Proposed new Junior ISA account/ November 2011

A consultation paper has now been issued to confirm the plans for the new tax efficient Junior ISA account, which is proposed to start from 01 November 2011 and will allow an overall annual contribution limit of £3,000 (proposed not for those without a Child Trust fund/CTF). Full draft regulations can be found at the HMRC website here: http://www.hmrc.gov.uk/budget-updates/march2011/junior-isa-regs.pdf

In part, the proposals for this style of new account is a replacement for the Child Trust Funds (CTFs) and their payments which were allowed for children born between 01 September 2002 and 02 January 2011. After that time, all government contributions to CTFs ceased. Also, any payments that would have been made to disabled and severely disabled children will be channelled to other kinds of support.

The value of the proposed new Junior ISA plan will be locked in for the beneficiary until they reach the age of 18 and then the account will become an adult ISA thereafter. It is anticipated that many of the current providers who offer adult ISA arrangements will expand their range to offer the new Junior ISA option. As with the current standard ISA regime, investment will be able to be made into a stocks and shares arrangement or into a cash /deposit type plan. It is planned that these new ISA limits will be confirmed once the consultation in May 2011 is complete.

Many parents and grandparents may find this of interest for future family savings. We are all different and the 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.

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.

Churchouse is a Trademark of Churchouse Financial Planning Limited

Are ‘Unisex’ Annuity Rates on their way?

The world of retirement planning seems to in a state of transition at the moment with the proposed changes of the coalition government to end the need to purchase an annuity, whilst also introducing an uplift in the death duty on vested pensions from the current level of 35% to an increased level of 55%, such as Income Drawdown plans. I have covered this in greater depth in a previous blog earlier in late January 2011 (called Income Drawdown Policy Review and Proposed Rule Changes on Annuitisation).

European law may now also have an effect of the income available from future retirement funds with the possible introduction of unisex annuity rates from early March 2011. Along with other gender based products based on the sex of the applicant, such as many insurance based products, a ruling from the European Court on 01 March 2011 may see the terms of future contracts change, with varying results dependent on whether you are male or female. My understanding is that their ruling will be based on the argument that the current gender based regime is discriminatory because there is overlap between men and women in the ages to which most people die. Obviously, there are opposing views to this argument and its subsequent studies and the European Court will rule accordingly on 01 March 2011.

This is a multi-billion pound market in the UK each year and many insurance companies and annuity providers are already gearing up for this potential change and the unisex annuity rates from many may change quickly, if not immediately, to meet the new requirements. This may well have an effect on your pension income planning if you are looking at drawing your benefits in 2011. Your Independent Financial Adviser (IFA) should be able to guide you with your individual planning.

As a general suggestion, if this legislation is approved, male annuity rates are likely to fall (some suggest up to 5%) and female annuity rates may rise by approximately 3%. Joint life annuity rates may see a fall of around 1%, as approximate examples, although we will wait to see how providers react. This may see the prevalence of more research by investors into the retirement options available for their pension benefits, such as the use of the Open Market Option (OMO). I have detailed retirement options further on our website here, Retirement Options.

Retirement planning is a complex subject and this article should not be treated as individual advice. Individual advice is only available based on your individual circumstances. Further information, advice and contact details are available at our websites, www.churchouse.com or www.planmypension.co.uk

Keith Churchouse

Director of Churchouse Financial Planning Limited

Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority. www.planmypension.co.uk is a trading name/style of Churchouse Financial Planning Limited.

The changing rules for ISAs in 2011

There have been many changes to the ISA allowances in recent years.

No new changes have been proposed for this tax year. This allows a maximum contribution of £10,200 to be made (2010/2011). If you chose, you can split this contribution, with £5,100 being made into a Cash ISA and £5,100 going into an equity type ISA. You can use one provider for each in a year and can vary providers each year if you require. The terms Mini & Maxi ISA’s have now been abolished.

ISA contribution allowance increase 2011/2012

In the new tax year 2011/2012, the new ISA allowance is proposed to increase from the current level of £10,200 to a new level of £10,680 from April 2011. This is an increase in the allowance with RPI (the Retail Prices Index) and it is now proposed that this limit will increase each year

New Junior ISA, October 2011

For further information, a Junior ISA (for those up to the age of 18) will be available from October 2011. At the time of writing, the maximum contribution limit is yet to be decided. Many parents and grandparents may find this of interest for their family in the future.

Review

Through the changes that have occurred with ISA regulations in recent years, it is always worthwhile reviewing your existing investment strategy (including ISA’s) , your asset allocation and your need for income, capital growth or both. This will usually be based on your circumstances and your attitude to investment risk. A guide to investment risk can be found here: http://www.churchouse.com/risk.php. ISA investment may not be suitable for everyone.

As I hope you can see from the above, there is a lot to consider both in the months of February and March 2011 and the forthcoming tax year (2011/2012). With this in mind, it should be noted that 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
Chartered Financial Planner & ISO22222 Certified Financial Planner

Director of Churchouse Financial Planning Limited
Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority

February 2011….a month for financial planning?

February is usually a month for both snow and end of year tax planning. Hopefully we will avoid the former of these two this year, especially after the deluges in December, which may leave more time for the latter, i.e. effective financial planning.

