judgement day
New allowances this year will benefit many savers,
inheritors and pensioners – provided you act now
By Neasa MacErlean
20
|
THE INVESTOR
IN YOUR INTEREST
A
year-end tax review is always
useful to ensure that you do
not lose out on allowances
and incentives.This year,
however, it is imperative,
following a series of changes in tax and
inheritance legislation that has thrown
up a range of opportunities to make
savings, both now and in the future,
if you act before 6April.
Perhaps the most significant opportunity
arises from the interaction between
changes to the InheritanceTax (IHT)
rules on pensions, which were introduced
last April, and the reduction in the annual
allowance for pension contributions
for some higher earners, which takes
effect this April.
The changes to IHT mean that, with some
exceptions, pension funds can now be passed
on tax-free by those who die under the age
of 75. If the person dies at or after the age of
75, then the pension will, in many situations,
be subject only to IncomeTax in the hands
of the heir, who can continue to receive
money from the fund for as long as it lasts.
Tony Müdd, Divisional Director,
Development andTechnical Consultancy
at St. James’s Place, says the changes to the
way pensions are taxed on death will have
a big impact on estate planning:‘This will
become an important part of someone’s
InheritanceTax planning.’
Pension tax incentives for higher earners
are being reduced from 6April so that the
maximum tax-free contribution for those
earning more than £150,000 will gradually
be reduced from £40,000 to as low as
£10,000 for those most affected. Unused
annual allowances can be carried forward
for three years.Thus, those who will be
affected by the change should consider
making the most of unused contributions
before the new limits kick in.
Make themost of
unused contributions
before the new limits
kick in
