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Planning for the new tax year

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11th Feb 2010
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With the new tax year just around the corner, now is the time to assess your clients and make sure they’re aware of the issues which will affect them. Below is a round-up of the top five tax points likely to crop up this year.

Retirement age increase

Currently the age of retirement is 65 for men and 60 for women. The government plans to raise this to 65 for women from 2010 onwards, pushing it up by two years every year. The changes will take effect over the next two months, so it’s important to make clients who may be affected by this aware as soon as possible.

The latest tax guidance for those who are retiring, as well as full details of current personal allowance rates can be found here.

Going forward, there are also plans to increase this to 68 for both sexes between 2024 and 2046.

New 50% tax band
The chancellor unveiled plans for a new 50% tax band in this year’s Pre-Budget Report. The new band will come into effect this tax year and will apply to those earning more than £150,000 a year and is expected to affect around 350,000 people.  For those with clients earning over £150,000 it might be worth looking at bringing income forward or deferring expenditure where possible.

High earners’ personal allowances

From 5 April those earning over £100,000 p.a. will see their personal allowance decrease. Personal allowance is currently £6,475, but this is to be removed on an incremental basis. Advisers should ensure their clients are aware of the changes and prepare accordingly.

Furnished holiday lets
The tax advantages previously conferred on furnished holiday lets will terminate on 6 April 2010. HMRC recently published its interpretation of the transitional rules that will apply when FHLs move from trading to property rental status on 6 April 2010. These transitional rules have introduced a number of new, surprising and welcome openings for FHL property owners to exploit. Action must be taken now as the opportunities will close on the 5 April 2010.

To find out more about these, download Rebecca Benneyworth’s Tax Essentials: Guide to Furnished Holiday Lets.

Capital gains tax to rise
Capital gains tax is hotly tipped to increase in the Budget this spring. If you have clients who are expected to make a disposal, the advice is to make sure they’re aware of this and try to get it in before the end of the tax year. For information on the current rates and tax-free allowances, click here to be redirected to the relevant page on HMRC's website.

*Please note, the above tips are suggestions only and members are advised to consult the HMRC website or contact the relevant department.

Replies (5)

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By rjwaberuk
12th Feb 2010 10:48

"...PA's cut by maximum of £2,590 a year...removed on a incremen

What does this mean....what am I missing...? For 2010/11 onward, where "adjusted net income" exceeds £100,000 the personal allowance is reduced by £1 for every £2 over £100K - tapering to £0 at £112,950 onward. Someone with, say, £140K therefore gets £0 PA - what is the £2,590 a year mentioned....?

 

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By chris4454x
12th Feb 2010 10:49

High Earners Personal Allowance

The comment that the allowance has been cut by a maximum of £2,590 is incorrect. If the whole personal allowance is withdrawn the effect is an increase in tax of £2,590 i.e. £6,475 x 40%. This isn't the same thing.

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Della Hudson FCA
By Della Hudson
12th Feb 2010 11:11

phew

Thanks for the clarification. Thought I'd missed something there when £2,590 was mentioned. As a sole practitioner I'm paranoid about missing updates.

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By Gina Dyer
12th Feb 2010 14:40

Sorry!

Apologies for the oversight there. Didn't mean to panic you!

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By haywokm
12th Feb 2010 16:54

State pension age increase

Your information on the increase to women’s state pension age is, I believe, misleading.  The increase does not take place as a single overnight change from 6 April, nor does it increase by ‘two years every year’.  It is a graduated change over ten years between April 2010 and April 2020.  Those born after 5 April 1950 are potentially affected and can find a state pension age calculator on the Directgov website to check exactly when their ‘retirement age’ will be.  It should also be noted that pension credit entitlement will similarly change.  For both men and women, is currently available to eligible claimants from the age of 60. But a further consequence of the state pension changes is that this minimum age will also from 6 April 2010 begin a 10-year phased increase to 65 following the same pattern as for women’s state pensions.

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