Did Someone Mention a Pension?

Taxing Times indeed ! So now more than ever does one need to consider the future. Pensions have and always will be a good way to save money for when you want to retire (yeah right !) and you have always been able to obtain tax relief from your contributions. However this is about to change with the the new legislation coming into play,

HM Revenue and Customs (HMRC) has issued new guidelines on the recent changes to the tax relief available on pensions.As part of the changes, the annual allowance for tax relief on pensions has been cut from £255,000 to £50,000 for 2011/12.The announcement was confirmed last October. Those that have received large bonuses lor have just come into some money may want to think about other avenues to invest as they will not obtain higher rate relief and they may be faced with an additional tax charge if invested.

The annual allowance covers how much can be paid into a pension pot while attracting tax breaks.
Now HMRC has published its latest, updated guidance on what the new limit means for pension savers.
In some circumstances, HMRC said, savings added to a pension fund between 14 October and 5 April may come under the remit of the new rules. The new guidance can be found at http://www.HMRC.gov.UK/pensionschemes/annual-allowance/index.htm

I still believe pensions offer something very important but do not assume you can just throw your money at a pension. The rules are packed with anti forstalling legislation so I suggest contacting me for further information.

mitch@ljd.uk.com

Act now before the Budget Bites you !

It should not be forgotten that the Budget takes place on 23 March 2011 which is a few days before the end of the tax year, so rather than to rush your end of year tax planning from after that date I have decided to share a couple of tax planning tips for you now in order for you to potentially take advantage of prior to any potential changes being made in the Budget.

The first being to take advantage of ISA’s. Individual savings accounts – the maximum investment for 2010/11 is £10,200, of which £5,100 can be in cash. These accounts usually have good rates of interest and the interest earned in not taxable !

Secondly if one spouse has a much lower level of income than the other, consider transferring income-producing assets to the low income spouse to maximise the use of the basic and higher-rate tax bands rather than the top rate of 50%. This can also be effective if one spouse/partner would otherwise have income between £100,000 and £112,950 where, because of the withdrawal of personal allowances, the marginal rate is 60%.

Finally, you should be making sure you utilise your capital gains tax annual exemption of £10,100 and remember that transfers between spouses and civil partners produce neither a gain nor a loss – the inherent gain or loss is effectively transferred with the asset.

There are of course more 'advance' planning steps that you could take prior to the budget that include pension contributions as this area is the biggest area of change. Other tips include potential asking or forwarding any dividend or bonus payments to avoid the increase of National Insurance.

Most people don't often think about tax planning or they might wait for their accountant to suggest/contact them, this rarely happens as accountants take on more or more clients the first thing to get neglected is tax planning. If you want any advice on this or want to know more just drop  me an email and we will be happy to help !

The Budget is on 23 March 2011, so don't wait !!! Act Now !!

No Work Place Like Home !

Over the past few years there has been increasing number of employees working from home. This has become the norm in todays society with IT and computer software being that advance that you can see your own work computer screen and network at home. I can only see numbers increasing as the years go on due to ever increasing costs to commute, but the question remains is there any taxable benefit of working from home?

Working from home means you are likely to incur additional living expenditure such as gas and electricity but as an employee you can only claim a minimal amount. The Revenue give a guidance of a lousy £3 a week plus business calls will be allowable. For those employees that are interested you can find this in HMRC's Employment Income Manual.

For self employed individuals the picture is slightly better, generally you can claim a larger proportion of your annual home expenditure usually being around 20%.  However HMRC tend to review these claims quite reglarly  and thus you should look at the quality of the time you work at the home and speak to a tax advisor to work out an acceptable proportion.

There are loads of tax cases you can look at which provide great examples of working from home, the most famous one being Horton v Young 47 TC 60. Which concerned a self employed brick layer who had no office and went to different sites every day thereby using his home as his main office.  The brick layer won this case when reviewed by HMRC and was allowed his expenditure claimed for use of home as office as well as travelling to and from home to jobs.

However this is just one of many cases and my advice would be that if you work from home and want to claim expenses speak to your tax advisor. In terms of the tax advantages in working from home, well in my opinion they aren't great ! The main benefits are mainly practical however if you do substantial work from home there are reliefs available to you, you just need to be careful !

Feel free to contact me for further information

mitch@ljd.uk.com