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.

Savings and Saving Tax

Saving for retirement

For many, the focus of saving is to be able to enjoy a comfortable retirement. Tax reliefs encourage savings through pension plans, with tax relief at up to 40% on your own savings and a tax deduction for your employer. However, be aware that contributions to tax-advantaged plans are limited, and that:

* 2005/06 savings need to be invested by 5 April 2006
* Personal pension premiums carried back to top up 2004/05 savings need to be paid, and claimed, by 31 January 2006
* Retirement annuity premiums paid up to 5 April 2006 can be carried back to top up 2004/05 savings, and use unused relief for the previous six years.

From 6 April 2006 many of the current restrictions on pension ' savings will be removed. Contact us for more information.

Regular savings

Small regular amounts can be saved in Individual Savings Accounts (ISAs). Gains and most income on an ISA are tax-free. With a limit of £7,000 on annual savings, a couple could save £70,000 by the time the current limits next come under review in 2010. You have until 5 April 2006 to make your 2005/06 ISA investment.

Regular savings can also be invested in National Savings (some products offer a tax-free return, which is particularly attractive to 40% taxpayers) and banks and building societies. Those willing to accept the possibility of greater risk might consider the stock market or buy-to-let property.

Gift planning

Tax-efficient gift planning in your lifetime means that you can enjoy seeing your money put to use. You can plan a strategy to make the most of inheritance tax reliefs.

Ideas to consider include: gifts of up to £3,000 before 6 April 2006; small gifts before 6 April 2006 of up to £250 per person; gifts to charity; regular gifts out of income; and gifts of a stake in the family business.

Substantial gifts not covered by specific exemptions are not chargeable to IHT if you survive I seven years from the date of the gift. A tax-efficient Will is also very important.

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