Tax should be Taxing, that's actually the point.

Let's be clear, tax avoidance is permitted, but tax evasion is not. We have all seen the way in which our National Debt has soared. In the current tax year many of us will experience some financial discomfort as result of tax increases and allowance reductions or restrictions. Perhaps it may be odd to say it, but I am not someone that thinks tax is a bad thing, although I would certainly suggest the amount, how the tax is raised and how it is spent needs an awful lot better thought and application. Indeed part of my job is to help clients reduce their tax bill - legitimately. Invariably the sort of tax avoidance that financial advisers like myself do are really a little bit of a gimmick to encourage people to save for their own benefit.

So I hope that I have been clear, I am in favour of tax and also in favour of avoiding tax. It sounds like a contradiction and it is in part. However, what I am not in favour of is tax dodging where multinationals effectively move money around from one tax haven to another in order to reduce their declared profit and as a result pay considerably less tax (if any). This damages poor countries by not remitting the revenue that they are rightly owed. This makes it harder for them to get out of poverty. It also damages our country. Indeed tax doding makes benefit fraudsters look like decidely small fry. As a result of lower tax revenues and the public finance commitments, more tax is needed for UK plc to cope, so the effect is (cuts aside) that more taxes are required, whether these are obvious or not. Politicians merely do there best to move the chairs around, we all know this, but it seems that it is rarely stated. I may be naive, but surely a better way to world peace is to ensure that we all prosper together.

I know of no reasonable person that deliberately makes efforts to keep the worlds poorest in poverty. A poverty that we are rarely exposed to, thankfully. However, unless reasonable people take action, fairly unreasonable things will continue. That is why I am involved with the Christian Aid "Trace the Tax Campaign". I know that the world is a complex place, I know that we as investors are all seeking good returns and that we often hold shares within funds of companies that have some fairly nasty practices. I'm aware of my own hypocrisy's. However I don't think that doing nothing is an option. Have a look at the video and if you feel able, join the campaign. Its not about creating some sort of radical communist ideal, but about giving the poor a chance to get out of poverty and attain some dignity.

For better or for worse... the tax benefits of getting married

Tomorrow is the "big day" and whatever your views about the coverage and national celebrations, I'm sure that most of us would wish Miss Middleton and Mr Windsor the very best for their future together. So, given that we are all very much aware of a certain wedding, perhaps this is an appropriate time to reflect on some of the tax issues surrounding "tieing the knot".

David Pointer of Open Tax Consultancy explains..



David Pointer, Open Tax Consultancy



Any transfer of assets between spouses or civil partners who are living together are treated as being made on a 'no gain/no loss' basis for Capital Gains Tax (CGT) purposes. This can therefore provide an opportunity to ensure that both spouse's or civil partner's personal tax allowances and basic rate tax bands are utilised efficiently, and allow assets to be transferred without an immediate tax charge. This also helps couples to make use of their CGT annual exemptions. For example quoted stocks could be transferred between each other, especially if only one of you is liable to higher rates of tax and the other is not. To work transfers need to be genuine with 'no strings' attached.

On the flip side there is a major capital gains tax disadvantage of being married or in a civil partnership. This relates to the principal private residence exemption. For CGT purposes a married couple or civil partners who are living together can only have one 'main residence'. Where a couple have two properties which are used as residences, their main residence will usually be determined based on the facts and a CGT liability could arise on the sale of the second property. It is possible to submit an election within two years of acquiring the second property to specify which should be regarded as the principal private residence. This can then be varied at a later date as required.

For inheritance tax (IHT) purposes any gifts between UK domiciled spouses or civil partners during their lifetimes or assets left upon death to each other are usually not chargeable to IHT.

David also reminded me that ...It is also important to note that marriage or entering a civil partnership invalidates an individual's Will so once married new Wills should be considered. This is an excellent reminder to ensure that your Will is up to date. The highlighted links will open up my guide to Wills (not a personal guide to married life to the Prince, but how to prepare the legal document!).

Finally, let's not forget that marriage is a legal contract, a couple enters into an agreement to share everything, including assets and liabilities as well as the bathroom! So with this additional responsibility, thought should be given to ensuring that adequate financial protection has been arranged, perhaps making sure that any employee benefit schemes are notified about changes to beneficiaries. Of course, it would be very sensible to have a proper financial review that takes account of joint priorities and any plans for a family. These all have a dramatic impact on financial planning and the sooner that they are discussed thoughtfully the better. Something, that I obviously do with clients.

