The Chancellor has announced today the Coalition Government’s first Budget.
This is not intended as an in-depth analysis of the Budget speech (we will leave that to the real experts) but we hope this quick snapshot helps you gain a quick grasp on the key points:
Tax
VAT to increase to 20% from 4 January. Current zero-rated items to remain exempt for whole of current Parliament.
CGT to increase for higher-rate taxpayers to 28% from 23 June 2010. CGT to remain 18% for basic-rate taxpayers and the CGT tax-free allowance to remain £10,100 this year.
The CGT entrepreneurs rate of 10% to be extended to the first £5 million of lifetime gains.
Personal income tax allowance to be increased by £1,000 in April 2011 to £7,475. Higher rate threshold to remain frozen until 2013.
The April 2011 introduction of taper on higher rate tax relief on pension contributions by high earners to be reviewed.
Insurance premium tax to be increased from 2011. Higher rate to be 20%, standard rate 6%.
Councils that propose low council tax increases to be offered additional funds to allow them to freeze the tax for one year from April 2011.
State benefits and pensions
Benefits, tax credits and public service pensions to be increased in line with CPI rather than RPI from 2011.
Basic state pension to be linked to earnings from April 2011.
Pensions guaranteed to rise in line with earnings, prices or 2.5%, whichever is greatest.
The increase in the state pension age to 66 to be accelerated.
Child benefit to be frozen over the next three years.
Tax credits to be reduced for families earning over £40,000 from 2011.
Child element of the child tax credit to be increased by £150 above indexation in 2011.
Sure start maternity grant to go to the first child only.
Cap on housing benefit to be introduced - from £280 a week for a one-bedroom property to £400 a week for four bedrooms or larger.
Medical assessment for Disability Living Allowance to be introduced from 2013 for new and existing claimants.
Businesses
Corporation tax to be cut to 27% in 2011 and by 1% a year over the following three years to 24%.
Small companies rate to be cut to 20% in 2011.
Employer’s NI threshold to increase by £21 a week above indexation in April 2011.
Tax relief for video games industry to be scrapped.
Bank levy to be introduced in January 2011 to apply to balance sheets of UK banks and building societies and UK operations of foreign banks.
Duties
No increases in fuel, alcohol and tobacco duties.
Planned increase to duty on cider by 10% above inflation reversed.
Public sector pay
Two year public sector pay freeze to be introduced on staff earning more than £21,000.
People earning less than £21,000 to receive a flat pay rise worth £250 in each of the two years.
Internet
Planned landline tax to be scrapped.
Showing posts with label financial adviser. Show all posts
Showing posts with label financial adviser. Show all posts
Tuesday, 22 June 2010
If in doubt, disclose
When taking the decision to buy any type of protection policy, you do so to gain the peace of mind that, should something happen, your income or your family will be covered. However, we are continually hearing that policy providers find ways to turn down claims - and always this happens just when the people concerned needed the money most. So why would a provider turn down a claim? The primary reason will be that the insurer finds some incorrect, missing or incomplete information on the original application forms. This is called 'non-disclosure' and examples include details such as claiming to be a non-smoker, reducing your weight significantly, not checking the status of a dangerous hobby (sailing, skiing or maybe even horseriding) or simply not owning up to an existing medical condition, even if you thought at the time it was irrelevant. If such details are uncovered, they can make any policy you thought you bought in good faith, completely invalid. For this reason, particularly for any sickness related plans (eg: critical illness or income protection), it is sensible to seek Independent advice. Such plans may all carry the same name but the conditions they cover and the exact definitions they use for those conditions can vary widely. Covering yourself against any unforseen circumstance can appear to be an expensive business when you first start the conversation. It is therefore absolutely vital that you get the type of cover right - and don't give your insurer any reason to be able to get out of your claim should you ever have reason to need it.
Friday, 18 June 2010
Planning for a market downturn
As an investor, you understand that different asset classes and industry sectors are liable to turn against you from time to time. Despite equities' long-term potential, both the meltdown of the 'dot.com' boom and, more recently, the credit crunch fallout demonstrate things are much less certain in the short term. Similarly, bonds are viewed as medium to lower-risk investments, particularly when economic growth is on the wane. However, holders of some bonds over the period since the crunch first hit would have suffered. Many investors, faced with such downturns, tend to panic. They see only the shortterm loss on their portfolio balance sheet and forget their reasons for investing. Sadly, this is the worst thing they can do – and it is why planning at the outset of any investment is worth every minute spent. If you know why you are investing and understand fully the risks involved, market downturns should never have such an impact. If you are far-sighted and have a degree of nerve, they can even be an opportunity. Such downturns can be wide-ranging and indiscriminate, meaning the share prices of high-quality companies can suffer alongside lower-quality peers. This gives canny investors the opportunity to add to their portfolio at bargain prices. However, for most, the best strategy is simply to protect yourself while the market settles down. Nothing in a portfolio is more valuable than the time you spend achieving balance, diversification and cementing that long-term objective.
