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The end of the current 2011/2012 tax year is 5 April 2012.  This highlights an important opportunity to focus on key areas which could help you achieve a more secure financial future for yourself and family. Today, we will be focusing on Tip 1: Making most use of your ISA allowance.  

Making Use of Your ISA Allowance

An Individual Savings Account (ISA) is a tax-efficient wrapper. Within an ISA you pay no capital gains tax and no further tax on the income, making it one of the most tax-efficient savings vehicles available.

If you are planning to open or transfer an existing ISA, you have until 5 April, but you should not leave it until this date. If you miss the deadline, you will lose your £10,680 allowance for the 2011/12 tax year forever. HM Revenue & Customs says the ISA application must have been received by your ISA provider and it must also have been processed to qualify by 5 April 2012.

What types of ISAs are there?

There are two main types of ISAs: Cash ISAs and Stocks and Shares ISAs.

Cash ISAs work in the same way as normal savings accounts. You choose if you want a fixed-rate account, and easy access (or instant access) account or a regular savings account. The only difference is that you do not pay income tax on the interest you earn.

With a Stocks and Shares ISA you can invest in individual stocks and shares or investment funds. Any profit you make is not subject to capital gains tax. However, you pay 10% tax on dividend earnings.

Who can save in an ISA?

Anyone who is 16 or over and a UK resident can save money in a tax-efficient Cash ISA but to save in a Stocks and Shares ISA you need to be at least 18.

How much can I invest?

As of April 2011, the ISA limit increased for everyone by £480 t0 £10,680 per tax year. Of this, the maximum amount you put into a Cash ISA is £5,340, and then the remainder can be invested into a Stocks and Shares ISA. Alternatively, you may choose to allocate the entire £10,680 into a Stocks and Shares ISA.

When should I invest?

As long as you have not exceeded the current £10,680 ISA limit you can invest in an ISA at any point during the tax year and, depending on the ISA provider, you can allocate lump sums or monthly contributions that fit around your lifestyle.

Can I transfer my existing ISA money?

You can transfer the money saved in a Cash ISA to a Stocks and Shares ISA, even if it was saved in previous tax years, without affecting your annual ISA allowance.

Do not miss out…

Please do not miss out on using your tax-efficient allowance. Our role, as Independent Financial Advisers with 50 years experience is to assist all of our clients in making best use of their money to help them meet their unique goals and aspirations. To ensure there are no delays in processing your ISA application, please contact us sooner rather than later. We have great experience in investing people’s ISAs and making best use of this most tax-efficient savings vehicle.

From today, 1st November 2011, Junior ISAs have gone on sale and have replaced Child Trust Funds.  

What is a Junior ISA?

A Junior ISA is a tax-free savings account for children which can’t be encashed until they reach 18 years old, except for exceptional circumstances including terminal illness and death. It essentially allows family or friends to contribute to a child’s future. It is very much viewed as a savings vehicle for a child in preparation for University Fees or for first-time buyers of their home.

How much can be contributed annually?

The maximum annual contribution from friends or family is £3,600.

How does it differ from a Child Trust Fund?

Well, the Child Trust Fund annual contribution limit was £1,200, however, this will now increase to the Junior ISA limit (£3,600) later on this year.

However, the main difference is that the Junior ISA will not benefit from the government contributions that the CTF enjoys, but instead relies entirely on funding from parents, relatives and friends.

What are the potential benefits? Why save?

Based on a growth rate of 5% per year, providers are purporting that it could be possible for a Junior ISA fund to accumulate £100,000 by the time the child reaches age 18, the minimum age at which it can be encashed. This is a result of compound interest  “The most powerful force in the universe” (Albert Einstein)  From a financial planning perspective, it is certainly powerful and one of the fundamental reasons why people should be saving as early as possible. It’s the perfect way to make money from money.

What happens when the child turns 18?

Once the child turns 18, the Junior ISA is automatically transferred into an adult ISA in the child’s name. However, from as early as the age of 16, the child can take control of the investment although it won’t be able to be enchashed until 18.

What are the disadvantages?

Whilst the Junior ISA is available to UK residents under the age of 18, it is not available to those children who already have a Child Trust Fund. This essentially excludes children born between 1st September 2002 and 2nd January 2011, which is 9 years. Money saved in a CTF can’t currently be transferred into a Junior ISA. However, it is not known at this point whether the rules will be relaxed.

Do you want more control over where your money is invested?

Self-Invested Personal Pensions (SIPPS) were introduced in 1989 to give those planning for retirement greater control over where their pension fund is invested. Essentially, a SIPP is a pension wrapper that is capable of holding investments and providing you with the same tax advantages as other personal pension plans.

SIPPS provide MORE CONTROL

You can choose from a number of different investments, unlike other traditional pension schemes, giving you control over where your money is invested. A SIPP offers the widest range of pension investments including, cash, equities (both UK and foreign), gilts, unit trusts, OEICS, hedge funds, investment trusts, real estate investment trusts, commercial property and land, traded endowment plans and options.

CARRY FORWARD

There is an annual maximum tax-relievable contribution level of £50,000 for 2011/12. You could contribute more, but would be taxed at your marginal rate. Commencing from the start of the 2011/2011 tax year, it is now possible to carry forward any unused allowance from the previous three tax years (for this purpose the maximum allowance is £50,000 per tax year). To utilise this option, we strongly recommend that you seek independent financial advice such as from Hutt Professional Financial Planning.