Funds: Fidelity Fund Merger

Fidelity are proposing to merge two of their funds, both of which are managed by James Griffin. Fidelity want to merge the Fidelity Growth & Income Fund into the Fidelity MoneyBuilder Growth Fund. In order to proceed with the merger a motion will need to be approved at the next shareholder meeting on 25th May 2011. Assuming this is passed, the Funds will be merged on 16th July 2011. If you have holdings in this form you will receive a mailing directly from Fidelity.

Visions of Britain 2020

Friends Life are running a campaign or series called "Visions of Britain 2020" that attempts to reveal some of the financial trends that are happening here in Britain. I hadn't heard it before, but was introduced to the term "Coping Classes" which Friends Life define as a middle-income group earning a total household income between £25,000-£50,000. Apparently this group make up 1 in 5 of the population (which by maths is 20%). Friends Life translate this as 8m people, but my understanding is that the UK has around 60m people, so 20% would be 12m. Perhaps they are only considering those earning money or having an income, which would exclude most children...but then why use terms like "household"? anyway their website has a lot of statistics, which on the face of it are certainly enlightening, but I'm afraid that I'm fairly cynical about most surveys and particularly those that attempt to extrapolate data and read trends across the entire UK.

Anyhow, some points to consider - something like 59% of this group would not be able to provide for themselves and any dependents for longer than 6 months if they lost their main source of income. 79% would not cope beyond a year. 80% of them have some form of debt (probably to be expected if they include a mortgage?). 41% of them say that they would turn to their parents for help if they lost their main form of income.

So why are Friends Life interested in this? well because they provide one of the best income protection policies going, which is one of the solutions to this problem. They are quite right to bring this to our attention, but of course most people are more complex than a set of statistics derived from a survey. Sorry, but I just don't meet many people that divulge their financial information to someone with a clipboard in the street or even on the phone. Their soundbite videos are so short and lack any real information that I would worry about anyone drawing too many conclusions from them. Anyhow, if you are interested in the data, do have a look, if you are wondering how you would cope in the event of "disaster" then have a look at my website and give me a call or email.

Business News Updates 27th April 2011

There has been a flurry of banking news of late, much of it will not alter the general mood of a nation that is still pretty fed up with them. However Bank stocks often form a reasonable part of the main FTSE100 index (or the equivalent on a global basis). Barclays have announced a Q1 decline in profits when compared against 2010. They recorded a 9% fall in profit, predominantly due to declines in corporate and investment banking which fell by 29% to £983m. This must imply that the other sectors (which include retail banking to punters like you and I) made a profit increase of 11% and indeed the figures reveal retail and business banking pre-tax profit was up 21% to £692m. Swiss Bankers UBS also announced a reduced level of profit - down 18% on their 2010 Q1 figures, mind you it is still a fairly hefty £1.2bn of profit for 3 months.

Marketeers will be familiar with the term "Cash Cow" - well there really is a lot of money to be made in the milk business in Europe. There can be fierce rivalry between farmers, something often observed by those that live in the countryside (or who grew up there - as I did). Rivalry took on new scale as the French dairy firm Groupe Lactalis launched a £3bn takeover bid for Italian food group Parmalat (they already own 29% of Parmalat as it is). How this will impact food prices in the region remains to be seen. The French company collect nearly 10bn litres of milk and have a turnover of 9.4bn Euros. Plenty of va-va-voom in les vaches!

Cash cows are probably a thing of the past in the automotive industry, but Ford have managed to deliver their strongest Q1 figures for 13 years, achieving profit of £1.54bn. Ford have warned about getting carried away with this good news (if you are a Ford shareholder or employee) as like many car manufacturers, many parts within a car are made in Japan, as a result supply problems are obviously an issue at the moment. As a guide, Toyota's Japanese production fell a massive 63% in March compared to March 2010. Even if 99% of a car is made elsewhere, the Tsunami and earthquake in Japan is having a growing economic ripple effect. One is left wondering if outsourcing really is such a good idea.

