Rising inflation poses a risk to any investor. Cash and gilts are the most vulnerable asset classes when it comes to erosion from inflation: cash because the returns are generally quite low and gilts because they pay a fixed interest. In contrast, rental income and company earnings tend to rise in line with inflation. Equity income funds, which invest in companies, aim to pay and grow dividends above the rate of inflation.
Each person has their own way at looking at life and their own set of unique circumstances; therefore we believe that it is essential you obtain professional advice when it comes to generating an income for your retirement. If your pension fund is due to mature in the next twelve months, make sure you talk to us sooner rather than later to help ensure that you don’t miss out on the best pension arrangement available for your requirements. Here we explain why converting pension savings into an income is probably the most important financial decision you will ever make – and there is no second chance if you get it wrong.
The top rate of income tax increased from 40 per cent to 50 per cent on 6 April for those earning more than £150,000, while the personal allowance will be gradually withdrawn for those earning more than £100,000 and from April 2011 National Insurance contributions (NICs) rise from 11 per cent to 12 per cent.
For the entrepreneurial company director or self-employed owner-manager, we can provide advice on setting up small pension schemes not only to fund your own individual pension pot, but also to provide a flexible and tax-efficient vehicle to assist in achieving business economic success.
Employment related securities
Anti-tax avoidance legislation will be introduced in relation to share incentive plans (SIPs) and company share option plans (CSOPs), effective immediately. In relation to SIPs, corporation tax deductions will not be allowed where companies pay money into a SIP as part of a tax avoidance scheme. In relation to CSOPs, new grants of CSOP options over unlisted shares in a company which is under the control of a listed company will not be permitted.
The Chancellor, Alistair Darling set out his measures in Budget 2010 for a crackdown on offshore account holders. In the pre-election Budget, Alistair Darling had already laid out a number of anti-avoidance measures, namely signing tax sharing agreements with Dominica, Grenada and Belize, and imposing a 200 per cent tax penalty for those with irregularities relating to offshore accounts.
Although the rate of VAT remains at 17.5 per cent, a number of changes were announced:
Supplies of postal services by the Royal Mail which are not made under a licence duty (e.g. Parcelforce) and services provided on terms and conditions that have been freely negotiated, will, from 1 January 2011 be subject to VAT at 17.5 per cent rather than being VAT exempt.
Business Taxes
Corporation tax – the main rate of corporation tax remains at 28 per cent.
Late filing and payment of returns – Measures will be introduced to encourage filing and payment by the correct dates by introducing an escalating series of penalties depending upon the number of failures within a set penalty period. Further penalties will arise if there is a prolonged delay in filing returns or paying the tax due.
Financial security for late payment of PAYE and NIC – Legislation is to be introduced to allow HMRC to require a financial security from employers where amounts due under PAYE or NICs obligations are seriously at risk. This would be in line with the current practice for VAT.
Penalties for offshore tax avoidance – Finance Bill 2010 will introduce larger penalties for taxpayers who fail to provide a full account of their income tax or capital gains tax liabilities, where the failure is linked to an offshore matter.
The Chancellor during his Budget 2010 speech referred to the “green bank”. While the measures proposed under this scheme will be welcome in making available funding to businesses in the renewables sector, the mechanisms for doing so are limited.
In addition to this headline scheme, more detailed measures included in the Budget to increase rates of green indirect taxes and the introduction of a new green tax were;
the introduction of a landline tax (physical electronic communication networks) from 1 October 2010 at a rate of 50p per line per month;
increases to landfill taxes and a review of material subject to the lower rate;
increases to rates in relation to climate change levy;
an increase in the aggregates levy rates;
amendments to hydrocarbon oil duty rates; and
an increase of air passenger duty rates for travel on or after 1 November 2010 – including for those who have already booked tickets.