Many of you will know that today (06th April 2011) is the start of a new tax year for individuals and this brings with it the renewal of many tax allowances. Happy New Year to you all!
In most tax years there is sometimes a scramble at the end of the tax year to ensure that as many tax allowances are used where available, and, most importantly, where affordable. Some clients prefer to use these allowances at the beginning of the tax year, rather than waiting until the end, to try and enjoy the full tax year of benefit which starts on the 06th of April.
I have taken this opportunity of listing some of the allowances that you may want to consider in the coming time as we approach Easter and, of course, the Royal Wedding towards the end of April 2011.
- Increase in ISA investment allowances 2011/2012
The ISA allowance for this new tax year (2011/2012) is £10,680 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 £5,340 in deposit/ cash holdings, still leaving a balance of £5,340 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). It is now proposed that the annual ISA allowance will now increase each year in line with the Retail Prices Index (RPI).
As noted in a previous blog, a new Junior ISA of £3,000 has been proposed (initially for those without a Child Trust Fund) is in consultation. This may be available from November 2011.
- Capital Gains Tax allowance (CGT)
This is an allowance which allows a tax free gain to be made in a tax year from the sale or transfer of an asset, such as shares or unit trusts, up to a limit in the new tax year of £10,600. Some assets, such as your main residence and your personal car are exempt from this tax.
Many clients, especially higher rate tax payers, find this allowance valuable. If a gain is made above the exemption amount, the gain is then taxed at a flat rate of 28%.
- Annual Gift allowance
To save some inheritance tax (IHT), many clients like to use their annual gift allowance of £3,000. If they did not use last year’s allowance, they can go back one year and use this allowance, making a total gift of £6,000. With the Royal Wedding nearly upon us, it should also be noted that a gift on marriage by a parent to a child of up to £5,000 is also exempt.
The nil rate inheritance tax band of £325,000 currently remains the same in the new tax year 2011/2012. Thereafter, an estate is taxed at 40%. Married couples can combine their allowances together to a total level of £650,000, having taken into account any potentially exempt transfers (PETs) in the past or gifts to others on death.
- Changes in pension contribution rules
In this new tax year (2011/2012) there are many changes in pension legislation and part of these changes have been noted to you in previous newsletters. One example is the change in the level of pension contribution that can be made to a new level of £50,000 gross in the tax year.
There is also a new three year carry forward facility being introduced and if you would like to review your pension contribution planning then please let me know and we can undertake a review based on your circumstances accordingly.
Summary
As you would expect, this is not an exhaustive list of the changes in the new tax year. Because we are all different, any individual needs for saving (both for yourself and for children/grandchildren), 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.
CHURCHOUSE is a Trademark of Churchouse Financial Planning Limited
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