PENSIONS
 
Saving for retirement is very important and contributing to a pension scheme provides you with significant tax reliefs.
 
All individuals can obtain tax relief on personal pension contributions of £3,600 gross made each year with no reference to earnings.  Contributions over this amount can be made up to the level of earnings.
 
However with the change in the basic rate of income tax from 6th April 2008 it will in future cost you quite a bit more to contribute the same amount to your pension. 
 
       
 
To get a gross amount of £1,000 into your pension before 5th April 2008 it will cost you £780 but after April this cost goes up to £800, that’s an increase of over 2½% (£2.56 per £100).  Yet another hit on pension contributions and your pocket!
 
Pension contributions are also taken off earnings for tax credit purposes, therefore a large contribution could increase your tax credit claim.
 
Companies can also make contributions on behalf of directors or employees as part of their remuneration package and receive corporation tax relief.  This is a particularly good way of providing remuneration without tax and national insurance costs to the company or individual.
 
With the increased cost of pensions from 6th April 2008 you can’t afford to delay in making a contribution therefore we suggest you should maximise your contributions in the 2007/08 financial year.
 
You need to do it now!
 
Contact us today to make the necessary arrangements.

SAVINGS RATES
 
BAD for Borrowers – GOOD for Savers!
 
This is not all bad news.
 
For savers there are terrific one year fixed rate savings at 6.95%. Fixing your rate at this high rate could be worth consideration.
 
Call us today for an no-obligation consultation regarding your savings and investments with James Cook from THR Financial Services Ltd or email jamesc@thr.co.uk

INVESTMENTS
 
ISA LIMITS (Individual Savings Accounts)
 
Have you used your allowance this year?
 
ISA's are investments free from income tax and capital gains tax. Each year you can invest up to £7,000 in a maxi ISA (either all in stock and shares, or £3,000 in cash with the balance in stocks and shares), or £3,000 in a mini ISA (cash).
 
From 6th April 2008 the ISA limits are being increased so that each year you can invest up to £7,200 in a stocks and shares ISA (either all in stocks and shares or £3,600 in cash with the balance in stocks and shares), or £3,600 in a cash ISA. The names Mini and Maxi ISA's are being replaced by Cash ISA's and Stocks and Shares ISA's from 6th April 2008.
 
Use your FULL ALLOWANCE and use it now. As an ISA is tax free, using your allowance either with cash or by redirecting it from other savings or investments, will help to reduce the amount of income tax you pay as well as any future capital gains tax (CGT) liabilities.
 
WARNING
When choosing between investments always consider the differing levels of risk and your requirements for income and capital in both the long and short term. An investment strategy based purely on saving tax is not advisable.
 
Contact us today to make use of your ISA allowance before 5th April 2008

DISCOUNTED GIFT TRUSTS (DGT)
 
These are still a great way to have your cake and eat it, but you need to act quickly. With the Budget coming up shortly (12th March) this could all change.
 
With a DGT you can remove capital from your estate to avoid inheritance tax whilst still receiving the income. All growth on the investment is also out of your estate.
 
Don't miss out on this great tax saving opportunity. Call us today.

CAPITAL ALLOWANCES AND EXPENDITURE
 
(a) Enhanced Capital Allowances (ECA's)
 
 ECA's allow businesses to claim 100% first year capital allowances on certain energy saving equipment. This enables a full write-off of expenditure against profits in the year of purchase. This can give good cashflow advantages.
 
Qualifying equipment includes boilers, lighting, motors, drives, combined heat and power, thermal screens, insulation, refrigeration and some water technologies. Energy efficient cars with CO₂ of less that 120g/km also qualify for 100% relief.
 
For more detailed information visit the ECA's website at www.eca.gov.uk or contact us.
 
(b) Annual Investment Allowances (AIA)
With effect from April 2008 every business will receive full relief on the first £50,000 of qualifying plant and machinery expenditure.
 
From April 2008 it is proposed that the allowances for capital expenditure will be changed as shown in the table below:
 
               
 
 
Please note the following:
1.  Qualifying plant and equipment does not include motor cars.
2.  The £50,000 AIA will be shared between group companies and related business.
3.  The £50,000 AIA will be available in addition to the 100% first year allowances on energy efficient plant.
4.  The £50,000 AIA is not likely to be available for partnerships that include a company.
 
As you can see there are significant changes to the rates of capital allowances from April 2008 (1st April for companies, 6th April for unincorporated businesses) therefore it is essential that if you are contemplating any capital expenditure in the next few months you contact us now to ensure that you maximise relief by getting the timing right. 
 
