How will you achieve your investment goals?

Gaining prudent exposure to stock exchange investment without putting all your eggs in one basket

Investment trusts are a way of gaining prudent exposure to stock exchange investment but without putting all your eggs in one basket. They are often categorised into country and regional funds and sub-divided further into funds that invest only in certain industry sectors. Continue reading “How will you achieve your investment goals?”

Would you need to get back to work quickly if you were off sick?

Over half of UK workers are unable to
survive financially for more than three months

New research from Aviva reveals that over half of UK workers (52 per cent) would be unable to survive financially for more than three months if they were off work with an illness. Around a third (30 per cent) say they would survive for less than a month. Less than one in ten (9 per cent) say they would remain solvent for a year or more. Continue reading “Would you need to get back to work quickly if you were off sick?”

Identifying the most appropriate solution for you

What should you do to reduce, or
even eliminate, an Inheritance Tax burden?

Inheritance Tax (IHT) in the UK may be one of life’s unpleasant facts but IHT planning and professional advice could help you pay less tax on your estate. With the current thresholds set to remain at £325,000 for individuals and £650,000 for married couples and registered civil partnerships until 2014, now is the time to consider reviewing your potential liability and finding out what you could do to reduce, or even eliminate, this burden. Continue reading “Identifying the most appropriate solution for you”

Autumn Statement

The state of the economy and the government’s future plans

On 29 November 2011, the Chancellor of the Exchequer, George Osborne, announced the Autumn Statement, which provided an update on the government’s plans for the economy based on the latest forecasts from the Office for Budget Responsibility. These are the key announcements from his speech. Continue reading “Autumn Statement”

Working for financial need rather than enjoyment

More people will have to work later in life
to maintain an adequate standard of living.

Some 6.1m of today’s over-50s expect to work past the current state retirement age, according to data from LV=’s Working Late Index. The report reveals that, on average, those planning to work past state retirement age will work for an extra six years, which could see them retiring at age 71 for men and 66 for women based on today’s retirement age. Continue reading “Working for financial need rather than enjoyment”

Get your finances fit for 2012

Year-end tax planning tips

With further tax increases likely on the horizon, there really is no time like the present to take a step back and look at how you could reduce your taxes and improve your financial planning strategy.

The end of the current 2011/12 tax year is 5 April. We have provided an overview of the key areas you may wish to consider that could help you achieve a more secure future for you and your family.

Make use of personal allowances

Every person in the UK is allowed to earn a certain amount of money each year without paying income tax, known as a personal allowance. This tax year, the personal allowance is £7,475, with higher allowances available to those aged 65-74 (£9,940) and age 75 and over (£10,090). If you become 65 or 75 during the year to 5 April 2012, you are entitled to the full allowance for that age group. If you earn income above £100,000 you start to lose the personal allowance (at a rate of £1 for each £2 you earn above this limit).

If you are married and one partner is not working, if appropriate, it could be beneficial to transfer savings accounts to them, so that you pay less income tax as a couple. If you don’t make use of your personal allowance in any tax year, you cannot carry it forward to the next year.

Use your Individual Savings Account (ISA) allowance
ISAs allow you to save tax-efficient money. Within an ISA you pay no capital gains tax and no further tax on the income. You don’t even need to declare ISAs on your tax return. This tax year, you can invest up to £10,680 in a Stocks and Shares ISA or, alternatively, you can invest up to £5,340 in a Cash ISA and the balance in a Stocks and Shares ISA. Any allowance not used by the 5 April deadline will be lost forever. The value of tax savings depends on your circumstances and tax rules can change over time.

Top up your pension contributions

The annual allowance for the tax year 2011/12 is £50,000, inclusive of your own contribution and any other amounts paid into an approved pension scheme. Contributions paid by you to a personal pension plan or a stakeholder pension scheme are made net of 20 per cent basic rate tax. This means that for every £100 you want to save, you pay only £80. Tax relief of £20, topping your contribution up to £100, is then added by HM Revenue & Customs (HMRC).

