Financial Update from Morris Cook Chartered Accountants - January 2015
13th January 2015
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This month’s newsletter provides suggestions on planning before your business year end, a new initiative to top up your State Pension and an idea for those with incomes approaching £100k.

Topping up your State Pension

The Government has indicated that it wants to offer more to existing pensioners and people who reach State Pension age before 6 April 2016 when the single-tier pension is introduced.

To achieve this a new Class 3A voluntary contribution will be available from October 2015 to April 2017.

The Class 3A contribution will allow people to top up their additional State Pension. The rate of contribution, which will be a lump sum payment, will be set at an actuarially fair rate that ensures that both individual contributors and the tax payer get a fair deal.

The scheme will be only be open for a limited period as it is expected that most people who want to take-up Class 3A entitlement will do so in the first few months.

You may want to consider the effects this may have on your State Pension at retirement.

Work out your tax position sooner rather than later

If you are required to file a Self Assessment tax return there are compelling arguments to support the notion that you should calculate your tax position as soon as you can after the 5 April. Don’t forget, it is possible to work out your tax position for 2014-15 and consider your planning options before you file the return. Certainly, we can undertake this for you.

By the end of May or early June 2015 you should be able to draw together most of the information you need to complete your return for 2014-15.

Here are three reasons why you should seriously consider this early-bird approach, and there are many more:

You will be aware of any underpayment of tax to 5 April 2015, and more importantly, how you will fund the payment that will become due on or before 31 January 2016.

If your tax arrears include Income Tax at the higher rates, you may want to consider making a charitable donation before you file your 2015 return. It is possible to carry back charitable donations made after the 5 April 2015 as long as you make the claim before you file. Knowing your tax position at an early date will give you an opportunity to consider this option.

If you have overpaid tax for 2014-15 why leave it in the Treasury’s bank account? Getting the job done as soon as you can, after 5 April 2015, should ensure your refund is quickly received.

Is your income approaching £100,000?

If you estimate that your taxable income for 2014-15 will marginally exceed £100,000, perhaps for the first time, you should consider your options.

If your income does exceed £100,000 then for every £2 that your income exceeds this amount your personal tax allowance will be reduced by £1.

As the basic personal allowance is £10,000 for 2014-15 this means that when your income is £120,000 or greater, you will no longer qualify for a basic personal allowance. Any steps that you can take to keep your income below £100,000 will potentially save you Income Tax at the marginal rate of 60%.

For example you could consider negotiating a salary sacrifice arrangement with your employer or additional pension contributions. Maybe, trading salary for non-taxable benefits such as increased holiday entitlement? Further, pension premiums and gift aid payments count as deductions in arriving at your taxable income.

If you would like to discuss your options in more detail please call 01691 654545.

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John W

Member since: 10th July 2012

A quick introduction - I'm John Waine, Director of TheBestOfOswestry. Having lived in this beautiful area for around 20 years now, I have decided to stay. :)

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