As we are thinking of Japan, another successful exporter has had problems. Nintendo have revealed reduced annual profits at £570m due to a fall in sales and strong Yen. This is a fall of 66% over the same period. Compare this against the mighty Apple, who have announced their Q1 figures at net profits of £3.6bn, more than they expected due to the continuing rise and rise of the iPhone, if you are techy enough listen to the release here. This is largely without any sales from the new iPad 2 which judging by the queues at various shopping centres will merely add more to the success that Apple enjoy.

Widow Seeks White Knight

The Times has reported that Lloyds are preparing to offload Scottish Widows as a part of the review of the business by António Horta-Osório the Portuguese born head of Lloyds Bank - who took over at the start of March 2011 having previously headed up (CEO) Spanish Bank Santander here in the UK. Scottish Widows may be somewhat relieved at this, being able to wriggle free of the clutches of the Bank with whom they have had close relations since March 2000. The Lloyds HBOS amalgamation in 2009, has not really helped to add credibility to its brand.

So if you have Scottish Widows products (which includes Clerical Medical ones) prepare yourself for a bombardment of paper over the coming months as potential owners jostle for position to win over the Widows. In my opinion Scottish Widows is one of the best insurance companies around and ought to attract a worthy buyer, who would need a far better brand name (and I cannot think of one) that would warrant dropping the Scottish Widows brand name.

Banks Caught Out

The Banks have lost today's High Court ruling into the judicial review of payment protection insurance (PPI). My view is that this is good news for consumers. Many people have got this sort of rip-off insurance (sorry I cannot think of a better term) without even knowing it.

Many people (largely the self-employed) often cannot claim on the cover which is expensive for what you get. All the cover does is to ensure that the lender gets their monthly payment if you cannot work for 2 years - with lots of stings attached. The cost of the cover is very high when compared to the benefit and the better alternative of Income Protection (or Permanent Health Insurance - PHI), sometimes people have PHI provided by their employer so there is no need for additional cover anyway. Some lenders have misled people into believing that the loan/credit is only available if they take out the PPI. In addition, the cost of the PPI has often been added to the debt and incurred additional interest, thereby inflating the cost of the debt or loan. This is plainly unethical. I am at a loss to understand why it took the FSA quite so long to deal with this issue properly. I am sorry to say that this is yet another example of commission based selling leading to the detriment of the consumer and the further tarnishing of the entire financial services industry.

Whilst I do not advocate or promote a culture of complaint, clearly when something is wrong it should be put right and the Banks have failed in this regard. Redress is estimated to be around £3bn which is a huge sum of money and of course one that Banks are unenthusiastic about parting with. Regrettably, we all know that all of us will probably ending up with a share of the bill, by way of increased bank charges.

More information can be found at Martin Lewis' Moneysaving Expert website, (which needs a better design)he has championed this cause for some time and has further details about how to claim, although assuming that today's ruling stands (which will probably be appealed), Banks will need to contact anyone that they have sold one of these policies to... so give it 6 months and watch out for the bland letter that will possibly be deliberatley mailed during the 2011 Christmas postal period.

Business News Updates - Small World

Tesco in China

There have been mixed results for UK retailers announced in the past few days. Supermarket giant Tesco announced pre-tax profits of £3.54bn for the 12 months to the end of February, this is an 11.3% increase on the same period for the previous year. Positive results have been accredited to expansion in Asia. There is a short video about Tesco in China here. When you consider all that Tesco now do, this is probably unsettling news for the Home Retail Group who own Argos and Homebase. They reported profits for 2010 of £265.2m which is a reduction of 10% on the previous year.

As if to prove that multinational companies have little observation of national boundaries, Deutsche Telekom and France Telecom have decided to work together on a joint venture to buy telecommunications equipment together. This alliance will save an estimated £1.15bn a year. Staying within the technology arena, Intel have announced record Q1 earnings of $12.8bn. Meanwhile Chinese Huawei, who make telecom equipment that presumably companies like Deutsche Telekom and France Telecom might buy, announced an increase in net profits to £2.23bn for 2010.