If you are a 40 per cent higher rate tax payer, you may be able to claim additional tax relief. If you are a 50 per cent additional rate tax payer, you may also be able to claim additional tax relief at your highest rate. Depending on how much you earn over the higher rate tax band, and your level of contribution, any additional rate tax relief would range between a further 1 per cent up to a maximum of 30 per cent.

Plan for Inheritance Tax (IHT)

Effective IHT planning could save your family hundreds of thousands of pounds. If you haven’t done anything about a potential IHT bill, now is the time to take action. Currently, IHT is charged at 40 per cent on anything you leave over £325,000 when you die (£650,000 for married couples or registered civil partnerships). With rising property prices in recent years, this has resulted in more people being subject to IHT.

Start by writing a will, making it clear to whom you want to leave your money and possessions when you die. You may then want to try and minimise any potential IHT bill by giving regular small gifts away. Currently, you can give away a lump sum of up to £3,000 in each tax year without paying IHT – known as your ‘annual exemption’ – or £6,000 this year if you haven’t used last year’s allowance.

You also have a ‘small gifts exemption’, which means that you can make small gifts of £250 each year free of IHT. There is no restriction on the number of small gifts but they must each be to separate individuals. You cannot use your annual exemption and your small gifts exemption together to give someone £3,250.

Reduce your capital gains tax (CGT) liability

If you have made a taxable gain from the sale of property, shares, investments, businesses or any form of capital gain, make sure you don’t make unnecessary CGT payments. CGT is a tax charge that arises from the disposal of assets, such as shares or buy-to-let properties, charged at 18 per cent for lower and 28 per cent for higher rate tax payers. Every individual has an annual CGT-free allowance, which currently stands at £10,600 for the 2011/12 tax year.

The limit applies to each individual, so if you are married or in a registered civil partnership you each have an annual exemption and should ensure that each of you maximises your CGT-free gains.

There are different ways to reduce CGT bills, for example, equalisation or joint ownership of investments will transfer income to the lower-taxed one. This can be done CGT-free for married couples and registered civil partnerships. By transferring an asset into joint names, you could both make use of your tax-free allowance so that up to £21,200 of any gain can be tax-free in the current tax year. But the transfer to your spouse or partner must be a genuine outright gift, so this might not be a suitable strategy for everyone.

It may also be appropriate for some unmarried couples to equalise non-CGT assets such as bank accounts, which could mean that it becomes possible to equalise or transfer assets on whichever gains are less than their annual CGT exemption. Even if an asset is only put into joint ownership the day before it produces income – for example, through interest or a dividend – that income will still be split equally between both owners.

If you immediately sell employee shares that you get through a Save-As-You-Earn share option scheme, company share option scheme or enterprise management incentive scheme, you may have a CGT bill. Consider selling in several tranches, so that each year’s gain is within your annual tax-free allowance.

The hunt for income continues apace

33 per cent of investment companies yielding more than FTSE 100 average yield

While the hunt for income continues apace, recent figures released by the Association of Investment Companies (AIC) demonstrate that 33 per cent of conventional investment companies are yielding more than the FTSE 100 average annual yield of 3.2 per cent. Of these, 66 per cent are trading at a discount to net asset value. Continue reading “The hunt for income continues apace”

Individual Savings Accounts

A tax-efficient wrapper surrounding your fund choices

Individual Savings Accounts (ISAs) are not actual investments; they are a tax-efficient wrapper surrounding your fund choices. When you make an ISA investment you pay no income or capital gains tax (CGT) on the returns you receive, no matter how much your investment grows or how much you withdraw over the years. Continue reading “Individual Savings Accounts”

Investment bonds

A range of funds for the medium- to long-term

Investment bonds are designed to produce medium- to long-term capital growth, but can also be used to give you an income. They also include some life cover. There are other types of investment that have ‘bond’ in their name (such as guaranteed bonds, offshore bonds and corporate bonds) but these are very different. With an investment bond, you pay a lump sum to a life assurance company and this is invested for you until you cash it in or die. Continue reading “Investment bonds”