Motivating Mum UK

by Rachel Efetha

 Image courtesy of  FreeDigitalPhotos.net

As the Government’s austerity programme drags on, with an end date now pushed out to 2018, year-end tax planning for individuals and businesses has become more important than ever.

Recent tax changes announced in the various Budgets and Autumn Statements of the last couple of years have meant that there are many new and important tax saving opportunities you may consider acting on well in time for the end of the tax year on Friday, 5 April 2013. If you want to be really cautious, you might act before the Spring Budget on 20 March, just in case George Osborne makes some surprise announcements in his set piece of the year.

Pensions

The Chancellor made some important announcements about pensions in the Autumn Statement, but most will not take effect until 6 April 2014. This does not mean that they can be ignored in terms of 2012/13 planning.

For example, the lifetime allowance – the maximum tax-efficient worth of all your pension benefits – will now fall from £1.5 million to £1.25 million. At the same time, there will be a new transitional protection introduced, which will allow you to retain the £1.5 million, provided you make no further contributions or accrue no further pension benefits. There is therefore an opportunity to maximise your pension fund now before seeking protection by April 2014.

Regardless of whether the lowered lifetime allowance will affect you, Friday, 5 April 2013 is the deadline for making a contribution to mop up any of your unused 2009/10 annual allowance. It is also the last chance to take advantage of 50% tax relief on contributions – the additional rate falls to 45% in 2013/14.

Individual Savings Account (ISAs)

The 2012/13 ISA contribution limit is £11,280, which will rise to £11,520 from 6 April 2013. The Junior ISA has a limit of £3,600, which will increase by £120 at the same time. There are four good reasons for making the most of your ISA allowances.

1. Income from fixed interest securities held in a stocks and shares ISA is free of personal UK tax.
2. Interest earned on deposits in a cash ISA is also UK tax-free.
3. Gains made within ISAs are free of capital gains tax (CGT).
4. There is nothing to report about your ISA on your tax return.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

CGT Annual exemption

2012 was a more profitable year than 2011 for most major stock markets, even if there was something of a rollercoaster summer. It could be wise to realise some of the 2012 gains (and any from earlier years) before 6 April. In 2012/13 you can crystallise gains of up to £10,600 without any CGT liability. The exemption cannot be carried forward, so either you use it, or you lose it.

Inheritance tax (IHT)

The IHT nil rate band of £325,000 was frozen on 6 April 2009 and will remain unchanged next year. That freeze makes it all the more vital that you do not waste your annual IHT exemptions. The main £3,000 annual exemption can be carried forward, but only to next tax year (2013/14), and then can only be claimed once the 2013/14 exemption has itself been used up. If you and your partner have not made any gifts since 6 April 2011, you could now jointly give away £12,000 free of IHT.

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Services Authority does not regulate tax advice.

Rachel Efetha is an Independent Financial Adviser at AWD Chase de Vere. She can be contacted on 07894 619793 or Rachel.efetha@awdcdvc.com