Wednesday, 21 April 2010
Abolishment of Contracting Out
On 16 March 2010, the government confirmed that contracting-out under defined contribution pension schemes will be abolished from 6 April 2012.
Angela Eagle, minister for pensions and the ageing society, said abolition was a simplification measure as contracting-out for defined contribution schemes was a complex issue. She said: "It has become increasingly difficult to determine that a scheme member would be better off by contracting-out of the additional state pension."
The announcement means after the 2011/12 tax year people in defined contribution schemes will no longer be able to contract-out of the second state pension (S2P). For those who are contracted-out through a personal or stakeholder pension, no further national insurance rebates will be paid to their scheme after the one for the 2011/12, which is likely to be paid by the Department for Work and Pensions around October 2012.
Those in contracted-out money purchase schemes will start to pay higher national insurance contributions from April 2012 onwards.
People who have been contracted out will start to build up entitlement to S2P from 6 April 2012 onwards.
Benefits built up by being contracted-out will remain in the pension scheme until the individual transfers these to an alternative arrangement or benefits are paid.
Any other contributions being paid to the pension scheme will not be affected.
Angela Eagle, minister for pensions and the ageing society, said abolition was a simplification measure as contracting-out for defined contribution schemes was a complex issue. She said: "It has become increasingly difficult to determine that a scheme member would be better off by contracting-out of the additional state pension."
The announcement means after the 2011/12 tax year people in defined contribution schemes will no longer be able to contract-out of the second state pension (S2P). For those who are contracted-out through a personal or stakeholder pension, no further national insurance rebates will be paid to their scheme after the one for the 2011/12, which is likely to be paid by the Department for Work and Pensions around October 2012.
Those in contracted-out money purchase schemes will start to pay higher national insurance contributions from April 2012 onwards.
People who have been contracted out will start to build up entitlement to S2P from 6 April 2012 onwards.
Benefits built up by being contracted-out will remain in the pension scheme until the individual transfers these to an alternative arrangement or benefits are paid.
Any other contributions being paid to the pension scheme will not be affected.
Tuesday, 20 April 2010
Social Care White Paper is welcome but people entering care will continue to need proper financial advice.
The Social Care White Paper seeks to set up a National Care Service (NCS). However, even if Labour wins the next two elections, it will take at least 5 years to conduct a proper examination of the funding options and delivery of a NCS. This means that many of the people entering residential care homes in the next 4 years will have died by the time a NCS is established.
These people urgently need care funding advice now. This issue is significant with 130,000 people entering residential care homes in England each year, of which 41% or 53,000 people are wholly self funding. Of this number only 7,000 receive proper financial advice about how to fund their care needs.
And this does not include the 20,000 co-funders or the hundreds of thousands of people who require domiciliary care.
As the ageing population rapidly grows IFAs will continue to provide vital specialist financial advice, although as a consumer you should ensure that you seek out an adviser that is appropriately qualified, holding the CII CF8 qualification, or similar.
These people urgently need care funding advice now. This issue is significant with 130,000 people entering residential care homes in England each year, of which 41% or 53,000 people are wholly self funding. Of this number only 7,000 receive proper financial advice about how to fund their care needs.
And this does not include the 20,000 co-funders or the hundreds of thousands of people who require domiciliary care.
As the ageing population rapidly grows IFAs will continue to provide vital specialist financial advice, although as a consumer you should ensure that you seek out an adviser that is appropriately qualified, holding the CII CF8 qualification, or similar.
Friday, 9 April 2010
What can parents do to save enough for their children's higher education?
Universities are expected to cut their budgets. There are also calls to stop subsidised tuition fees for higher earning families. Experts predict the change will be aimed at households with annual incomes of more than £25,000, so the middle classes will be hardest hit by any possible changes. With fees likely to rise, and the lack of likely financial support, the rising costs of living, and so on, is it surprising that so many students graduate with debts in excess of £20,000? The debate for many parents is whether or not they should be supporting their children.
When considering university education, as a parent you should be asking:
1. What will it cost to send my child to university for a year? As a rough guide you might consider:
Tuition fees £3,000
Accommodation £5,000
Books, beer and beans on toast £4,000
TOTAL £12,000
2. Can I afford it?
3. Before committing a great deal of hard-earned cash, is your child suited to university and will future employers see the benefit of this huge investment once your child is “released” into the big wide world?
So the question is, how best to provide the right amounts, at the right time in the most tax-efficient, least volatile and secure manner.
