Some of you may not have heard the budget announcements yesterday, so here is a very brief summary of some of the highlights:

The personal allowance will be increased to £9,440 for those under age 65, this is all part of the plan to raise it to £10,000 which will be achieved from 2014/15, a year earlier than expected.

The reduction in the personal allowance for those with ‘adjusted net income’ over £100,000 is to continue, which means there will be no personal allowance remaining for individuals where their ‘adjusted net income’ exceeds £118,880 in the 2013/2014 tax year.

The basic rate of tax is and will remain at 20% however the band of income chargeable to tax at this rate is being reduced to £32,010. This means that the level at which the 40% tax band applies will also fall. The previous level was £42,475, but this will reduce to £41,450. Please note, this assumes entitlement to the full basic personal allowance.

Currently the 50% tax band applies where taxable income exceeds £150,000 but as already announced, this rate will fall to 45% in 2013/14.

The basic state pension will rise by 2.5% in April taking it to £110.15 per week, and the Government will introduce a single flat rate pension of £144 per week in 2016.

The main rate of corporation tax is 23% from 1st April 2013. The Chancellor announced in December that the rate from 1st April 2014, previously planned to be 22%, was to be reduced to 21%, the Chancellor has now announced that this will be reduced to 20% from 1 April 2015.

The CGT annual exemption will be £10,900 for 2013/14 and will be increased to £11,000 for 2014/15 and £11,100 for 2015/16.

The Government also confirmed its intention to freeze the inheritance tax nil rate band at £325,000 until April 2018.

From a pensions perspective, there were no reductions to the Annual Allowance and Lifetime Allowance.

26th March 2013 will be the date when capped income drawdown rates will rise from 100% to 120% of the value of an equivalent annuity.

The stocks and shares ISA limit will rise to £11,520 and the cash ISA limit will rise to £5,760 with effect from 6 April 2013

As ever, if you want to discuss this or any other points, then please give me a call.

Shane Beardsley
Managing Director / Independent Financial Adviser
shane@kirkellainvestments.co.uk

Yesterday, the Chancellor unveiled his Autumn Statement, and here is a brief summary of some of the changes being implemented.

Personal Taxation:

The personal allowance for 2013/14 for those aged under 65 will be increased from £8,105 to £9,440.

The reduction in the personal allowance for those with ‘adjusted net income’ over £100,000 will continue.

Where adjusted net income is expected to exceed £100,000 you should seriously consider reviewing your situation before 6 April 2013.

Adjusted net income is taxable income from all sources reduced by certain reliefs such as pension contributions. Consideration should be given as the whether these could be made to protect some or all of the personal allowance.

The current basic rate of tax is 20% and the band of income taxable at this rate is being reduced from £34,370 to £32,010 so that the threshold at which the higher rate of tax, 40%, applies will fall from £42,475 to £41,450.

The 50% band currently applies where taxable income exceeds £150,000 but as has already been announced, this rate will fall to 45% next year.

For 2014/15 and 2015/16 the increase in the higher rate threshold will be capped at 1%.

Pensions:

For tax year 2014/15 onwards:

- The annual allowance for pensions tax relieved savings will be reduced from £50,000 to £40,000. This comes only two years after Osborne slashed the allowance from £255,000 to £50,000.
- The standard lifetime allowance for pensions tax relieved savings will be reduced from £1.5 million to £1.25 million

Income Drawdown limits

The maximum income limit for capped drawdown is to be pushed back up to 120%. The Chancellor has announced that the Government will revert the capped drawdown limit from 100% back to 120% giving clients with these arrangements the option of increasing the income they take from the fund.

Individual Savings Accounts (ISAs)

From April 2013 the overall ISA savings limit will be uprated to £11,520.

Corporation tax rates

The main rate of corporation tax is 24% from 1 April 2012 and 23% from 1 April 2013. The Chancellor has announced that the rate from 1 April 2014, which was planned to be 22%, will be reduced by an additional 1% to 21%.

The small company rate will remain at 20%.

Capital Gains Tax

The current rate of CGT is 18% rising to 28% for people paying higher rates of tax. The rate for Entrepreneur’s Relief (ER) remains at 10% with a lifetime limit of £10m per individual.

The Chancellor announced that the exemption would be £11,000 for 2014/15 and £11,100 for 2015/16.

Inheritance Tax

The IHT nil rate band remains frozen at £325,000 until 5 April 2015 and will rise to £329,000 for 2015/16.

You may have read about this in the press, but as the date approaches we still don’t know exactly what the overall effect of this will be, but it looks likely that the costs for a wide variety of insurance products could increase towards the end of this year as a result of a ruling from the European Court of Justice (ECJ).

Women look likely to be the most effected from the equalisation of insurance premiums. Men tend to die younger than women and therefore typically cost more to insure. Whilst the rates for men and women may meet somewhere in the middle, it is more likely that rates for women will just increase.

However on the subject of annuity purchase, women reaching retirement are likely to be offered higher annuity rates to bring them in line with men.

Contracts already in force will not be affected, so it might make sense for those of you who need insurance or are considering purchasing an annuity to consider reviewing this sooner rather than later.

Please bear in mind that underwriting can sometimes take longer if a GP report or medical is required. So far no insurer has really declared its hand, so it is very hard to say one way or another, but if you are likely to be in the market for either then it would be worth a conversation.

Employees working at some of the country’s largest companies as well as the employer themselves will have to start paying into qualifying pension schemes from today.

This will initially affect large firms such as banks and the larger supermarkets, and between now and 2018 all employers will be included right down to the smallest of companies.

Over 500,000 people will be auto enrolled by the end of this year and this number will have risen to over 4 million by May 2014.

Minimum contributions start at 1%, and by October 2018 this will increase to 4% for employees. This will equate to a total of 8% of a certain band of earnings and will be made up of 3% employer, 4% employee, and tax relief of 1%. Employees do have the option to opt-out.

This is intended to radically alter the way we save for old age; The Department for Work and Pensions (DWP) have said about 11 million people are not saving enough for retirement and research suggested less than a third will opt-out. This is going to affect everyone to some extent, employers and employees!

There is no point beating around the bush, at a time when people have very little spare cash it might prove difficult for employers to find an additional 3% of their total payroll bill, or employees to part with 4% of their salary. But at the end of the day, there is a reason for this, we are living longer, and saving less for retirement than ever before!

Attention property landlords…
A new HMRC taskforce will target landlords in Yorkshire….

HMRC has announced it will be creating several new taskforces targeting tax dodgers, one of which will specifically target Landlords in East Anglia, London, Yorkshire and the North East.

The taskforces will be made up of various HMRC compliance and enforcement teams that will visit those operating in these perceived higher risk sectors to review their records. They estimate £23million will be raised in addition to the estimated £50million collected from taskforces started in 2011.

HMRC said ‘ Deliberately evading tax you should be paying can land you with not only a heavy fine but possibly a criminal prosecution as well’.

If you receive rental income from investment property, I am sure you already have your tax affairs in order. Nevertheless I felt that I must just let you know, as they have reason to believe a significant number of landlords in this region are not properly declaring their rental income.

If you are not 100% certain that your affairs are in order, I would urge you to contact your accountant immediately for a review.

Mortgage Payment increases….
Did yours go up?….

An estimated 1.2m mortgage holders received a rise in their monthly payments through an increase in their standard variable rate this spring – Were you one of them? and how much more will this add to your household bills?

Based on a £100,000.00 mortgage over 20 years on capital and interest repayment…..

• 850,000 Halifax customers that saw their rate rise from 3.5% to 3.99% – which represented an approximate increase of £306pa.
• 200,000 Royal Bank of Scotland offset mortgage holders saw their rate rise from 3.75% to 4% – which represented approx £157pa increase.
• 100,000 Bank of Ireland customers will see their rate rise from 2.99% to 3.99% – which represented approx £616pa increase.
• The Co-operative bank will be raising it’s rate from 4.24% to 4.74% – which represents approx £323pa increase.

Just in case you are feeling like you have missed something ‘No’ the Bank of England Base Rate has not suddenly increased.

With fixed rate mortgages as low as 3.69% not only could you build in the security of knowing what you are paying each month, but you could also potentially save money.

