Higher rate and Additional rate tax relief – if you are a higher-rate taxpayer, you may be able to claim additional tax relief, depending on how much you earn over the higher-rate tax band.

Make hay while the sun shines – the top tax rate for high earners will fall from 50% to 45% from April 2013. If you pay tax at the highest rate, you should consider maximising the tax benefits arising from your pension contributions before the top 50% tax rate is cut.

Annual allowance - you can save as much as you like into your pension scheme(s). However, the most you can contribute to your pension each year whilst receiving tax relief is either 100% of your earnings or £3,600 (whichever is greater), subject to an annual allowance of £50,000. Contributions paid by your employer also count towards the annual allowance.

Carry it forward – if you want to pay more than £50,000 into your pension in a year, you can carry forward any unused annual allowance from the previous three years to the current tax year, and add it to your annual allowance for the current year.

Don’t lose out – even if you are a non-taxpayer, you can pay into a personal pension scheme and receive tax relief at the basic rate on the first £2,880 you pay in.

Family ties – you can pay into the pension schemes of your spouse, civil partner, child or grandchild. They will benefit from tax relief at the basic rate, and this will not affect your own tax bill. These contributions might also prove helpful for inheritance tax planning.

A lump sum – subject to the rules of your pension scheme, you can draw out a tax-free lump sum of up to 25% of your pension fund from the age of 55, as long as your total pension savings fall within the “lifetime allowance”, which currently stands at £1.5m for the tax year 2012/13.

Flexible drawdown – you may be able to withdraw income from your pension fund, as long as you already receive a secure annual pension income of at least £20,000, and have finished saving into pensions.

Gains without pain – pension funds do not pay tax on investment income or capital gains.

Paul Dixon FPFS

Chartered Financial Planner

A summary of what has been happening in the past week in the financial world.

FTSE / Japanese Inflation / Chinese Growth Forecast / US Housing / Euroxone Purchase Managers Index / UK Inflation & GDP Dowgrade / Vodaphone, M&S, Brberry & Rio Tinto Stocks

What analysis can be made from the Money Marketing statistics? Tough market conditions and the increase in regulatory costs have severely impacted the number of mortgage advice firms. As Andrew Montlake, Director of Coreco Group, says: “The market is tough. Regulatory costs, the Mortgage Market Review and lenders’ lack of lending have all taken their toll.”

What does Census Financial Planning take from this? We believe that the strongest, most professional firms have survived. The quality of advice is essential, especially in relation to mortgages as this will be most people’s biggest financial commitment and financial risk.

The falling number of mortgage advice firms is certainly a reflection of current mortgage market conditions, but the one thing I think we can all agree on is the high level of advice and professionalism must be maintained. Contact Census Financial Planning today to speak with myself or another of our highly-qualified mortgage advisers.

Christine Newton
Financial Planner

During the recent parliamentary elections, many Greek voters cast their ballots in favour of parties opposing controversial spending cuts. Attempts to form a coalition government have failed in the country, undermining confidence that spending cuts can be successfully implemented and rekindling fears that Greece might leave the single currency. The European Financial Stability Facility, the eurozone’s bailout fund, subsequently announced it would withhold €1bn of its latest tranche of bailout funds for Greece.

Meanwhile, the appointment of a new French President, Francois Hollande, who intends to prioritise economic growth over austerity, raised questions over the future prospects for the eurozone’s struggling economy, particularly as German Chancellor Angela Merkel continues to espouse austerity. To compound this, a disappointing election result in one of Germany’s most significant state elections undermined Merkel’s focus on austerity as a solution to the eurozone’s debt crisis.

European leaders are caught in an increasingly unpleasant ‘Catch-22’ situation that forces them to attempt to balance austerity with growth. However, it is hard to see how sustainable growth can be generated in the short term. European manufacturers are still suffering in an environment of declining demand and soaring unemployment. The rate of unemployment in the eurozone surged again during March to an aggregated level of 10.9%. Unemployment in Greece reached 21.7%, while Spain’s jobless rate hit 24.4%. Amongst young people, the unemployment rate in Greece and Spain is more than 50%.

The eurozone’s economy stagnated during the first quarter of 2012, registering zero growth. The region only just managed to avoid tipping back into recession, having previously contracted by 0.3% during the last three months of 2011. However, the economy was shored up by relatively strong growth in Germany. France’s economy did not grow at all during the first quarter of 2012, while the economies of Spain and Italy contracted. Greece’s economy shrank by 6.2% during the period.

Figures from the Investment Management Authority show that European funds remain very unpopular with investors. Amid the ongoing uncertainty, share prices have tumbled around the world, and this is likely to overshadow corporate fundamentals until investors feel that they can face the future with a degree of confidence.

Paul Dixon FPFS
Chartered Financial Planner

A summary of what has been happening in the past week in the financial world.

FTSE / European Elections / Chinese Beank Reserve / US Consumer Sentiment / Spanish Bank Downgrade / UK Recovery / Renalt & Nissan Stocks

There are a number of tax allowances granted to you by the Government. You have a personal income tax allowance, an annual exemption from capital gains tax and there are numerous tax credits available depending on your circumstances. Schemes like Gift Aid also offer relief, if you make donations to a charity. And you have an Inheritance Tax (IHT) allowance for when your estate is passed on.

