14 March 2008
With the new tax year only days away, Alliance
Trust is urging professional advisers to take advantage of ‘use them or lose
them’ opportunities for tax saving to enhance their clients' pension
arrangements before the tax-year-end deadline passes. Alliance Trust Savings
Pensions Development Manager Steve Latto said, “These issues provide advisers with
opportunities to improve the tax efficiency of their various clients' pension
arrangements. However, with the end of the tax year looming, now really is the
time to make the most of your clients’ tax allowances. As the current tax year
ends, the chance to take advantage of today's basic rate of tax and CGT taper
relief will be gone for good. By planning quickly and carefully, taking
advantage of tactical and long-term opportunities, advisers can help clients
preserve and build their wealth.”
Cut your
clients’ capital gains tax bill
With capital gains set to be taxed at a flat rate
of 18% from 6 April, certain long-term investors face the choice of being taxed
at the new higher rate on disposal or selling their investment now. However,
For example, a client who has made a £100,000 gain
on an AIM share holding could sell these shares to their pension fund or use
these shares for an in-specie pension contribution before 6 April 2008 and
avoid paying an additional £8,000 in CGT.
The client would then be free to sell their pension fund holding at any
point in the future without incurring any further CGT liability.
If the same client has not used any of their CGT
exempt amount for the current tax year (£9,200), this could be used to reduce
or eliminate any potential CGT liability.
Get back
to basics before it’s too late
Advisers
with basic rate taxpaying clients should consider whether they are in a
position to boost their contributions this tax year, to take advantage of the
22% tax relief currently on offer. With
the basic rate of tax set to fall to 20% from April 6, tax relief will also fall
by two pence in the pound. The relaxed
rules on contributions since A-Day may tempt clients to make a significant
one-off lump sum contribution ahead of the April deadline.
This
change will also affect clients contributing the maximum allowance of £3,600
gross to a non-earning spouse’s pension or child's pension. Currently, they need to pay £2,808. This will rise to £2,880 in the next tax year.
Accelerate
tax relief for high earners
Alliance Trust highlights a one-off opportunity
around tax year end for high net worth clients to take advantage of input
periods to make three years contributions in just a few days.
For example, a client makes a pension contribution
of £225,000 gross (£175,500 net) on March 25, 2008, and then nominates to end
the input period early on March 26, 2008. The client then makes another pension
contribution of £235,000 gross (£183,300 net) on March 28, 2008 and then nominates
to end this input period early on April 6, 2008. On April 7, 2008 another
pension contribution of £245,000 gross (£196,000 net) is made. Each input
period ends in a different tax year, therefore the client has made gross
pension contributions of £705,000 between March 25 and April 7 2008 without
incurring an Annual Allowance charge.
By
manipulating input periods in this way, advisers' clients – if they have
sufficient relevant
-- ends --
Contacts
Tel +44 (0)1382 306064 Tel +44 (0)20 7294
3605 / 3641 Mobile 07745 783212 Email alliancetrust@lansons.com Email jane.holligan@alliancetrust.co.uk Web www.alliancetrust.co.uk |
Notes to
editors
- Alliance
Trust is the brand name of Alliance Trust Savings, a financial services
company that offers investment dealing, self-invested
personal pensions and a choice of investment wrappers. Alliance Trust
Savings administers assets on behalf of more than 46,000 customers.
Alliance Trust Savings is a top ten SIPP provider by number of accounts.