Page 45 - Phonebox Magazine June 2013

All of us have a Personal Allowance. It is the amount of income we can receive before we pay any tax. For some, they never seem to see it because they have bene ts from their employment (such as a car) that uses most or all of it up. In fact, with the tightening of rules on company cars over the last decade, many nd themselves owing tax before they have even been paid by having a negative allowance! For most though, this is not the case.
The Personal Allowance has increased greatly in recent years. Whilst it used to go up roughly in line with in ation, over the last 3 years it has risen from £6,475 to £9,440 – an increase of over 45%. In the overall scheme of things this has been counter balanced by a reduction in the amount of income you can earn before you pay Higher Rate tax. Many high earners will, therefore, have seen little bene t from the changes.
However, for lower earners these changes can make a signi cant difference as, over a 3 year period, the income that can be earned free of tax has risen by 45%. The question is though – how do you make sure you make the most from this?
Perhaps the most obvious area of planning is for couples, in particular where one partner is working part time. In this situation, the part time worker could easily nd that over the last 3 years they
have gone from being a tax payer to a non tax payer. This will leave some of the Personal Allowance unused, whilst at the same time the other partner could be paying 20%, 40% or even 45% rates
of tax. Interest on Bank and Building society accounts is a classic type of income that may be in the name of the higher earner and savings could be made by moving it to the non taxpayer.
Looking further ahead, the rise in Personal Allowances will mean more people are likely to retire as non tax payers in the future. Pension income can not be changed from one partner to another, so it may be prudent to start directing pension contributions away from the higher earner and into the name of the lower earner now, so that the pension income in retirement is tax ef cient for the couple overall. The effectiveness of this will depend on individual circumstances.
If you would like to discuss or review your current nancial arrangements or your general retirement planning, then please call us. Remember, initial meetings are free and we are happy to come to see you in the comfort of your own home. See our advert below.
This article does not constitute advice and should not be taken as a recommendation to purchase or invest in any of the products mentioned.
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...that if you had invested £1,000 in the best performing Investment Management Association Investment Fund at the beginning of 2012 it would have been worth £1,443 by the year end but if you had chosen the worst, it would have been worth just £570?
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Advison can help you construct a portfolio of investments that take into account your aims, attitude to risk and timescales. Why not contact us today for a free initial meeting. Remember, initial meetings are always without cost or obligation.
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Advison specialises in Investments, Retirement Planning and Protection. We offer a return to the traditional values that only a smaller company can offer, a service we find is appreciated by the more discerning client.
www.advison.co.uk
If you choose to proceed on a fee basis, our typical hourly fee is £150.
Advison Ltd is an appointed representative of IN Partnership the trading name of The On-Line Partnership Limited which is authorised and regulated by the Financial Conduct Authority. Registered (England) No. 5009271
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