Tax Planning Opportunities
Shared by: MichaelChoate
Issue3 2009 In this issue Financial Planning Tax Planning A Financial Healthcheck Employee Benefits A New Mortgage Service Seminars Matters Tax Planning Opportunities The introduction of the 50% income tax rate from 6 April 2010, and the immediate restrictions on higher rate tax relief for pension contributions are causing a number of our clients to reassess the structuring of their personal finances, including how they extract income from their businesses. Cover story Salary sacrifice and Financial healthcheck your pension for individuals When an employee makes a pension As a result of the current economic contribution from his/her net salary, there uncertainty, many individuals are keen to is no National Insurance Contributions reappraise and consider how best to plan (NIC) saving. In contrast, when an for their future. However, it is quite employer makes a contribution to a common to have tax, legal and financial pension scheme, no NICs are payable. advisers who do not know one another, Therefore, implementing a salary sacrifice which means the advice a client receives scheme is an attractive way of making is not co-ordinated and there so no both employer and employee NICs savings. comprehensive structure to how financial This can be structured in a way that leaves objectives on the whole can be met. the cost to the employer and the employee’s net disposable pay To combat this and help ensure you’re unchanged, while increasing the pension your personal financial, tax and legal scheme funding by up to 30% (see table affairs are suitable and up to date we below). have launched our “financial healthcheck” In this year’s Budget, the Chancellor Benefits for you: The financial healthcheck announced that, from April 2011, higher- is carried out by experienced financial There are a number of simple strategies rate tax relief on pension contributions for planners who can work with your tax and that all clients should consider, such as individuals earning more than £150,000 legal advisers. revisiting the relative efficiencies of salary will be restricted. Anti-avoidance measures were introduced with effect from 22 April What is involved: The healthcheck involves versus dividend payments and what, if gathering sufficient information with anything, can still be contributed tax 2009 to prevent the new restriction being circumvented. This includes using salary regard to efficiently to pension schemes. sacrifice arrangements to reduce income • You and your family There is also an exercise to be done in below £150,000 so, in the context of • Your assets and liabilities considering whether individuals should be registered pension schemes, the above bringing forward income into the current • Your income and expenditure planning only works for individuals with tax year (eg by declaring dividends early) income below £150,000. For individuals • Your retirement plans rather than allowing it to fall into the with income in excess of £150,000, the • Your tax position following tax year and be taxed at higher salary sacrifice approach is still possible, • Your legal documentation rates. but only using unregistered pension schemes. • Your objectives Pre-salary Post-salary There are a number sacrifice sacrifice (£) (£) It operates in a similar of simple strategies Company position way to a medical that all clients should Gross annual 20,000 18,262 salary healthcheck – consider, such as Employers NI cost 1,828 1,606 Employers pension 0 1,960 evaluating whether revisiting the relative cost you are in good shape efficiencies of salary Total costs of 21,828 21,828 employment to ensure a healthy versus dividend future. payments… Employee position Gross annual 20,000 18,252 salary We are happy to help prepare example Tax and -4,276 -3,738 Once this information is provided, we will calculations to show the tax implications employees NI arrange a meeting to understand fully your of taking income in this year rather than Employees pension -1,200 0 overall position. The healthcheck will then next, should this be of interest. contribution be completed and sent to you as a bespoke report within two weeks. The Total net salary 14,524 14,524 report will summarise your circumstances Beyond the simple strategies, there are and objectives, flag up areas that we more complicated approaches which can Pension scheme believe require immediate attention as involve the full restructuring of a business position well as those areas which require more in- and the use of trusts and other vehicles. Contribution 1,200 1,960 depth analysis. received These will not be appropriate for every In this respect it operates in a very similar business or individual and care and advice Income tax rebate 300 0 way to a medical healthcheck – evaluating should be taken. Total received by 1,500 1,960 whether you are in good shape and pension fund bringing to your attention areas that require specialist treatment to ensure a healthy future. The value of employee A new bespoke benefits mortgage service Establishing and maintaining pay and Are benefits communicated to We have identified that many of our clients benefits policies which are attractive, fair employees in a way which fits your require a more tailored service when and affordable can be a major headache company culture and ensures that arranging property finance. for employers. employees see real value in what is provided? High net worth individuals, often with Getting it right now will allow better cost complex financial affairs, require a more control for the employer and can lead to • The continued competitiveness of considered, personal and discreet service. higher levels of motivation and those products: Do the components Our experienced advisers are able to engagement with staff. provide value for money and offer provide