From 6 April 2012 the Government has confirmed that contracting out of the State Second Pension (S2P) through defined contribution schemes (e.g. individual and group personal pensions /  stakeholder pensions) will be abolished. It is still possible however to stay contracted out for the current tax year.

To recap, contracting out happens when an employed individual elects to have part of their annual employee national insurance (NI) contributions paid into a private pension of their choice. The amount of NI paid through salary stays the same, however once a year a partial NI rebate is paid as a lump sum into the pension. An individual who is contracted out for periods of time during their working life will generally have a reduced entitlement to S2P, although the main basic state pension remains unaffected.

Pension money built up from being contracted out, is known as Protected Rights. From 6^th April 2012, Protected Rights will become ordinary pension benefits, this means that individuals will no longer have to provide a pension for their spouse/civil partner when they retire – although they can do so if they still want to.

Following the publication of inflation figures for September, HMRC has announced that subscription limits for Individual Savings Accounts (ISAs) for the 2012/2013 tax year will increase to £11,280 – a maximum of half the annual allowance can be saved as cash (£5,640).

It is also worth noting that Junior ISAs (JISAs) will be available from 1 November with a limit of £3,600 for each eligible child per year.

Those who have been saving into a Child Trust Fund (CTF) for their children will not be disadvantaged – the current £1,200 pa savings limit will also treble to £3,600 from 1 November, thus aligning these savings plans with the new JISA limit.

At the start of this month, I attended the Institute of Financial Planning’s annual Conference which again proved to be valuable time well spent listening, learning and reflecting on the speakers provided for our benefit.

One speaker particularly stood out this year, and I thought I would take the opportunity to share some of the key points raised by the renowned American financial commentator, Nick Murray. Read the rest of this entry

In my email blog last week, I covered the benefits of investing into longer term fixed rate deposits to provide certainty of return – 4.65% pa was a quoted 5 year rate at that point.

Well what about an investment with an inflation linked hedge instead?

As the National Savings Indexed linked certificates were withdrawn recently, I was interested to read about the 3 and 5 year indexed linked bonds offered by the Post office (via Bank of Ireland).  Save for a 3 year fixed term and receive the annual RPI inflation rate plus 0.25% gross / 0.24% AER fixed each year, paid at maturity. Save for a 5 year & 1 day fixed term and receive the annual RPI inflation rate plus 1% gross / 0.98% AER fixed each year, paid at maturity. If the annual RPI inflation rate is 0% or below in any year, you will still benefit from the fixed return for that year (paid at maturity). Read the rest of this entry

It is estimated that six million people will receive tax refunds this week averaging £400 as HMRC have overcharged them. The repayments are likely to total more than £2.5bn in excess payments which date back to 2001. On the other hand another 1.2m people — including 150,000 pensioners — are likely to receive a bill for an average of £600. Read the rest of this entry

With bank base rates still holding at 0.5% and with the likely-hood of this remaining into the near term while the UK struggles to come out the recession, the plight for UK savers continues.

Regularly, we see people coming out of decent maturing 4 or 5 year fixed rate bond accounts which were taken out when interest rates were substantially higher and those savers are now discovering the harsh savings reality of 2011. i.e:

• low interest rates
• high inflation
• uncertainty

So, the choice you’re left with is less than ideal. Either you wait and see – take a short term hit in the expectation that things will improve in the next year or two OR you take a long term savings product, such as another 5 year fixed rate bond, and risk being locked into an uncompetitive rate later on.

So is a 5 year fixed rate bond, the right place to put your money? Read the rest of this entry

HMRC have recently issued further guidance on the VAT treatment of salary sacrifice schemes.Where an employer charges an employee for benefits, this has always been seen as a supply for VAT purposes. This has applied whether the employee pays cash, or by deduction from salary. Clearly, the nature of the benefit determines whether VAT is due from the employer. Childcare vouchers, for example, would not normally be VAT-able, nor would insurance, including PHI. The change relates to salary sacrifice, i.e. where the employee accepts a lower salary in return for the benefit. Read the rest of this entry

As publicised, twenty high-profile UK Economists have lobbied the Financial Times (FT) with a letter urging the Government to cut the 50% tax rate ‘at the earliest opportunity’ to aid economic growth.

The economists who include two former members of the Bank of England Monetary Policy Committee argue that the tax of 50p in the pound for earnings over £150k is rendering the UK uncompetitive and an unattractive destination for foreign investment, entrepreneurs and a talented workforce.  It is also argued that the UK’s wealthy tax payers may relocate to tax havens in order to avoid the higher rate. Read the rest of this entry

It was announced in the June 2010 Emergency Budget that, following a successful pilot, HMRC would use private debt collection agencies (DCAs) operating under industry and HMRC standards to boost HMRC’s debt collection capacity and help the pursuit of lower value debts.

