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In each edition of 'Your Money Matters' we aim to provide you with one or two financial strategies we follow when advising clients.
New Tax Levels - 6 April 2012
Following the recent budget there has been considerable coverage of the Chancellor's decision regarding personal allowances and in particular age allowances from the start of the 2013/2014 tax year BUT we do need to remember that there have been changes in respect of the new tax year starting on 6 April 2012.
- Individual personal allowances for those under 65 have now risen to £8,105 from £7,475.
- For the over 65's the personal allowance has risen to £10,500 and for those over 75 £10,660. The previous levels were £9,940 and £10,090 respectively.
- However, please remember that if you are over 65 and your income is in excess of £25,400 (£24,000 for the previous tax year) then the Inland Revenue will reduce your allowance by £1 for every £2 of income that exceeds this income limit.
- For those earning in excess of £100,000 the personal allowance is also reduced by £1 for each £2 by which income exceeds this amount (irrespective of your age).
- The rates of income tax have also changed:
- The first £34,370 of income is now taxed at 20%, compared with £35,000 for the previous tax year.
- 40% tax applies from this level up to £150,000 and thereafter it is 50% and (as we already know) this will change from the next tax year to 45%.
Clients who are over 65 should firstly check that they are paying the correct level of tax and please do not assume that the Inland Revenue know your date of birth and apply the correct level of personal allowances.
An investment bond is an excellent way of helping reduce the levels of income tax you pay if you are over the age of 65, as an investment bond does not produce income only growth within the investment.
If you are affected by the age allowance limit, please consult your Independent Financial Adviser here at Firth & Scott to see whether we can help reduce your tax liability.
ISA Allowances - Tax Year 2012/2013
ISA allowances have increased again for the new tax year. The maximum investment that can be made is now £11,280. This is an increase from £10,680 for the previous tax year but please remember that the maximum that can be paid into the Cash element is £5,640.
So for example, if you had £11,280 to invest you could if you wished invest say £2,000 into a Cash ISA and £9,280 into an Investment ISA or a maximum of £5,640 into the cash version and the same amount into the investment version.
There was no change in the investment limit for Junior ISA's, which is £3,600. These are available for children under the age of 18 (unless they already have a Child Trust Fund).
Clients who move abroad often ask :
"Can I continue to contribute to an ISA effected in the UK?"
The ruling on this is that to open an ISA you must be resident and ordinarily resident in the UK for tax purposes. (The only exception to this is members of the military and Government employees who are sent to work abroad).
Once you have emigrated permanently you will not in addition, be allowed to open a new ISA or continue to contribute to one in existence. Depending on your country of permanent residency, you may become liable to tax on the interest that you earn on the ISA in the UK.
Articles written by Steve Hopkins FCII. | 
Hello and welcome to the latest edition of 'Your Money Matters'. 