this, and can relieve you of the the best possible terms available in time consuming and frustrating task of Conversely, an unplanned and reactive finding and comparing all of the available the marketplace? strategy can lead to inconsistency, low options. staff morale and an increased risk in the • The identification of other benefits form of higher costs and non-compliance which may be of interest: what other We have detailed knowledge and with legislation. benefits components might be experience of the specialist mortgage relevant to your organisation/staff market and in conjunction with financial Whether you are a new or more planners, tax advisers and legal specialists established company, you should take requirements? we can offer truly bespoke solutions. time to consider how best to create and • Compliance with current legislation: maintain the right package, ensuring that We have, over the years, built excellent Are you up to date with relationships with private and overseas benefits are both cost effective and requirements? appreciated by your most valuable asset – banks, as well as specialist underwriters your employees. at high street banks and building societies. Given the current economic climate, it is arguably even more important for Whether you are a new In addition to arranging bespoke finance employers to review the structure of their or more established for your principle residence we are happy to provide advice and arrange finance in benefit programmes to ensure that the benefit spend is providing the best value company, you should the following areas: for money. take time to consider Second homes and holiday A proper review process should provide an objective and independent assessment of how best to create and homes existing benefits packages covering the following key areas: maintain the right Both in the UK and overseas, as well as residential investment finance for buy to • The suitability of the products package let properties currently in place: Do the current benefit components fit the employee • The service provided by advisers Lending to limited companies, profile? Are they seen as valuable? Are employees engaged in the benefit and the product providers: Do the Trusts or other SPVs current arrangements meet your process? Are their thoughts required standards? For principal private residences, second considered? homes and buy-to-let investments. Availability based upon documentation • Administration: Do your current and details of structure systems provide the best platform? Offshore mortgages Both for foreign nationals and when required to form part of a wider tax planning strategy Foreign currency mortgages Switchable currency mortgages are available to those with a detailed understanding of foreign exchange and risk and reward, and single currency loans for those who have substantial income in that currency. There may be a fee for mortgage advice. The precise amount will depend upon your circumstances and will be agreed with you before we undertake any work. Your home may be repossessed if you do not keep up repayments on your mortgage. Seminars We are either holding or participating in a number of seminars over the coming months which should be of interest to a wide range of our clients and professional contacts. No charge is made for attendance. Retirement Planning for Business Wealth Management for Private Employee Benefits Owners Clients & Trustees September 2009 September 2009 September 2009 • Knowing when and how to retire • How to create the most suitable • What we’ve done so far to and exit from your business investment strategy employees in this recession • Effective use of pension schemes, • What is investment risk? • How can we rebuild employee given legislative changes morale to ensure they are focused • What to expect from investment • Investment planning to generate tax on success? portfolios efficient income • How employee benefits can cost • Personal tax planning opportunities • Coping with the impact of inflation effectively help the engagement and longevity • How to make your assets go further process in retirement. • Creating your desired lifestyle • How tax can be applied creatively to employees in the UK and overseas • Estate planning considerations • How share schemes can be used to motivate and retain our high flyers Solicitors & Accountants Nursing Home Proprietors October 2009 November 2009 • Regulation and the future • Are you feeling frustrated with the level of support provided by your • Integrating tax, legal and financial bank? services • Are you looking to expand, buy or If you would like to receive • What is financial planning? build a new home? an invitation to any of • Ever wondered what the key drivers these seminars please • Appropriate investment are on valuing a home? contact Dee Ruan on: management for individuals, trusts and charities • Are you looking to sell your business in the next 5 years? firstname.lastname@example.org • Do you wonder whether you are claiming all the tax allowances that you might be eligible for? Contact Us: For further information or assistance regarding any of the topics covered in this newsletter please speak to your usual Blacktower adviser or contact us at one of our offices New Malden St Albans Redhill 80 Coombe Road 105 St Peter’s Street 36-44 High Street New Malden St Albans Redhill Surrey Herts Surrey KT3 4QS AL1 3EJ RH1 1RH Tel: 020 8336 6350 Tel: 01727 896 033 Tel: 01737 781 570 Email: email@example.com Email: firstname.lastname@example.org Email: email@example.com Blacktower Financial Advisers Limited is authorised and regulated by the Financial Services Authority (FSA). Past performance is not a guide to future performance and the value of your investments can fall as well as rise. The FSA do not regulate taxation and trust advice, nor some types of mortgage.