JP Morgan Chase announced Q1 net income of $5.6bn, compared to $3.3bn for the same period in 2010. Earnings per share rose to $1.28 from $0.74 (double) for the same period.  Goldman Sachs 2010 results saw its net revenue reduce from $45.173bn to $39.161bn to the end of 2010, earnings per share reduced from $22.13 to $13.18.

So some Bankers are doing better than others... but the message to take home is that those firms doing business in Asia are seeing fruit.

University Challenge - the price of a Degree

Something like 75% of Universities have now announced their tuition fees for Degree courses starting in 2012. You may remember that the Government set a maximum limit of £9,000 expecting this to only apply to some of the more traditional old-school Universities. However, of those declared, the average fee is looking like £8,679 for the year, this is far closer to the upper limit and significantly above the current maximum level of £3,375. So parents and students will be stumping up rather more money.

It remains to be seen how this impacts other elements of student life. I estimate that at present University tends to cost around £9,000 a year, but that includes the course fees, accomodation and living cost. It is possible that the actual cost of a year at University may end up far closer to £18,000 a year

Of course, the devil is in the detail - different courses will have different costs. However, my suggestion is that you allow a minium of £15,000 per year. I will be interested in how costs are decided for a 4 year course, much of which involves unpaid work placements - such as a Degree in Education to become a teacher.... like my daughter..yikes!  

The Truth About Global House Prices

The Economist has an interesting interactive tool that plots house prices across the world (well the major economies where homeownership has a market). The tool can be used to show the House-Price Index, Prices in Real Terms (after allowing for inflation), prices against average income, prices against rent and the % change.

The problem with any data is that it invariably relies upon an average - there are regional variances of course and as we all know, with property there is the all important phrase "location, location, location". Never-the-less this does reveal a poor set of statistics and shows Britain to be more "out of kilter" than the US when it comes to prices against average income. It would appear from the data, that the average house price is now at 2006 levels and that when allowing for inflation, property prices are actually at 2003 levels.

Have a look at the tool.

Early Access To Pensions Delayed

At the moment you can access your pension from the age of 55. That is not to say that most people do, but it is possible. This might be particularly helpful for some people as under the current rules it is possible to take the tax free lump sum (25% of the fund) and leave the balance in the pension to grow until it is required as income.

The Government considered motions to grant access to pension funds before 55 but have decided against this for the time being. The thinking being that now is not the right time and that people need encouraging to save not withdraw money from their pensions.

The Financial Secretary said "“The Government is committed to encouraging saving and wants to give individuals greater flexibility in saving for retirement. While early access has some merits, there is insufficient evidence to suggest it would act as an incentive to save more into pensions. We will work with industry to develop workplace saving to supplement pension savings. In addition, we will explore other ways of making pension tax rules simpler and more flexible, for example by making it easier to deal with small pension pots.”

I can understand the Government's position, but would offer this as a thought. Imagine that you have reasonable funds tied up in a pension pot, you are 52 years old and for whatever reason have managed to get into a position where your debts are such that your home is about to be repossessed. Surely in such circumstances, it would be helpful to have access to the tax free cash so that such debts could be reduced or cleared rather than becoming another repossession statistic. If you were 55 this would be possible, but not at any point beforehand. This seems to be a little nuts. Yes we need to ensure that people do not pillage their pensions so that they then become reliant upon the State, but on occasion, it would seem that the smarter move is the short-term. Context is everything and of course, robbing Peter to pay Paul is not a solution, but the option to create an escape plan seems to me to be entirely reasonable.

Spring Portfolios - New Asset Allocations

I have been working hard reviewing portfolios and have now updated my guidance and advice on this. The document is now ready for clients in either printed or email versions.

If you are a client and would like me to email you a copy please email me.

Friends Provident (Friends Life) Pension Fund Closures

Four funds are being withdrawn and closed by Friends Provident (now Friends Life). These will not be available from 10th May 2011 to any new investors, but will close to all in August 2011. The funds are as follows.

FP UK Special Situations

FP M&G UK Select

FP Schroder UK Mid 250

FP UK Index Tracking

Save the Chequebook - Please Get involved!

You may have read or heard that the days of the cheque are running out - but probably a lot sooner than many people realise. For starters you may have recently had a mailing from your Bank, but like most people put this in a pile of "Bank Stuff". So in case you didn't spot the change - from July this year the cheque guarantee system will end. That means that any cheque that you receive no longer has a backed up guarantee by the relevant Bank.

