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Since April of this year there have been many many changes to the rules that govern aspects of our personal finance, so you may be forgiven for not being sure what the various allowances, thresholds and exemptions now are.
It’s a mixed bag of good news and not such good news! Some of the key points are as follows:
1. Pensions – these have undergone the most fundamental changes in decades, and as an investor, you now have more flexibility in how to take your benefits (income and/or lump sum) at any age from 55. So this is generally good news, although the processes involved are nowhere near as simple and straightforward as the media has reported. You still have to be mindful of tax implications and the timeframe for accessing your funds can be protracted, so always ensure you take financial advice before embarking on these big decisions. Your pension fund needs to last you for the rest of your life, and the decisions you take at the beginning may be irreversible.
2. Taxation of dividends – unfortunately these changes are not such positive news if you are self-employed and take most of your earnings as dividends. New rules will start in April 2016, so talk to your accountant and /or financial adviser about what’s best to do during the remainder of this tax year as well as from April next year.
3. Inheritance Tax threshold – over the next few years, the threshold at which you start paying inheritance tax will include a family home exemption, if the home is one of the assets within your estate. This will mean that for a married couple, you can pass up to £1 million of assets on to your nearest and dearest without incurring any inheritance tax (which is very high, at 40%).
4. Buy to Let – from next April the amount if tax relief available to offset financing of a buy-to-let will be curbed to the basic rate of 20% which means if you are a higher or additional rate taxpayer you will owe more income tax on the rental income you earn, making buy-to-lets much less attractive as investment options
These are only a few of the main changes that have occurred, so now is a great time to have a financial MOT or health check. If you don’t currently work with a financial adviser, then now’s the time to start! Begin with a general and holistic review of your position, your future goals and priorities, and then you can consider how these changes are likely to impact you. Thereafter your planner can advise you on how to make the most of the positive changes, and potentially minimise the negative ones.
Knowledge – then action! – is power.
To receive a complimentary guide covering Wealth Management, Retirement Planning or Inheritance Tax Planning, please contact Amanda Redman on 07801 045587, email [email protected] or visit www.amandaredmanfp.co.uk