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A warning that in a new policy, HMRC is refusing Time to Pay (TTP) applications where dividends are used as a form of remuneration.

TTP, introduced in November 2008, normally allows companies and individuals to defer and pay by instalment any taxes that they owe, in a bid to assist with temporary cash flow problems. 

Read the rest of this entry

From 9 August 2011 tax payers  will no longer be able to use HMRC’s Bank of England accounts. Payments made into these accounts will no longer be accepted.

Unfortunately you may be charged a penalty and interest if your payment is not received by HMRC by the agreed deadline date so please take a note of the new arrangements.

Details of how to pay can be found on HMRC’s website

As financial planners, we are regularly asked about the pros and cons of making pension contributions versus making contributions to ISAs and the decision to invest in one over the other is not clear cut. Although the rules around how and when pensions can be taken have become far more flexible following the April 2011 rule changes, there are still several reasons why people rule out pensions as an investment. Read the rest of this entry

This week, HMRC has launched details of an ”initiative” for businesses with turnover above the VAT threshold of £73k but are not VAT registered to declare their unpaid taxes. Read the rest of this entry

On 7 June I had the pleasure of presenting a summary of the tax implications arising from the 2011 Finance Bill at the Association of International Accountants (AIA) Taxation and Tax Planning Conferences in London and Nottingham.
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As of 6 April 2011, employees can now claim 45 pence per mile for the first 10,000 miles of business use. This figure is an increase from the previous rate of 40 pence per mile. The 25 pence  per mile rate which applies to additional business miles per year is unchanged. These rates (45p and 25p) are called Approved Mileage Allowance Rates or AMAPs.

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National Savings & Investments have re-launched its popular inflation-linked savings certificates after they were withdrawn last year due to huge demand.

They are only available for a five-year term and these tax-free certificates are linked to the Retail Price Index, which was 5.3% in March 2011, plus there is a fixed rate of 0.5%.This equates to a potential gross return of 9.66% to a higher rate tax payer, assuming inflation continues at this level throughout the term.

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Taxpayers who started receiving their state pension in 2010/11 may not have this adjusted by HMRC in their PAYE code for 2010/11 and 2011/12.
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Critchleys are reminding businesses of changes to the rules for paying some of the most common taxes. Read the rest of this entry

I know I have commented in the recent past about the potential risk of rising inflation and trying to find products that provide an inflation linked return and sadly we still await the re-launch of the National Savings & Investments Index Linked certificates. I was therefore recently pleased to be informed about the new 5 year inflation protected Cash ISA being offered by Kent Reliance Building Society. Read the rest of this entry

The European Court of Justice (ECJ) was recently asked by German courts in “Manfred Bog and others” to decide whether hot food and drinks should be defined as a ‘supply of goods’ and therefore subject to a reduced VAT rate rather than a ‘supply of services’ which would have been standard rated.

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Last July, NS&I closed its doors to new customers wanting to buy index-linked savings certificates after fears that its targets would be overwhelmed by a flood of applications by savers desperate to safeguard their cash from inflation. It was therefore great to hear the announcement by George Osborne in the Budget recently, that the product is to be re-launched in 11/12. Read the rest of this entry

From 21 December 2012, all annuity providers will not be able to offer different annuity rates for men and women as this has been declared discriminatory in a recent European Union ruling.  This seems mad as in our opinion, calculating annuities based on a customer’s life expectancy on proven demographic and actuarial statistics is extremely fair. It’s a proven fact that women tend to live longer than men and thus it is reasonable for men’s annuities to be higher in compensation since it is expected to be paid for a shorter time. The ruling is stopping this and will affect many forms of insurance (car insurance too) although it’s the impact this decision will have on annuity rates that is causing the biggest cause for concern. Read the rest of this entry

We’ve seen a number of cases where HM Revenue & Customs (HMRC) have written to taxpayers, saying, “The last year we need you to complete a tax return for is the year ended 5 April 2010.” They then go on to say that they don’t intend to issue those lucky taxpayers with any tax returns in the future. Read the rest of this entry

Is the current annual pension allowance £255,000 or £50,000?

The answer is it depends, because when a pension contribution is made, it is tested against the annual allowance rules applicable in the tax year in which the pension input period (PIP) ends (for that particular pension scheme). It is the end of the PIP that is important not the date the contribution was made. Read the rest of this entry

The introduction of the FSA’s retail distribution review (RDR) from 2012 will be one of the most dramatic changes in financial services since the implementation of the Financial services Act in 1986. 

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