On top of these there are also tax efficient investment products, such as Individual Savings Accounts and pensions. These are the straightforward ones and give you relief from both income and capital gains tax (CGT) to different extents. Other more complex or higher risk investments can extend the level of relief, depending on your situation.

In addition, some individual assets that you own are also specifically exempt from CGT even if they are sold at a profit. Typically, these include your home, your car, certain personal jewellery, antiques and UK Government bonds (gilts). In addition, there are ways to mitigate CGT, such as giving away assets to your spouse.

For the 2012/13 tax year, your Inheritance Tax (IHT) allowance is £325,000 (this has the potential to rise to up to £650,000 for married couples and civil partners, if the unused portion of someone’s allowance passes to their spouse on their death), but anything you leave in your estate that takes the total above this amount will leave a liability. This can result in beneficiaries having to sell family heirlooms to pay the tax bill. However, a little bit of planning can help you access the range of annual exemptions and allowances which are available in advance. This can help you reduce the liability – or provide the means with which your beneficiaries can pay it without having to sell items of sentimental value.

For most people, using your tax allowances could simply be a matter of adjusting your portfolio to maximise use of the various allowances and savings products. For others, the process is more complex. A professional adviser can help you through the maze and help you find the best set of solutions for your personal needs.

Paul Dixon FPFS

Chartered Financial Planner

What options do you have to avoid IHT if your home takes you close to or over the current £325,000 individual IHT limit (or £650,000 for married couples and civil partners, tax year 2012/13) without allowing unscrupulous or disorganised relatives to leave you without a roof over your head?

Despite all the urban myths, the one thing you definitely cannot do is simply sign your house over to your descendants and continue to live in it. This is called a `gift with reservation` and is ultimately inefficient for tax planning purposes as the house will continue to form part of your estate. The only way to get round this is to pay the beneficiaries a market rent, but this is unlikely to be a popular option for those who have scrupulously paid off their mortgage in order to enjoy a comfortable retirement. It also opens the door to your house being sold from under you if your beneficiaries get into financial trouble.

So what options do you have? You could sell, move out and rent or buy somewhere smaller, gifting the balance of your gain to your beneficiaries. This is called a potentially-exempt transfer (PET) and becomes IHT-free as long as you survive 7 years. If you have a big enough house, you could arrange joint ownership and live together in the house. That proportion of the house then is then a PET and again, is IHT free as long as you survive 7 years.

For larger estates, there are some more complex schemes. ‘Shearing’ involves selling the freehold and obtaining a short-term lease. Another arrangement involves selling the freehold in return for a lease for life and cash. This cash goes into a trust and the freehold becomes a PET. However, such schemes need to be constructed with the help of a financial adviser to make sure they meet the regulations – and also to ensure that an equitable deal is done.

There are no easy ways to avoid IHT if a lot of your equity is tied up in your main house. However, you can at least maximise use of all the other allowances available to ensure you at least way lay the tax man and in the meantime, still keep a roof over your head.

Paul Dixon FPFS

Chartered Financial Planner

A summary of what has been happening in the past week in the financial world.

FTSE / European Banks / Chinese Inflation / US Unemployment / UK Production / Mcdonalds & JP Morgan Stocks

Ratings agency Standard & Poor’s reduced Spain’s credit rating to BBB+ and placed the country on “negative outlook”. The benchmark Ibex 35 index fell by 12.5% during the month while share prices in Italy dropped by 8.7%. Elsewhere, in Germany and France, the DAX index and the CAC 40 index fell 2.7% and 6.2% respectively.

Spain’s woes were compounded by the news that the country’s economy had fallen into recession. Meanwhile, according to preliminary estimates from the Office for National Statistics, the UK economy slipped back into recession during the first quarter of 2012, registering a contraction of 0.2%. The FTSE 100 index fell by 0.5% over April as a whole.

In the US, however, confidence at the Federal Reserve appears to be on the rise, with the US central bank increasing its forecast for economic growth and cutting its forecast for unemployment – although policymakers remain cautious about the outlook for the global economy. The Dow Jones Industrial Average index ended the month broadly unchanged, while the S&P 500 index fell 0.7%.

In Japan, the Nikkei 225 index fell by 5.6% during April, with investor sentiment affected by renewed concerns over the outlook for the global economy. In addition, the Bank of Japan’s quarterly Tankan survey of business sentiment indicated that confidence among Japanese manufacturers remains low.

The International Monetary Fund has increased its forecast for global economic growth during 2012 from 3.3% to 3.5%. The organisation appears a little more sanguine – or, at least, a little less negative – about overall prospects for the eurozone and now expects the region’s economy to contract by only 0.3% this year, instead of its previous estimate of 0.5%. Meanwhile, growth in developing economies is tipped to be even stronger than previously expected during 2012 so, in aggregate, developing economies are now forecast to expand by 5.7% during the year, rather than 5.5%.

Elsewhere, the International Labour Organisation (ILO) believes that tough austerity measures imposed by advanced economies are harming global employment prospects and impeding scope to create new jobs. In particular, the ILO believes the “narrow focus on fiscal austerity” in many eurozone countries could lead to another recession in the region.

Paul Dixon FPFS

Chartered Financial Planner

A summary of what has been happening in the past week in the financial world.

FTSE / European Elections / Chinese Growth / US GDP / UK Construction / Nike & BP Stocks