The so-called UK Payment Council also plans to abolish all cheques by 2018. The Treasury Select Committee has now re-opened an inquiry as there has been a reasonable number of concerned citizens that this really is not a good idea.

It is possible that you have not used your chequebook for some time - indeed you may not know where it is! but for some people this is a valuable transaction format. Not every small business offers credit card or point of sale payments (which cost everyone more anyway) and some people do not use or trust the Internet for the security of their financial transactions.

So the case has been re-opened. Those most affected will be those with poor credit records, small businesses and charities. In addition, elderly people tend to rely on their chequebook as their primary method of payment. I would add that whilst much progress has been made for for investments to be made electronically, there is still much to be desired across the investment sector.

Cheques are certainly not fraud or foolproof, but writing out a cheque has a psychological advantage - it provides one last opportunity to ask yourself "am I doing the right thing?" - something that Banks seem to rarely ask themselves.

So what are the UK Payments Council proposing instead to replace cheques - well payment via mobile phone is an option and would you believe it - but a "paper-initiated payment instrument" (I kid you not) - which of course sounds like a cheque, which yet again exposes the complete lunacy that seems rampant within the Banking system.

You can get involved by putting your comments to the Treasury Select Committee by Friday 6th May - just 4 weeks time.

Which? are running a petition

LibDems are too.

You could also get involved by pushing this post around your peers and friends.

Easter Break in London

The majority of our clients live and work in the London area. The tourist season is starting to gather momentum and of course there is a big do at Buckingham Palace later this month. London offers a huge range of great things to see and do, but remains one of the most expensive cities in the world. You may be interested to learn of the "Days Out Guide" a website that provides fairly significant discounts to many of the attractions. Just a thought.

Panning for Gold or Gold for a Panning?

1925: The Gold Rush - Charlie Chaplin

The financial pages are becoming awash with the news that Glencore is set to float on the London stock exchange. The floatation qualifies for fast-tracking and  is expected to burst into the FTSE100 in early May. The company which is owned entirely by its managers and employees, had a turnover of $145bn in 2010.  Its main activities are the production and marketing of commodities. Glencore are selling off something like 20% of their own shares. It is estimated that this "floatation" means that the company is worth in the region of $60bn. There's about $11bn worth of the company up for grabs when it floats, that's about £6.7bn making it the largest floatation in UK history.

Whatever you read over the coming days remember that a market exists to serve both buyers and sellers. The sale of £6.7bn of shares will make several of the key staff billionaires. A key question that is prompted then is "have commodity prices peaked? - hence the sell off?"

A word of caution - those that really made money in the American gold rush  of the 1840's were the ones selling the shovels. Remember that I'm not a stockbroker, so cannot and do not give advice about individual shares. So please do not call me to ask for an opinion on buying Glencore. What I can tell you is that it will end up in most portfolios by default due to fund managers simply having to hold the stock.

Business Updates

Forth Ports, the BAA of shipping in Scotland – indeed the largest port owner in Scotland, has accepted a takeover offer from its largest shareholder, an investment company Arcus Partners, who are buying Forth through the Arcus European Infrastructure Fund 1 for a magnate sized £760m.

It has been a poor start to the new financial year for Allied Irish Bank who posted a loss of £9bn in their preliminary results for 2010. The credit rating agencies, which, let’s face it, are not exactly covered in glory have downgraded AIB and placed the Bank on a negative watch list. At the end of last month, following the completion of stress tests on the bank (Prudential Capital Assessment Review or PCAR) the bank was required to raise a further 9.2bnEuros in addition to the 4.2bn deferred from February. That’s a lot of money and as we all know Ireland has some difficult economic decisions to make, having a bank repair its balance sheet rather than lending money to business is unlikely to help.

This is set in contrast to the Italian bank, Banca Monte dei Paschi di Siena, Italy’s third largest bank, who are raising £2.22bn of capital in preparation for their stress test, this resulted in credit agency Standard & Poor’s upgrading the bank’s credit rating. So not only is the bank set in one of Europe’s most beautiful cities, it is also attracting the right attention, by taking proactive measures.