For unincorporated businesses increased allowances mean a reduction in your taxable profit for tax credit purposes therefore getting the timing right could also increase your tax credit claim.

WILLS
 
With the changes introduced in October 2007 regarding the transferability of the IHT Nil Rate Band between spouses or civil partners you should review your wills to see if they are still tax efficient.
 
If your existing Will includes a Discretionary Trust that accepts an IOU from the surviving spouse you could end up with more tax to pay on the death of the surviving spouse.
 
Every situation is different therefore you need to take advice to ensure that your Wills are still tax efficient.
 
Contact us today if you would like to review your Wills.

TAX SAVING TIPS FOR THE FAMILY
 
Married couples and civil partners
Simple planning can be undertaken for married couples and civil partners by ensuring that income producing assets are held correctly. For example, a transfer of £1,000 of savings income from a higher rate tax paying spouse to one with minimal income could save up to £400 per year.
 
For taxpayers over the age of 65 care must be taken to maximise personal allowances by balancing income between spouses wherever possible to keep each individual below the income threshold, currently £20,900. When income increases above this level, age related allowances are reduced. You may wish to consider switching to non-taxable capital growth investments to avoid losing out on these allowances. 
 
Contact us if you want to know more.

CHARITABLE GIVING
 
Charities can currently claim back 22% of donations made, with an individual claiming back an additional 18% from the taxman if they are a higher-rate taxpayer.
 
With the reduction in the basic rate of tax from 22% to 20% from 6th April 2008, the amount of tax reclaimable by the charity will reduce, therefore you may wish to increase the level of your donations. Always remember to keep a record of the gifts made.
 
Please note that charitable donations are deducted from your income for the purposes of tax credits, therefore a donation could increase your tax credit claim.
 
If you are over 65 the donations you make reduce your income for the purpose of the £20,900 income limit for full age allowances.

CAPITAL GAINS TAX
 
As we have advised previously, the capital gains tax regime is changing with effect from 6th April 2008. For disposals made after this date indexation and taper relief will be abolished and gains will be taxed at a flat rate of 18% regardless of other income levels. The annual exemption (currently £9,200) will remain.
 
For business assets, taper relief is being replaced by Entrepreneur's Relief which reduces gains of up to £1m by 4/9ths, resulting in an effective rate of 10%.
 
Entrepreneur's Relief is more difficult to obtain than business asset taper relief but in broad terms it should apply to disposals of whole or part of a business, disposals of assets used in a business that has already ceased, or shares in qualifying companies owned by individuals who are officers or employees of the company and have owned at least 5% of the shares and voting rights for more than a year.
 
Contact THR for further information or if you think you may be affected.

ENTREPRENEUR'S RELIEF AND LOAN NOTES
 
If you have previously sold shares in a company in exchange for QCB loan notes you should obtain Entrepreneur's Relief on the disposal of those loan notes provided that the original share sale would have qualified for the relief.
 
Full details of Entrepreneur's Relief should be available after the Budget on 12th March 2008.

If you are an employer the end of the tax year marks the start of the form-filling season! Here’s a reminder of important deadlines for sending information (and money!) to HMRC.
 
19th April 2008 – Interest will run on any 2007/08 PAYE, NIC, student loan and CIS deductions not paid over by this date (22nd for electronic payments).
 
19th May 2008 – Employers’ year end returns (P35 and P14s) due for submission. This year, there is a tax free incentive for small employers of £100 for submitting the return by internet.
 
31st May 2008 – Employees must be provided with their P60 (certificate of pay and tax deducted).
 
6th July 2008 – Submission of P11Ds and P9Ds which show details of expenses paid and benefits provided to employees and directors. There is a penalty for submission of late or incorrect returns. Employees must also be given a copy of their P11D/P9D by this date.
 
19th July 2008 – Class 1A NIC for 2007/08 on most benefits in kind provided to employees must be paid. Interest runs from this date on late payments.
 
19th October 2008 (22nd for electronic payments) – PAYE settlement agreement liabilities for 2007/08 are due, together with Class 1B NIC. Interest runs from this date on late payments.
 
Electronic filing and payment
 
All employers with at least 50 employees must file their end of year returns electronically. Employers with fewer than 50 employees do not have to start online filing until 2009/10 but there are tax-free incentives for early take up. Large employers (those with at least 250 employees) must also pay their PAYE electronically.
 
Talk to us if you are interested in using a PAYE settlement agreement to account for the tax due on minor employee benefits. It can reduce administrative hassle and save time!