc.gov.uk/rates/corp.htm )


• National Insurance Rates

Indirect Tax

• Value Added Tax (VAT) currently 20% (current business threshold £70,000)


• Fuel Tax


• Tobacco & Alcohol tax

One other significant way that the pound in your pocket can be effected is with the allowances that are sometimes allowed before you pay tax, such as the personal allowance (currently £6,475 (Below age 65) 2010/2011) which we know is increasing in the new tax year (starting 06 April 2011) to £7,475 income in the year. This £7,475 threshold has a limit of £100,000 before it starts to reduce. More details on the Income Tax allowances for the new tax year 2011/2012 (in comparison to previous years) can be found at the HMRC website here: http://http://www.hmrc.gov.uk/rates/it.htm

Other tax efficient savings plans, such as ISA’s (current allowance 2010/2011 is £10,200, however this is increasing to £10,680 in 2011/2012) and pension contributions may also be affected, although much work has already been undertaken on the current pension regime in the new tax year, as already noted on these Churchouse Financial Planning web pages and also indicated on the HMRC website here: http://www.hmrc.gov.uk/rates/pensionsschemes.htm

Today will be an interesting day, with many speculating that it will be a pro business day, however, the UK purse does not have much to give away. These comments are made prior to the budget announcement and may be subject to change. We will plan to keep our website updated with any changes of significance over the coming months that may affect your financial planning.

There is usually a lot involved in any financial planning and we can go into detail with you when you enquire. We are all different and the needs for saving, retirement, investment or pension planning, as examples, will vary, dependent on your individual requirements. Therefore, this article should not be seen or used as individual advice.

This article contains links to websites of which the content has not been approved by Churchouse Financial Planning.

Seek Independent Financial Advice (IFA) for your circumstances.

Keith Churchouse, Chartered Financial Planner
Director of Churchouse Financial Planning Limited

ISO22222 Certified Financial Planner

Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority. The Financial Services Authority does not regulate taxation advice.

Race to the end of the tax year 2010/2011

The ‘starter’s gun’ seems to have been fired and the end of the tax year (05th April) dash seems to have started.

For most financial planners, this is the busiest time of the year with many clients and enquirers focussing on their allowances and effective ways of using them for the tax year 2010/2011 and thinking about the new (and in many cases changed) tax allowances in 2011/2012. 2011 is no different judging by the interest we are experiencing in all things financial planning.

In recent blogs I have covered many of the aspects of financial planning that our readers will want to consider at this time of year. However, as a reminder and ready-reckoner of some of the points that many are contacting us about at this time, you will find an example list below of the points being raised by many:

Individual Savings Accounts/ ISA’s:

As noted in my February blog, the ISA allowance for this tax year is £10,200 in total: This amount can be fully invested in equity type investments (such as stocks/OEICs/Unit Trusts), or, if you prefer, you can put up to £5,100 in deposit/ cash holdings, still leaving a balance of £5,100 available to go into investments. This is usually an annually renewable allowance and you can use your new ISA allowance each year with different providers if you prefer. (ISA rule restriction of one provider of each option per annum).

In the new tax year (2011/2012), the ISA allowance is being increased to £10,680 in total.

Pension Contributions:

Pensions are becoming an ever more topical subject at the moment. With Lord Hutton’s in-depth report yesterday on the ways forward for Public Sector pension schemes and ‘Unisex’ annuity rates being proposed by European Law from December 2012, the next few years are going to busy.

The regulation for ‘Anti-Forestalling’ limits (currently £20,000)will also end in this tax year, with a new ‘ceiling’ for pension contributions of £50,000 being introduced (along with a new additional ‘carry-back’ facility) and the need to purchase an annuity at any point in the future will also end in April 2011.

There are also significant changes proposed to the way that benefits could be made available under Income Drawdown type plans, as detailed in a previous 2011 blog. Pensions, in all their formats, are certainly a topic that I would recommend any investor or retiree/potential retiree takes individual advice on to ensure that they get the best from their financial planning decisions.

Capital Gains Tax/ CGT:

I always think this is a worthy allowance which is a missed opportunity for many. Each individual is allowed to make a gain of £10,100 tax free in this tax year from assets such as Stocks and Shares or Unit Trusts/ OEIC’s. If you have a gain within a portfolio that is worth taking, and you should seek advice on this point, then review your investment before the end of the tax year. If there is a significant gain, you could consider splitting the gain by selling part of an investment holding in this tax year and then using next year’s allowance early in the new tax year (in this example 2011/2012). The current flat rate charge for CGT is 18% and this rises to a flat rate of 28% for higher rate taxpayers.

Bed and ISA-ing:

In line with the use of your Capital Gain Tax allowance, it is possible to combine to allowances. In the example above, if you sell Stocks and Shares, you are not able to re-buy the same asset within 30 days without losing the tax benefit. However, if you sell Stocks and Shares or units in a portfolio and re-buy the same asset straight away under the shelter of an ISA (up to the maximum allowance of £10,200 in this tax year 2010/2011) this is allowed. For those who do not want to invest additional cash into an ISA, but do have a portfolio of assets, this may be an effective way of using up these valuable allowances.

Annual Gift Allowance:

It is possible for an individual to gift away £3,000 in a year and for this gift to fall outside their estate from the date of the gift. If they did not use last year’s allowance, they can go back one year and gift away a further £3,000, a total of £6,000.

Many parents and grandparents contemplate the benefit of this allowance each year. Some, with surplus income, also consider gifting further amounts away, although I would recommend that full professional advice is sought on this issue before proceeding.

Child Trust Funds/ CTFs:

The maximum contribution that can be added to these CTF plans by, as examples, parents and grandparents is £1,200 in total in the year. This may be worthwhile to build benefits for the child owner in the future.

Summary

This is not an exhaustive list, but gives a reasonable indication of what many will be considering as the race to the end of the tax year moves into top gear.

As I have noted in previous blogs, we are all different and your ongoing financial planning strategy will be individual to your needs, such as the use of annual tax allowances. Therefore, this article should not be seen or used as individual advice.

Seek Independent Financial Advice (IFA) for your circumstances. Churchouse Financial Planning Limited can be contacted in Guildford, Surrey on (01483) 578800.

Keith Churchouse

Director of Churchouse Financial Planning Limited, Guildford, Surrey.
ISO22222 Certified Financial Planner & Chartered Financial Planner

Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority. The Financial Services Authority does not regulate taxation advice.

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