Pensionable income, including employment income, bonus, benefits in kind, self- employment and partnership profits, can all be contributed. Pensionable income does not include investment income, rental income or pension income.  Also, if you make a contribution that takes your taxable earning below the higher rate tax threshold, then the tax relief will be less than 40%

Other Considerations

You cannot draw on a SIPP pension before age 55 and you need to spend time managing your investments. Where investment is made in commercial property, you may have periods without rental income, and in some cases, the pension fund may need to sell on the property when the market is not at its strongest.

To take control of your pension and work with us to help you meet your retirement needs, please contact Hutt Professional Financial Planning to speak with one our advisers. We will be turning 50 years old next year and have been doing this for some time, indeed a lot longer than most.

Tel: 02476 555 215

Email: info@huttprofessional.co.uk

Inheritance Tax (IHT) is an issue affecting increasing numbers of households across the country. Indeed, changes introduced in October 2007 have made it possible for couples and civil partners to combine their individual IHT allowances, so that it is easier for them to protect their family’s inheritance.

IHT is currently payable at 40% on any amount over £325,000 (the nil rate band 2011/2012). The nil rate band is the term used to describe the value an estate can have before it is taxed (£650,000 for married couples). So, if you have an estate worth £500,000, £175,000, is taxed at 40% meaning the IHT bill would be £70,000.

The good news, however, is that Trusts are available as a well-established and useful tool in estate planning. The value of a trust in IHT planning is that it enables you to decide the wealth on which your beneficiaries will pay IHT without making a valuable outright gift – something you might be reluctant to do if the recipients are quite young of might take an irresponsible approach to a substantial amount of money, for example. The trust allows wealth to be passed on in a tax-efficient manner under the control of the trustees. There are different types of trust. Some give the trustees very little discretion, but can be useful when the aim is to establish the future use of assets. For example, a Will trust could give a widow the right to certain income, with the capital passing to any children on her death. Other trusts, know as discretionary trusts, allow the trustees to retain control of the assets under the terms of the trust, which set out when and what the beneficiaries receive.

Hutt Professional Financial Planning has extensive experience in estate planning and ensuring the passing on of wealth in the most tax-efficient manner.  We have been doing this longer than most other advisory firms. Fifty years experience in the past, and fifty years for the future.

    Ruff Ruff! Here’s my daily tip: Diversification

At Hutt Professional Financial Planning we ensure our clients have a great deal of diversification in their investment portfolio. Indeed, we work very hard at getting the right balance for our clients. It is what we do best.

Diversification is an important factor to consider as by spreading risk across different investment types, you reduce the chances of your investment capital being adversely affected by any sudden market movement in the sector that you are invested in. Milo certainly likes to have a large range of doggie biscuits in his tray. If he eats too much of one flavour, he has the rest to choose from!

When diversifying your investment portfolio, you will probably invest in a combination of UK equities, overseas equities, property, bonds and cash. Your relative weighting in each class will depend on your attitude to investment risk. You will also need balance in each asset class to ensure you do not overexpose yourself to one industry or currency. We suggest that our clients hold a basket of assets that behave differently in differing investment conditions. This can have a smoothing effect during volatile investment conditions, which we are experiencing currently. The overall affect of diversification is stabalising your overall investment return.

Taking into account your attitude to risk, we will be able to select a portfolio that meets your needs.

As a doggie, I only comment. However, Hutt Professional Financial Planning have qualified, professional advisers (people) who advise clients on a daily basis on their investment portfolios. It is what they do best, and they have been around a lot longer than most. Contact us. Ruff Ruff!

Hutt Professional Financial Planning has extensive experience in consolidating people’s pension pots - it is what we do best.

The reasons people transfer their pensions vary, with some looking for better fund performance and lower charges, and others having been made redundant.

If you have a number of pensions from previous employers you should obtain professional advice as it may be appropriate to consolidate them, depending on a number of different factors you will need to consider.

INCREASED BUYING POWER

The main advantage of consolidating your pensions is to increase buying power. If appropriate, consolidation you pension plans would enable you to bring all your retirement savings together which could make it easier to mange or increase your choice of investment options – particularly useful if your existing funds are underperforming.

IS TRANSFERRING RIGHT FOR YOU?

Pension transfers are a complex area of retirement planning and you should be sure that a transfer is right for you before you proceed. You must investigate the following and we will be there to help you consider:

1. Compare the Charges: How do the costs of your current pension compare with those of the potential new provider?
2. Exit Fees: Some pensions apply an exit fee when you transfer out, so we will need to check with your current provider before.
3. Loss of Benefits: It’s important to check what benefits your current pension you could lose if you transfer out of it.
4. Compare the Investment Options: How does the range of investments from your current pension compare to that offered by the new pension provider?

There is a wide range of pension transfer options available that provide a differing array of benefits and arrangements. Due to the complexity of pension transfer arrangements, anyone researching this route should do so with the help of independent professional financial advice.

If you would like to discuss your options, please contact Hutt Professional. We have been doing this a lot longer than most.

Welcome to the first edition of the Hutt Professional Newsletter, designed to inform, guide and prepare solicitors in Coventry & Warwickshire for the Professional Indemnity Insurance renewal season ahead.

Click on the link below to download:

Solicitors PII Newsletter 2011

It’s taken a while but we seem to be finally there.  Thanks to Matthew Smith for everything that he has done to create our new website. We think it’s great and hope everybody else enjoys it too.

Click below to download information about our Professional Indemnity package launched for Quantity Surveyors, Estate Agents and Property Managers:
Professional Indemnity Insurance – Hutt Professional