Many of you will be aware of the usual and more obvious end of year allowances which, if not used, will be lost, with new allowances made available in the tax year 2011/2012, starting on 06^th April 2011. I have listed some of these below:

• ISA allowance, £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).
• Capital gains tax allowance (CGT): This again is an annually renewable allowance and currently stands at £10,100 in this tax year. This can be a highly efficient tax allowance for those able to use it, especially if you are a higher rate tax payer. The current flat rate charge for CGT is 18% and this rises to a flat rate of 28% for higher rate taxpayers.
• Personal income tax allowance: Currently up to £6,475 can be earned in this tax year without paying income tax in most circumstances. In the new tax year (2011/2012) the nil rate income tax band is increasing to £7,475 for the year, which may be advantageous for those on lower incomes.

This is not an exhaustive list and you should seek independent advice (IFA) about your own circumstances.

The new tax year (2011/2012) is likely to see changes that may well affect your financial planning going forward and I have listed some of the less obvious points as they stand at this time below.

• Higher rate income tax threshold: As noted above, the nil rate income tax band is increasing by £1,000 in the new tax year to £7,475. However, the level of income that can be earned before paying higher rate income tax is falling by a slightly higher amount, to a new level of £42,475 (20% tax band will fall from £37,400 to £35,001 / High rate income tax charge rate applied previously at £43,845 in 2010/2011). There has been much press comment noting that this may affect around 750,000 people. An example is here: http://www.ifs.org.uk/publications/5452
• The effects of higher rate income tax can be offset by pension contributions, however, in the new tax year 2011/2012), there are many changes expected for pension legislation. One example is the change in the level of pension contribution that can be made to a new level of £50,000 in the year. There is also a new three year carry forward facility being introduced and this is detailed on the HMRC website here: http://www.hmrc.gov.uk/pensionschemes/annual-allowance/changes.htm#5
• Other examples of proposed pension changes can be seen in my previous blog (Income Drawdown Policy Review and Proposed Rule Changes on Annuitisation) here: http://www.churchouse.com/blog.php

As I hope you can see from the above, there is a lot to consider both in the months of February and March 2011 and the forthcoming tax year (2011/2012). With this in mind, it should be noted that 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. 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. Churchouse Financial Planning Limited can be contacted in Guildford, Surrey on (01483) 578800.

Keith Churchouse
Chartered Financial Planner & ISO22222 Certified Financial Planner

Director of Churchouse Financial Planning Limited
Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority

Income Drawdown Policy Review and Proposed Rule Changes on Annuitisation

With most New Years, we find that proposed and draft legislation swings into action in the lead up to the end of the fiscal year, 05th April. Rule changes and tax rates need to be published and in place for the start of the new tax year, 06th April 2011. 2011 is no different and HM Treasury are now keen to give all parties three months notice of their intentions to allow some planning to affected, if needed.

One good example of this is the proposed change to the start of the higher rate tax threshold to £35,001, down from £37,400 this financial year (2010/2011). You will have to add to this the new nil rate income tax band, which is proposed to increase from £6,475 pa (2010/2011) to £7,475 pa (2011/2012) under age 65. This has been widely publicised in the media. I have attached a link here for further information: http://www.bbc.co.uk/news/business-12321524

The purpose of this blog is to look at some proposed changes to the overall pensions legislation of the UK. These included the ending of the need to purchase an annuity at age 77 (originally 75). This change along with others is due to happen in the new tax year 2011/2012, starting on 06th April, although it should be noted that the detail here is still draft legislation and may be subject to change. Full details of all of the draft changes and consultation in the Finance Bill 2011 can be found at the HM Treasury website here: http://www.hm-treasury.gov.uk/finance_bill_2011.htm

Income drawdown plans have also received some attention with regards to rule changes and I am now writing with regards to your plan both to update you on its value, as I did in the spring of last year, but also to identify the proposed changes as we know them. Some of this legislation is yet to be finalised and may be subject to change.

In no specific order, the proposed changes are as follows:

1. The maximum age to which annuity benefits had to be purchased increased from age 75 to age 77 this tax year. From April 2011, annuity will not have to be purchased at any age. There is also an increase in income flexibility (subject to an annual allowance charge if used) for those with a lifetime pension income of at least £20,000 per annum.

2. Currently, on death before age 77, fund benefits are available to your beneficiaries as a cash payment, subject to a tax charge of 35%. From April 2011, this death charge after this date will be 55%.

3. Currently, the maximum income available under an income drawdown is 120% of the annuity income that could be purchased under the plan on a single life basis. From April 2011, this is being reduced to 100% at your next 5 year review date. Thereafter, it will be reviewed every 3 years until age 75, whereby this changes to an annual review.

These are draft changes and propsals and may affect you planning. If you would like to review your plan or your future planning then please contact our office accordingly.

As always, it should be noted that we are all different and this information should not be used or relied on as individual financial advice. Please note that the website links above are to websites for which Churchouse Financial Planning has not approved the content.

Keith Churchouse
Chartered Financial Planner & ISO22222 Certified Financial Planner

Director of Churchouse Financial Planning Limited
Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority