Rates and allowances – Income Tax

Income Tax allowances

Income Tax allowances table
Income Tax allowances		2009-10	2010-11
Personal Allowance		£6,475	£6,475
Personal Allowance for people aged 65-74 (1)		£9,490	£9,490
Personal Allowance for people aged 75 and over (1)		£9,640	£9,640
Married Couple’s Allowance (born before 6th April 1935 but aged under 75) (1)(2)(3)		Not applicable	Not applicable
Married Couple’s Allowance – aged 75 and over (1) (2)		£6,965	£6,965
Income limit for age-related allowances		£22,900	£22,900
Minimum amount of Married Couple’s Allowance		£2,670	£2,670
Blind Person’s Allowance		£1,890	£1,890

(1) These allowances reduce where the income is above the income limit – by £1 for every £2 of income above the limit. However they will never be less than the basic Personal Allowance or minimum amount of Married Couple’s Allowance.

(2) Tax relief for the Married Couple’s allowance is given at the rate of 10 per cent.

(3) In the 2009-10 tax year all Married Couple’s Allowance claimants in this category will become 75 at some point during the year and will therefore be entitled to the higher amount of the allowance – for those aged 75 and over.

Income Tax rates and taxable bands

Income Tax rates and taxable bands
	2010-2011
Starting rate for savings: 10%	£0-£2,440
Basic rate: 20%	£0-£37,400
Higher rate: 40%	£37,400-£150,000

 

Additional rate 50%

Over £150,000

* From 2008-09 there is a 10 per cent starting rate for savings income only. If your non-savings income is above this limit then the 10 per cent starting rate for savings will not apply.

The rates available for dividends are the 10 per cent ordinary rate and the 32.5 per cent dividend upper rate.

(Source: HMRC)

 

ISA Allowance Change.

From October 2009, ISA limits will increase for people aged 50 to £10200, up to £5100 of which can be saved in cash. From 6 April 2010 everyone can benefit from the new ISA limits.

 

ANNUITIES

Last year, 2008, over 280,000 people* who bought an annuity with their pension, did not use the Open Market Option (OMO) to see if they could improve on their provider’s quoted rate. This meant an incredible £500 million** of retirement income was lost. Don’t lose out if you are coming up to retirement, obtain an OMO for your pension funds to maximise your income. Remember, smokers and people with medical problems are likely to be able to obtain an increased level of income. ( Research figures from * ABI business data, 2009 and ** Just Retirement, 2009).

  

 How can pension contributions help my company with cashflow?  Whilst a large pension contribution, say £200,000, reduces the amount of corporation tax payable, at least £42,000, most directors incorrectly think that that they no longer will have control over the money. The truth is that the money can be loaned back to the company and interest is then payable to the scheme further enhancing private wealth. The scheme could also purchase plant for lease back to the company. Remember pension scheme growth is largely tax free. Wouldn’t it also be nice if all the money could be accessed as cash?  For further information please contact Brian Rilatt for further information.

 

Attention Company Directors and high earning individuals thinking of retiring Overseas, good news about pensions? Transferring your pension benefits offshore to a Qualifying Recognised Overseas Pension Scheme (QROPS) may be beneficial to you. Subject to your new country’s jurisdiction, after 5 years, you may be able to access all of your fund as cash, buy residential property with the fund or even take a loan from your scheme.
Subject to building up a sizeable fund before making the move, £500,000, it makes sense to talk about your options well in advance.
Contact Brian Rilatt to discuss your situation and start planning to boost your fund before it is too late.

 

Individual Savings Account (ISA) 2008/09 Revised rules and allowances.

An ISA can be made up of an investment in cash, or investments like stocks and shares or insurance. You can invest in two separate ISAs in any one tax year: one cash ISA and one stocks and shares ISA.

For cash ISAs, an individual can invest up to £3,600 a year (2008/09) and can only invest with one provider in any one tax year.

For stocks and shares ISAs(SSISAs), an individual can invest up to £7,200 a year and can only invest with one provider in any one tax year.

If you want to invest in both a cash ISA and a SSISA in the same tax year the separate limits for each type of ISA still apply, but the individual cannot invest more than £7,200 in total. The cash ISA and SSISA can be with either the same or with a different provider.

Example

Someone saves £2,200 in a cash ISA at the beginning of the tax year. In the same tax year they could save another £5,000 in ISAs. This could be up to another £1,400 in the same cash ISA with the remainder of the £5000, £3,600 in a SSISA or up to £5,000 in a SSISA.

You can transfer cash ISAs to another ISA manager and either into another cash ISA or into a SSISA.

You can transfer SSISAs to another ISA manager, but only into another SSISA. You cannot transfer a SSISA into a cash ISA.

