Record amounts paid into investment funds last year
Many savers turned their back on high street deposit accounts last year as new figures show a record year for investments.
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Key tax planning tips
What you can do to reduce tax?
With further tax increases on the horizon, there really is no time like the present to consider your tax position carefully and explore what planning can be effectively put in place to help mitigate or defer the upcoming increased income tax liabilities. There are a number of areas that you may like to consider prior to the end of the current fiscal year. Specific matters may be relevant to you or this may be an appropriate moment to review your affairs generally, especially following the announcements in the 2009 Pre-Budget Report.
ISA surgery, use it or lose it
Have you taken advantage of the increased ISA allowance?
If you have not already talked to us about using your 2009/10 Individual Savings Account (ISA) allowance, time is running out. Any unused ISA allowance from this current tax year cannot be rolled over to the next tax year and will be lost forever.
Protecting against the unexpected
Putting steps in place to protect your standard of living, and that of your family
Whatever happens in life, we can work with you to make sure that you and your family are provided for. Premature death, injury and serious illness can affect the most health-conscious individuals and even the most diligent workers can be made redundant.
Shaping your portfolio
Deciding between growth and income
Several factors will determine the shape of your portfolio. The first of these is your investment objective. This takes into account whether you’re investing for income or for growth. If you want to generate income, perhaps to supplement your pension or salary, then you need to consider income-producing investments such as fixed interest or equity income funds. However, if it’s growth you’re after, then your portfolio could be more biased towards equities. Or, you may achieve growth by opting for an equity income fund and reinvesting the income.
Talking pensions
Don’t be put off from taking action
Wherever you are with your retirement savings, don’t be put off from taking action – it’s not too late. There are still steps you can take to boost the income you’ll receive when you retire.
Ethical investment opportunities
Where’s your money growing?
For investors concerned about global warming and other environmental issues, there are a plethora of ethical investments that cover a multitude of different strategies. The terms ‘ethical investment’ and ‘socially responsible investment (SRI)’ are often used interchangeably to mean an approach to selecting investments whereby the usual investment criteria are overlaid with an additional set of ethical or socially responsible criteria.
Offshore investments
Utilising tax deferral benefits
For the appropriate investor looking to achieve capital security, growth or income, there are a number of advantages to investing offshore, particularly with regards to utilising the tax deferral benefits. You can defer paying tax for the lifetime of the investment, so your investment rolls up without tax being deducted, but you still have to pay tax at your highest rate when you cash the investment in. As a result, with careful planning, and if appropriate you could put offshore investments to good use.
Taxation matters
Different investments have different tax treatment
Individual Savings Accounts (ISAs)
You pay no personal income tax or capital gains tax on any growth in an ISA, or when you take your money out. If you invest in a stocks and shares ISA, any dividends you receive are paid net, with a 10 per cent tax credit. There is no further tax liability.
Tax wrappers
Individual Savings Accounts
A tax wrapper can be wrapped around either the underlying investment or the pooled investment, and means you pay less or no tax. An example of a tax wrapper is an Individual Savings Account (ISA). An ISA is not a product on its own, but a tax wrapper around a savings or investment product, which protects your money from being taxed.
What can you save or invest in an ISA?
ISAs can be used to:
save cash in an ISA and the interest will be tax-free
invest in shares or funds in an ISA – any capital growth will be tax-free and there is no further tax to pay on any dividends you receive
You can invest in two separate ISAs in any one tax year: a cash ISA and a stocks and shares ISA. This can be with the same or different providers. By using a stocks and shares ISA you invest in longer-term investments such as individual shares or bonds, or pooled investments (such as open-ended investment funds or investment trusts).
The current ISA limits are:
If you were born on or before 5 April 1960 (that is, aged 50 or over during the current tax year) you can save up to £10,200. The full £10,200 can be invested in a stocks and shares ISA with one provider or up to £5,100 can be saved in a cash ISA with one provider, with the remainder being saved in a stocks and shares ISA with either the same provider or another.
If you were born after 5 April 1960 you can save up to £7,200. The full £7,200 can be invested in a stocks and shares ISA with one provider or up to £3,600 can be saved in a cash ISA with one provider, with the remainder being saved in a stocks and shares ISA with either the same or another provider. From 6 April this year, the ISA limit will increase to £10,200, up to £5,100 of which can be saved in cash for all
ISA investors.
According to the age 50 rule, someone who is currently under age 50 but who will reach age 50 between 6 October 2009 and 5 April 2010 will only be able to pay in more than £7,200 during the 2009/10 tax year (up to a maximum of £10,200) once they have attained their 50th birthday. So, for example, if an investor will not attain age 50 until 1 March 2010, they will not be able to pay in more than £7,200 until 1 March 2010.
From 6 April 2010 the limit is £10,200 (of which £5,100 can be saved in cash) for everyone.
If you choose to invest the whole allowance in an investment ISA, this can only be with one provider in any one tax year.
Transferring an ISA
If you have money saved from a previous tax year, you can transfer some or all of the money from your cash ISA to a stocks and shares ISA without this affecting your annual ISA investment allowance. However, once you have transferred your cash ISA to a stocks and shares ISA it is not possible to transfer it back into cash.
ISAs must always be transferred, you can’t close the old one and start a new one, otherwise you will lose the tax advantage. If appropriate, you may wish to consider switching an existing stocks and shares ISA if you feel the rate is not competitive. But if you have a fixed-rate ISA, you should check whether you may have to pay a penalty when transferring.