Tax Planning 0611
Tax Planning 0611
Tax Planning 0611
gls
2011
ab13
* The first 2,560 of savings income is taxed at 10% provided taxable nonsavings income does not exceed 2,560. Allowances and rate bands are allocated first to your earned income (which includes pensions), then to your savings income, then to any UK dividend income. If your non-savings income exceeds 2,560, the savings rate of 10% does not apply. Many individuals fail to optimise their tax allowances. If you have a partner, spouse or child who pays a lower rate of tax than you do then consider allowing them to hold some or all of the savings in their name. It is worth noting that while any interest in excess of 100 on money given to children by parents will be treated as the parents income, interest on money from grandparents may be set against the childs personal allowance. Similarly, higher-rate or additional-tax paying landlords could transfer rented property or a proportion thereof into the spouses name, which may also produce a capital gains tax benefit.
INVESTMENTS
There are a number of tax-free vehicles in which investments can be easily made, including ISAs (the 2011/12 allowance is 10,680 for all adults) and some National Savings products. Tax-advantageous investment vehicles include the Self Invested Personal Pension, which grants a large degree of investor choice at the expense of accessibility. Two other forms of investment, the Enterprise Investment Scheme and the Venture Capital Trust, offer substantial tax relief for those who are happy to invest with a higher element of risk. For a full review of your available options and how they might affect your tax liability, please contact us.
GLS | 0208 367 1313 info@gls.co.uk | www.gls.co.uk Oliver House, 23 Windmill Hill, Enfield EN2 7AB
2011
2011
RENTAL PROPERTY
Rental property loan interest is an allowable deduction from rental income. Landlords may also claim an annual 10% wear and tear allowance if the property is fully furnished. If you are letting a holiday property in the UK or elsewhere in the EEA, or thinking of doing so, and meet certain qualifying conditions, you can claim capital allowances rather than the 10%. However, the present tax advantages for furnished holiday lettings are being restricted from 6 April 2012. We can advise you of these changes and their implications for you. You can realise a tax advantage if you make a loss on your earnings from the property by offsetting it against other income charged to tax. If your rental income relates to letting out a room in your property, you are entitled to receive 4,250 per year tax free.
NEW PARENTS
The imminent arrival of your first child, with the extra responsibilities and perhaps the need for more space, should trigger a re-evaluation of your personal financial strategies.
MIDDLE AGE
As the children approach higher education you will need to ensure you can meet your share of the costs. Although the maturation of savings plans which began when the children were born can help at this time. You might also need to consider making extra provision as many students now leave higher education with debts in excess of 25,000, and within a few years this sum may be in excess of 40,000. Do you wish to assist your children in this area? Are you able to? By now you may well have reached your earnings peak, and as the children leave home and begin work you should review your strategies to ensure a comfortable retirement. What are your realistic objectives? You might, for example, want to consider moving to a smaller house, acquiring a second home, or increasing your retirement funding.
NEARING RETIREMENT
If retirement beckons in your planning in the next five years you will need carefully to consider and evaluate your income requirement and the extent to which your investments can deliver the return you require. You may wish to help your children, and you may have to pay for a wedding. Investments, property and annuity rates are probably all lower than what you might have expected before the recent economic crisis. As you approach retirement, you need to check at least once a year to satisfy yourself that your accumulated capital is at less risk and to ensure that your income in retirement will meet your needs - and provide a little extra for the realisation of some of those long planned dreams.
CHILDHOOD
It is never too early to begin planning for a childs financial future. Parents, grandparents, and other relatives can assist in the early years by providing funds for the childs education and future. This may be through direct gifts, or by making payments into a junior ISA.
IN RETIREMENT
After 40 or more years at work it is time to take a well-earned rest, but you still need to keep one eye on financial planning if you want to enjoy a long and comfortable retirement. This may also be the time to begin putting some money aside for your children or grandchildren. However, balanced against these desires may be the need to finance long term care for one or both spouses, and the potential impact of this on your financial security.
CHARITABLE DONATIONS
Throughout your life you may wish to give money to charity. There are a number of ways in which it is possible to gift cash or assets to charity tax-efficiently. For example, under Gift Aid you can give a charity 100 at a net cost to yourself of as little as 50. Charitable donations can also be included in your will, and again they will attract tax relief. Heres where we can advise:
Understanding your tax allowances and rates Making the most of tax free opportunities Keeping tax rates as low as possible across the family Using savings, capital and the Child Trust Fund to give your children a better start in life Making a Will Making a living will and giving someone you trust an enduring power of attorney over your affairs Insuring your life and obtaining disability and critical illness insurance Saving for income and investing for capital growth
YOUNG ADULTHOOD
This is usually the time to make provision for the purchase of a car, and to plan for the purchase of a home. It is also the time to start planning for retirement, even though retirement is a long way off and the initial investment may be modest. A small sum put away now for retirement has much longer to grow. Q: How much should be invested? A: It is important to seek advice, but 5% to 10% of gross income is normally considered a minimum.
SETTLING DOWN
You will be buying your first home. You need to save for the deposit and furnishings, and you will need to budget for the mortgage repayments and other household expenses (e.g. insurance, council tax, repairs and utility bills) that are an inevitable part of home ownership.