Cash provides security, but in today’s low interest rate climate, most deposit accounts offer little potential for growth. You could consider Cash ISAs, where the interest will be payable with no further liability to income tax, but again you need to do your homework to ensure you get a decent rate, and review it regularly.
Investments in equities over the long term might prove to be a more favourable choice. But, that all assumes you have time. Our advice would be to start as early as you can – the longer you have to save the less you need to put aside each month.
Some will favour child trust funds, but I have to say that I am not a fan of giving children control of large sums at a young age. They might prefer the beach in Bali, or might have some awful boy/girlfriend in tow! If the money is in the parent’s name, they retain control. You may agree to fund Bali or the awful boy/girlfriend, but it will be your choice!
When considering university education, as a parent you should be asking:
1. What will it cost to send my child to university for a year? As a rough guide you might consider:
Tuition fees £3,000
Accommodation £5,000
Books, beer and beans on toast £4,000
TOTAL £12,000
2. Can I afford it?
3. Before committing a great deal of hard-earned cash, is your child suited to university and will future employers see the benefit of this huge investment once your child is “released” into the big wide world?
So the question is, how best to provide the right amounts, at the right time in the most tax-efficient, least volatile and secure manner.
Cash provides security, but in today’s low interest rate climate, most deposit accounts offer little potential for growth. You could consider Cash ISAs, where the interest will be payable with no further liability to income tax, but again you need to do your homework to ensure you get a decent rate, and review it regularly.
Investments in equities over the long term might prove to be a more favourable choice. But, that all assumes you have time. Our advice would be to start as early as you can – the longer you have to save the less you need to put aside each month.
Some will favour child trust funds, but I have to say that I am not a fan of giving children control of large sums at a young age. They might prefer the beach in Bali, or might have some awful boy/girlfriend in tow! If the money is in the parent’s name, they retain control. You may agree to fund Bali or the awful boy/girlfriend, but it will be your choice!
Tuesday, 30 March 2010
So what does the budget mean for you?
A VERY brief summary of budgetary announcements made last week, and also a reminder of those already made that will take effect from 6th April:
- income tax personal allowances remain unchanged for 2010/11
- the National Insurance Lower Earnings Limit will be increased from £95 to £97
- a reminder that for those with adjusted net income over £100,000, their personal allowance will be reduced by £1 for every £2 over the limit
- a new tax rate of 50% will be applied on those earnings over £150,000
- for dividend income, the new tax rates will be 10%, 32.5% and 42.5%
- the ISA limit will increase to £10,200 from 6th April 2010, of which a maximum of £5,100 may be invested to a cash account
- from 6th April 2011 the higher rate of tax relief on pension contributions will be restricted for those with gross income over £150,000. Anti-forestalling rules apply in the interim
- consideration is being made for removing the dafault retirement age of 65, although no changes will come into place before April 2011
- inheritance tax thresholds will remain frozen at £325,000 until the end of tax year 2014/15, scrapping previously announced increases to the threshold
- first time buyers will pay no stamp duty on properties worth less than £250,000
- stamp duty on properties over £1,000,000 will increase from 4% to 5%
- to encourage greater financial inclusion, more people are to be given access to setting up bank accounts
- legislation is being introduced to provide for larger penalties for taxpayers failing to provide a full account of their income and capital gains relating to offshore investments
- capital gains tax will remain at 18%, with the annual exemption being frozen at £10,100 for 2010/11
- income tax personal allowances remain unchanged for 2010/11
- the National Insurance Lower Earnings Limit will be increased from £95 to £97
- a reminder that for those with adjusted net income over £100,000, their personal allowance will be reduced by £1 for every £2 over the limit
- a new tax rate of 50% will be applied on those earnings over £150,000
- for dividend income, the new tax rates will be 10%, 32.5% and 42.5%
- the ISA limit will increase to £10,200 from 6th April 2010, of which a maximum of £5,100 may be invested to a cash account
- from 6th April 2011 the higher rate of tax relief on pension contributions will be restricted for those with gross income over £150,000. Anti-forestalling rules apply in the interim
- consideration is being made for removing the dafault retirement age of 65, although no changes will come into place before April 2011
- inheritance tax thresholds will remain frozen at £325,000 until the end of tax year 2014/15, scrapping previously announced increases to the threshold
- first time buyers will pay no stamp duty on properties worth less than £250,000
- stamp duty on properties over £1,000,000 will increase from 4% to 5%
- to encourage greater financial inclusion, more people are to be given access to setting up bank accounts
- legislation is being introduced to provide for larger penalties for taxpayers failing to provide a full account of their income and capital gains relating to offshore investments
- capital gains tax will remain at 18%, with the annual exemption being frozen at £10,100 for 2010/11
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