Chartered Accountants of Poynton, Cheshire

Pension Payments

There have been considerable changes to the pension contribution rules over the last couple of years.

In summary, these are as follows:

• Any individual can make payments of £3600 per annum gross of tax, whether they have an income or not.

• If an employer makes a contribution on behalf of an employee, this will be tax deductible in that employer's accounts as long as the payment is made 'wholly and exclusively1 for the purposes of the trade.

• The maximum any individual can pay in any pension payment period (which is usually the same as the tax year) is normally £21,5000 and any contributions over this will be subject to income tax of 40%. There are some exceptions to this rule.

• There is no longer a provision which allows excessive personal pension contributions to be carried back to the prior year. Some special rules remain in place for retirement annuity contributions.

Edward Appleton: "You can make huge tax savings which can transform your life, when you know how."

Ralph Ellerton: "Appletons live and breathe the paperwork so you don't have to!"

Tax Returns
If you submit your tax details to us, we can advise you of your exact tax liability.

Buying a property abroad?

Here at Appletons, more and more clients are considering buying a second home either within the UK or abroad, maybe as an investment or as a second or holiday home.

If you think you might like to do the same, read on for some free advice...

Ownership

You need to consider the legal ownership of the property. You could own it in your own name, jointly with your husband or wife, through a limited company or perhaps jointly with business partners or friends.

Ownership will affect any capital tax liability due when the property is sold, and the tax due on any rental income received.

Local Tax Rules

If you are buying a property abroad, you must consider the foreign tax rules as they may differ from UK tax rules.

You need to understand the laws that apply in whichever country you are buying a property, such as sales taxes on the purchase.

Running Costs

Maintenance costs for the property (such as the letting agent's fees, electricity and gas) are tax-deductible.

You might also get tax relief for repairs and renewals to the property, though the rules are complex and each case would be judged on its merits. The good news is that you can normally use interest paid on loans to buy a property to reduce the taxable rental income.

Pensions Schemes

From 6 April 2006 the Government is considering allowing registered pension schemes to own domestic properties, which could mean significant tax savings since the pension fund will not pay tax on any rental income or capital gain. (At present they are only allowed to own business premises.)

Rental Income

If you are a UK resident, any rental income you get from letting out a property, in this country or abroad, will be subject to UK tax.

This includes rental income you receive from family members and friends. Any rental income you receive from a property abroad might also be subject to tax in that country, as well as here in the UK, unless there is a tax treaty between that country and the UK that prevents the income from being taxed twice.

A word or two of caution

When buying a foreign property you must take the advice of legal and tax professionals, both in the UK and the country where the property is located. A small extra cost now could save significant amounts later.

Still keen? Good! Appletons will be pleased to advise you on the tax implications of buying your second or investment property. Give us a bell!

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