Staying in Italy, Fiat yesterday announced that they are increasing its stake in the Chrysler Group from 25% to 30%. You may recall that the American car manufacturer based in Detroit filed for Chapter 11(Bankruptcy in English) in June 2009. Fiat was offered a deal for a stake in the company, which could rise to 51% if financial targets are achieved, although this can only happen once the US Government has been fully repaid. Fiat’s increased stake is good news for the United Auto Workers Voluntary Employee Beneficiary Association who have a 60% holding, the US Government owns 8% and the Canadian Government the balance of 2%. Fiat will sell Chrysler cars under its own Fiat badge in Europe and Brazil.

This leads neatly onto the news that the Brazil is benefitting from its relationship with the Chinese, its largest trading partner and foreign investor (one to watch for emerging market funds). Chinese Airlines have placed orders for 20 planes, plus an option to buy 15 more aircraft, in a deal worth £861m with Embraer, (who really are "for the journey") the Brazilian aircraft manufacturer.

Market Report

The April 2011 figures are now available in the Market Report. Biggest monthly gains were in the Baltic Dry Index, Mumbai Sensex 30 and the Korean Composite index.

Easter Break

Now that the majority of schools are on their Easter break, please note that the office will be closed on Good Friday (22nd April 2011) and Bank Holiday Monday (25th April).

May I take this opportunity to wish you a peaceful Easter.

Base Rate Held

The Bank of England decided to hold rates at 0.5% as expected. However, the city is generally of the view that a rise is likely in the summer. Given the warm weather here in London today, there was the slight chance that summer had come early, but fortunately borrowers have been given respite for a further month. It is likely that a rise will occur in June or July, but inflation figures whilst being somewhat alarming will improve naturally simply by mathematical inevitability. There is no real need for rates to rise at this point and whatever may be said in public, the truth is that a little inflation reduces debt and improves UK plc.

Business News Update

Those men in bowler hats at Bradford & Bingley, now such a national treasure that we all own them, have provided some good news in that for the first time in 2 years of trading they have managed to turn in a profit. A very pleasing pre-tax profit of £1.8bn, as opposed to a loss of £196m in 2009. The UK bank, with the split personality, which they themselves name as “good bank / bad bank” – well Northern Rock’s “bad bank” also reported a profit of £400.5m in 2010 compared with a loss of £257.5m the year before. It is unclear what this really means – are they better at running a business or simply not lending badly? Compare this to the “new kid on the block” and the world's biggest bank by market value, Industrial and Commercial Bank of China, announced better-than-expected profits for 2010, which increased 28% to £15bn on the back of increases in bank lending. So we are all hoping that their lending policy is an awful lot better than those of British, American, Spanish, Irish and Portuguese banks (and a few others besides).

If the impending Royal Wedding has you needing to purchase some bubbly for your street party, you probably will not be popping over to Oddbins. They have finally gone into administration after talks failed to persuade the Inland Revenue (HMRC) to accept lower payments of owed taxes.

Turning to telecoms, as someone that is considering an Ipad 2 I seem unable to find anyone willing to stick their neck out on which network I should go with. Perhaps Vodafone are looking good – they have agreed to buy Essar Group’s 33% stake of their joint Indian venture for £3.1bn. In addition, they decided to sell its 44% stake in the French mobile phone operator SFR to Vivendi for £7bn; which will give France's biggest mobile phone business full control of SFR. So I guess Vodaphone have more of an interest in India than our nearest neighbours in France.

If you have followed the news recently, there has been something of a storm over fishing rights and fish prices, this has absolutely nothing to do with chips or chip makers Texas Instruments, who announced they will be buying National Semiconductor lock stock and barrel for a sizzling £4bn; the deal makes TI the world’s third largest chipmaker and rather larger than Harry Ramsden (sorry I couldn’t help myself).

State Pension Announcement

After much speculation in the media over the weekend and my attempts to find a copy of the "Green Paper" it wasn't until yesterday evening, at 6.15pm that the Coalition announced their plans and a Green Paper regarding the proposed changes to the State Pension. Speaking to a sparsely populated House of Commons (spot the MP) Prof. Steve Webb spoke about the key issues and plans that are being announced. The video is shown below (or see the link). You need to move the slider to about half way along - to the right time of 18:15:45

Transforming the State Pension is no easy task, simplifcation is a term that has regrettably been largely misused in the pension world and whilst the changes have noble aims there is an awful lot of number crunching to do before we can categorically say that everyone is better off and the State pension is simple to understand. Mr Webb said "With today's Green Paper we are setting out how we plan to transform the pensions system and create a simple, decent state pension that is easy to understand and efficient to administer. We need to ensure that saving for the future pays."

