As the tax year end will soon be upon us it makes sense to start finalising plans in order to make the most of end of year opportunities available to you or your clients. We will be delighted to discuss and advise on any requirements.
Retirement Planning -Carry Forward
Carry forward – use it or lose it!
Carry forward is a new rule introduced to help compensate for the new lower £50,000 annual pension allowance. It allows clients to carry forward unused pension contributions from three previous consecutive tax years on a rolling basis.
The new rule is back-dated so, anyone who contributed less than £50,000 into their pensions during tax year 2008/2009, from now until 5 April 2012 is their last chance to use up the remaining allowance before it is forfeited for good.
Retirement Planning- Fixed Protection
Fixed Protection – use it or lose it!
On 6 April 2012, the lifetime allowance will be reduced from £1.8 million to £1.5 million. Fixed Protection makes sure clients with pension funds already in excess of the new limit, or those with funds expected to exceed it, are not unfairly penalised. The deadline for Fixed Protection applications is 5 April 2012 and cannot be moved.
Inheritance Tax Planning
Exemptions- use it or lose it!
Each individual has an Inheritance Tax free allowance known as the Nil Rate Band – subject to some exceptions, any assets held by you in excess of the Nil Rate Band are taxed at a rate of 40% on your death. The Nil Rate Band is currently £325,000 and is to remain at this level until at least 2014/15. However, the transferable Nil Rate Band now provides a maximum Nil Rate Band (on the basis of current figures) between couples of £650,000.
Although the transferable Nil Rate Band takes many couples outside the scope of Inheritance Tax, there are still plenty of tax planning opportunities for those who remain within the IHT trap, which could, and should, be utilised before the end of the tax year.
One particular strategy is regular gifts from excess income – if you find that you or your clients are accumulating income and increasing the assets in your estate which may ultimately be subject to Inheritance Tax, you should consider making regular gifts from your income. HMRC enforce the rules for this exemption rigorously and the gifts must be from excess income and regular to qualify.
Exiting the UK
For those who have exited the UK or intend to do so in the near future formalising the arrangement to coincide with the tax year end can often be a sensible approach. Whilst this may not correspond with the tax year in your intended country of residence it makes sense to formally exit UK on 6th April if practical.
More and more countries are taking a tough line on those expatriates who live as financial nomads deliberately flaunting residency rules to avoid paying local taxes. What is even more sad is that many of these individuals might well be better off financially by paying tax in their new jurisdiction and rearranging their investments and pensions to benefit from local rules.
To discuss any of the areas highlighted above, or any other areas of financial concern that you or your clients might have please either telephone +350 200 50982 in the first instance or email wealth @ fiduciarywealth.eu.
Note that for clients living in Spain we will be holding a series of Open Days on Costa del Sol and Costa Blance starting in mid February. You can arrange a meeting by simply clicking on the “Events” tab on our main website www.fiduciarywealth.eu. For UK based clients and intermediaries we will be in London 5th to 9th March and have some limited availability for meetings during that week. To arrange an appointment contact us either by telephone or email.