Spring 2015
End of year tax planning This year, there are good reasons to take action before the tax year ending 5th April 2015, as some opportunities will be lost after that date. Pensions The new pension freedoms should widen the appeal of pension schemes. From a tax perspective, they will remain the most tax efficient savings vehicle and should be at the centre of your tax planning. If you are intending to access the new income flexibility from 6th April you should take advice to ensure that you do not un-intentionally lose a large portion of your fund in tax. If you want to take advantage of the flexibility while maintaining pension contributions you may wish to consider boosting your fund before April. Accessing the new flexibility for the first time from 6th April 2015 will see your annual allowance fall from £40,000 to £10,000. Those already in drawdown will continue to have an annual allowance of £40,000 as long as their withdrawals remain within prescribed limits.
UK resident individuals are entitled to put £3,600 into a pensions plan each year even if they have no earnings and pay no tax. Tax relief reduces the contribution to £2,880. If you earn more than £3,600 you can pay more into a pension with tax relief at your highest rate. It may be possible to carry forward unused annual allowances to make pension contributions in excess of £40,000. Action - consider making a personal pension contribution It is also worth reviewing your savings and deposit accounts. You may be saving towards goals that you have for your retirement, or to leave money to your family after your death. Savings could instead be invested in a pension fund, benefiting from tax efficient growth, and qualifying for tax relief. The new pensions flexibility means that you can access your retirement fund without restriction (but subject to tax) and you can also pass your pension fund to your spouse or beneficiaries free of inheritance tax. Action - review your savings and investments