At Chapters Financial Limited, we like to keep our clients and enquirers informed of topical issues and topics that bear relevance to their financial planning. The May 2013 Newsletter has just been produced and will shortly be made available to our clients and contacts in the next few days.
In this blog, I have provided a flavour of what is included, amongst other topical issues, for your consideration.
If you would like to consider the potential for this planning further then please contact the team at Chapters Financial.
Inheritance Tax & Charitable Giving
We are pleased to have received many enquires seeking advice on ways that inheritance tax can be saved. As a highly topical subject, many clients and enquirers also consider charitable giving as a way of saving inheritance tax, both through their lifetime and through their wills. We have introduced a new Webpage entitled Charitable Giving, which details the opportunities further. If you would like to know more or to consider ways of supporting local organisations in an efficient manner then please contact Keith Churchouse.
Auto-Enrolment/ Workplace Pensions reminder
The implementation of Auto-Enrolment with the use of Workplace Pensions is well under way for many employers, starting with the largest employers and moving in company size to the smallest by 2016/2017. We have received many enquiries from Business owners on this subject and are well placed to provide advice and service in implementing the relevant requirements. If you would like to know more or to know when your business’s Staging Date is then please let us know.
The New Financial Conduct Authority
As noted in previous Newsletters, the Financial Services Authority has now ended and has been replaced by the new Financial Conduct Authority at the beginning of April 2013. We are pleased to have met with the new regulator in early April following their transition and we welcome this change and look forward to their work into the future.
New Chapters Financial APP
At Chapters Financial Limited, we try to keep ahead in terms of our communications and the way these can be received. Many of you will have visited our website to access Blogs, Podcasts, Press Comment and other information. This information can also now be accessed by our new APP, suitable for Computer tablets and Smartphones. Please see our website to download your additional access to news, updates and information from Chapters Financial Limited.
No individual advice has been provided during the course of this blog. If you would like to receive individual advice on the topics above, or receive our regular newsletter, then please contact the team at Chapters Financial Limited on 01483 578800.
Keith G. Churchouse
FPFS
ISO22222 Certified Financial Planner
Director and Financial Planner
Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.
The Financial Conduct Authority does not regulate Tax advice.
Tuesday 30 April 2013
Monday 8 April 2013
Personal Tax Allowance Trap
As you may be aware, one of the targets within the current coalition government was to raise the personal allowance to a limit of £10,000 within this parliamentary session. This process has been accelerated and will now come into force as from 06 April 2014. This sounds as though it is great news for everyone, as it appears as if no one will pay any tax on the first £10,000 of income in the tax year 2014/15. However, if an individual receives income in excess of £100,000 in the tax year then the personal allowance is reduced by £1 for each £2 of income in excess of £100,000.
60% Effective Income Tax Rate
So what does this mean for the people with income in excess of £100,000? It means that they have an effective income tax rate of 60% on any income between £100,000 and £120,000 in the tax year 2014/15 (between £100,000 and £118,880 in tax year 2013/2014). This is due to the 40% of higher rate income tax applied at this level, plus the loss of 20% of effective basic rate band allowance.
Penalty or Opportunity?
How can this be when the additional rate of income tax is meant to be 45% (as of 06 April 2013)? Surely a 60% effective rate of income tax is very punitive? Yes, I would have to agree that it is. So what can anyone do about this and try and mitigate this harsh effective tax band? The most immediate and effective option is to consider personal contributions into a pension scheme. If the spare capital and enough headroom within an individual’s maximum annual pension contribution allowance (£50,000 in 2013/2014) are available, then contributing an amount to effectively reduce one’s income to a level of £100,000 (or closer to it) for the tax year could be an extremely effective method of mitigating, and in fact capitalising on this effective tax rate band of 60%.
Summary
If this situation applies to you and you do have annual income in excess of £100,000, have you considered the benefits of engaging a professional Financial Planner to consider your options at these threshold points?
No individual advice has been provided during the course of this blog. The use of allowances and contributions into pensions should be planned for carefully and if you would like to receive individual advice on the topics above, then please contact the team at Chapters Financial Limited on 01483 578800.
Simon Hewitt BSc (Hons) Dip PFS
Financial Planner
Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.
The Financial Conduct Authority does not regulate Tax advice.
60% Effective Income Tax Rate
So what does this mean for the people with income in excess of £100,000? It means that they have an effective income tax rate of 60% on any income between £100,000 and £120,000 in the tax year 2014/15 (between £100,000 and £118,880 in tax year 2013/2014). This is due to the 40% of higher rate income tax applied at this level, plus the loss of 20% of effective basic rate band allowance.
Penalty or Opportunity?
How can this be when the additional rate of income tax is meant to be 45% (as of 06 April 2013)? Surely a 60% effective rate of income tax is very punitive? Yes, I would have to agree that it is. So what can anyone do about this and try and mitigate this harsh effective tax band? The most immediate and effective option is to consider personal contributions into a pension scheme. If the spare capital and enough headroom within an individual’s maximum annual pension contribution allowance (£50,000 in 2013/2014) are available, then contributing an amount to effectively reduce one’s income to a level of £100,000 (or closer to it) for the tax year could be an extremely effective method of mitigating, and in fact capitalising on this effective tax rate band of 60%.
Summary
If this situation applies to you and you do have annual income in excess of £100,000, have you considered the benefits of engaging a professional Financial Planner to consider your options at these threshold points?
No individual advice has been provided during the course of this blog. The use of allowances and contributions into pensions should be planned for carefully and if you would like to receive individual advice on the topics above, then please contact the team at Chapters Financial Limited on 01483 578800.
Simon Hewitt BSc (Hons) Dip PFS
Financial Planner
Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.
The Financial Conduct Authority does not regulate Tax advice.
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