You are able to transfer some or all of the money saved in previous tax years without affecting your annual ISA investment allowance.

Annuities

Impaired lives. If you smoke or have a medical problem you may be able to obtain higher income from your pension in the form of an impaired life annuity. C R Financial Services based near Grimsby in North East Lincolnshire, will source the highest annuity rate for you based upon your health and whether you smoke.
Only one company generally has the highest annuity rate for you at any one time. This means that most companies are giving less per year that you could achieve from the best. Basically, why be short changed, contact us and let us get the best deal for you.
Single life or widow’s benefit, 5 or 10 year guarantee, level or increasing annuity,

Latest financial news from FT.com at this link: – http://custom.marketwatch.com/custom/ft2-com/html-marketsDataTools.asp?

Have you pension funds in excess of £500,000? Would you like to use these funds to buy domestic property and eventually pass the residue to your estate? Pension value is therefore released for unrestricted investment anywhere in the world with no need to ever purchase an annuity; pension assets are therefore not compromised through taxation prior to any inheritance by beneficiaries. Contact us for further information.

Your Financial Goals – are they within reach?
Retirement, you don’t have to depend upon a State pension
What will you do when you have retired? Maybe you’ll spend time on hobbies, perfecting the garden, traveling or just visiting friends and relatives. Maybe you’ll have grandchildren to spoil! How will you pay for it?
Certainly, you’ll have your State pension (for 2007/8 the maximum per week that can be claimed is £87.30*) though it won’t take you very far, even at today’s prices. You may also be fortunate enough to be in a job that provides a pension.
With luck, you’ll still be in the job when you reach retirement age and your pension may have some inflation protection. However, since neither is guaranteed, you may want some extra reassurance.
(*Source:- Department of Work & Pensions www.thepensionservice.gov.uk June 2007)
How inflation can upset your plans.
Money doesn’t buy what it used to, certainly something to bear in mind when drawing up your plans for a financially secure future:-
1975 1985 2006
Ford Escort 1100/Focus 1.4 £1,299 £4,921 £12,445
Average retail price per litre of petrol 15.95p 41.54p 78p
1st Class postage 8p 17p 32p
Pint of Beer 64p 98p £2.05
Mars Bar 7p 19p 40p
Sources:-
Bristol Street Ford (www.bristolstreet.co.uk website June 2006)
Petrol Prices (BBC News website June 2006)
Royal Mail (www.royalmail.co.uk website June 2006)
Beer Prices in the UK (www.whatprice.co.uk/beer-prices.html website June 2006)
Tesco (local supermarket, Kent region)
As you can see, prices have doubled over the last 20 years. if this trend is set to continue then there has never been a better time or reason to start saving for a specific purpose!
Saving for School Fees. it takes more than an educated guess
If you have children/grandchildren, you naturally want them to have the best, especially when it comes to their education. However, School Fees and Tuition Fees at University continue to rise rapidly.
For example, the average University Fees in England & Wales currently are £3,070 per annum (due to the recent introduction of top-up fees), with School Fees amounting to several times this amount.
Coincidentally, the Annual IHT Exemption available for parents and grandparents is
currently £3,000 per annum (and last year’s exemption can also be used if it has not been used already).
3 years at University today would cost in the region of £27,000** (including Tuition
Fees) and if we incorporate inflation into this figure by 2.5% per annum over 18 years then this will amount to £42,111.
There are many investments available to help you prepare for skyrocketing costs of
School Fees and Tuition Fees at University.
(**Source:- National Union of Students Press Pack 2005/2006)
Looking beyond School Fees / University Fees
Most people think that savings for children/grandchildren relates to School Fees &
University Fees…but what about other expenses such as their first car, wedding, deposit for a mortgage. These are all things that need to be considered if parents/grandparents wish to improve the quality of life for their children/grandchildren.
Take a look at the following figures:-
Today 18 Year’s Time
First Car £7,600 £11,853
Wedding £15,900 £24,799
Deposit for 1st Home £16,299 £25,421
(All these figures assume 2.5% inflation, although School & University Fees are
increasing at 5% per annum).
Sources:-
What Car (www.whatcar.co.uk) e.g. Fiat Punto, Peugeot 206 and Citroen C1 (July 2005)
Confetti (www.confetti.co.uk). cost includes Honeymoon (August 2005)
Halifax average house price for August 2005 of £162,994 including associated fees.
Above article compiled by The Children’s Mutual, a trading name of The Tunbridge Wells Equitable Group.

“The future is not a result of choices among alternative paths offered by the present, but a place that is created – created first in the mind and will, created next in activity. The future is not some place we are going to, but one we are creating. The paths are not to be found, but made and the activity of making them, changes both the maker and the destination.” Deborah James, Business Consultant

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