If you would like to discuss your existing mortgage, fixed rates or reducing your outgoings then please feel free to contact us on 01482 658989.

* Please note, the above SVR figures are believed to be correct, however as this is to be used as a simple guide we would obviously double check your particular circumstances before making any recommendations.

2012/2013 ISA Investing….
…the new tax year

The last few days of March and the first few days of April were absolutely chaos. It is amazing how many people wait until the very last minute to maximise any unused ISA allowances.
I am going to be a bit controversial, and suggest that we try to buck the trend this year by utilising these valuable tax efficient allowances earlier in the year!

Joking aside, I know the end of the tax year will be the same as it always is, because it is just human nature. In the same way as most tax returns are filed in January, but if I mention this now then hopefully it might just make a difference.

Obviously ISA’s only form part of the investment strategy for many investors, and if you feel you would like to review your overall investment portfolio or discuss any new investments, then please do not hesitate to contact me.

The End of the Current Tax Year, Part 2, ISAs….
ISA Allowances, use them or lose them….

The end of the tax year also means it is your last chance to utilise any unused ISA allowances for the current tax year. Whether this is Cash ISAs, Equity ISAs, or both.

Should you not have already utilised this years allowances then it is worth noting that over the next 5 weeks you could potentially invest nearly £22,000.00 each into ISAs, £10,680.00 for this tax year and £11,280.00 for next.

This means for example that couple, married or otherwise, could collectively invest just under £44k into tax efficient ISAs within the next 5 weeks.

You might remember from a previous newsletters that there are actually several ISA millionaires in this country. People that have saved into ISAs, and previously PEPs over the years. It can soon add up!

If you want to utilise your tax efficient ISA allowances, then time is running out and I urge you to contact me soon to ensure there is enough time to process it before the year end.

The End of the Current Tax Year….part 1
Pension Contributions

As the end of the tax year approaches, it is a good time to consider tax planning opportunities to maximise the use of your allowances, reliefs and exemptions for the current tax year and minimise tax paid.

There are a number of valuable tax planning strategies that involve pension contributions. Obviously there is the tax relief that is (currently) received on pension contributions, currently either 20%, 40% or even 50%, but in addition there is the ability to carry forward unused annual allowances from previous years; it may also assist with restoring the basic personal allowance for certain higher earners. That said, last month I also wrote an article on the possible risk to tax relief on pension contributions for higher rate tax payers in this months upcoming budget, and it seems that the nearer we get to the actual budget announcement the more we hear about this. Therefore, if you are a higher rate tax payer, and were considering making any single contributions into a pension plan in the near future, or considering utilising carry forward, then it may be prudent to consider doing this before budget day as any change they do make may well be with immediate effect.

If you are self employed, or a business owner it may also be worth speaking to your accountant, and obviously I am happy to assist with this.

As always, if you want to discuss this or any other issues, then please do not hesitate to give me a call.

Attention Halifax Mortgage Customers….
…the increase to their standard variable rate from 3.5% to 3.99%

Many of you will have seen in this weeks press that Halifax will shortly be increasing their standard variable rate from 3.5% to 3.99%. Why is this? I hear you ask, and what can I do?

I received an email from the Halifax saying that this change acknowledges that the cost of funding a mortgage in today’s market remains significantly higher than the longer term average, and that they will be writing out to customers in the next few weeks advising them of their intention to increase the Halifax Standard Variable Rate. They are currently in the process of calculating customers’ monthly payments and will start writing to all affected customers from 10th April to explain the changes and provide new monthly payment details.

This marks the first rise in its SVR for three years and will affect roughly 850,000 of its customers and thousands more in coming months as borrowers that are currently on other deals revert back to the default standard variable rate.

So, as I said at the beginning, what can you do? well perhaps this is a time to consider discussing your current situation, and to consider whether or not now is the time to look at other deals available to you either with other mortgage lenders, or indeed within the existing range of deals that the Halifax offer. For example, for less than 0.5% more than their new SVR, and without any fees, you could fix your rate for the next 2 years.

If you are a Halifax customer and want to talk to us about this, please do not hesitate to call and we will be able to advise you on your options.