Higher Taxes Start At Midnight

Today is the last day of the 2010/11 tax year, adjustments to employee taxes need to be made and paid by 31st January 2012 and of course the self-employed have until the same date to submit and pay their returns. Today also sees the final execution of the A-Day Pension Rules from 2006.

Regrettably, remembering that "we're all in it together"..the new tax year which begins tomorrow is more complicated and for the majority of people, will mean that more tax is paid across to HMRC.

The most significant issue is that pension contributions are reducing from a possible £255,000 to £50,000 as a maximum for 2011/12. You also need to be warned that the way that this works in practice is not straight-forward. Contributions are based upon input periods, not necessarily payments made in the actual tax year. There is also now the option of using Carry Forward Allowance of unused relief from the previous 3 tax years. In addition the lifetime allowance is in its final year of £1.8m - this time next year it will be dropping to £1.5m unless Treasury plans are reversed. 

The basic personal allowance rises by £1,000 to £7,475 before any tax is paid, which is good news for nil and basic rate taxpayers. Everyone else will actually start paying a 40% tax rate earlier as the banded earnings has reduced from £37,400 to £35,000. In other words in 2010/11 you had to earn £43,875 before paying tax at 40%, for 2011/12 this has reduced to £42,475. For those earning over £100,000 the personal allowance is removed entirely from £114,950 (in 2010/11 this was the case at £113,490). The £150,000 income earners retain a 50% tax rate on income above £150,000. National Insurance contributions will also rise.

So as we look forward to the new tax year, there are lots of changes. My role is to help clients use their allowances legitimately and perhaps more than ever before, financial planning advice is vital for anyone with an income over £42,475 and of particular importance to anyone with a six figure income.

The new ISA allowance is raise to an investment of £10,680 and the tax free benefits of ISAs are becoming ever more valuable with each passing tax year. So if you can, fill your boots with ISA and pension allowances where appropriate.

Don't forget that Self-Assessment means that YOU are responsible for correctly reporting and paying your taxes to HMRC. So, if you don't already, make sure you keep a tax year file.... yes include all those silly dividend slips from shares that your granny gave you. The old Hector character from HMRC used to regularly remind us to keep documentation, now that they use former BBC newsreaders, the sentiment seems to have been dropped from the script, but not from the practice.

Compulsory Pensions On The Way

There are reports today within my trade press that the Government are close to scrapping the idea of short-term pension refunds. At the moment if you join an employers pension scheme and leave them within 2 years you are able to get a refund of your contributions, less any tax relief.

The administrative nightmare that this poses for NEST, when it eventually gets launched, is fairly obvious and probably the main factor for bringing in this new ruling (as yet unconfirmed). NEST will eventually see everyone making compulsory pension payments of 5% of salary with another 3% from employers (8% in all). The main problem for the state is that not enough people save enough for their retirement, most options have been considered, so now it will be compulsory to save (well in a couple of years).

This will be a major revolution for employers who must comply with the legislation and have to report their payments to HMRC. At the moment, I have to say that as a pension NEST is not that attractive, its not terribly flexible and you cannot move money in or out easily - until you retire. However, it is better than a poke in the eye, but at a maximum of £300 a month, is not going to make anyone have a retirement of luxury.

More on NEST to follow - also you can search this blog for previous items relating to it.

Client Services - Improving Our Service To You

I am delighted to announce that testing of our online services has been completed and we shall be launching a new online functionality for clients. This will make many tasks less tedious, including providing us with information about your income, spending and savings. The new site is secure and represents a shift in how we can further increase our usefulness to clients, saving you time and money.

I will be writing shortly to all clients to ask if you would like to take advantage of this service, which is free of charge to clients. You will require a unique password and username for your protection.

This is the result of significant work from myself, JCS and IFA Systems who have come together for mutual benefit to serve all of our respective clients better.