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Looking ahead to new tax saving deadlines

Danby Bloch, 19 Apr 2012


 

A shiny new tax planning deadline was introduced in the Spring Budget - and the key date is 5 April 2013. That particular Friday next year will mark two crucial events.

First of all, it is the last date on which a UK taxpayer will be able to get 50% tax relief. Another way of thinking about it is that the following day will be the first date of the new tax year in which the top rate of tax will 45% on income over £150,000.  

Tax reliefs limited

The other deadline for the same date is the Government’s proposal to limit the level of aggregate tax reliefs on such items as interest, losses and charitable gifts to £50,000 or a quarter of the individual’s income – whichever is the greater. So, for example, if you want to shelter £100,000 of income with interest relief and business losses, you will need to have £400,000 of income. Draft legislation and consultation is expected later in the year. The good news is that tax relief on pension contributions does not count as part of the aggregate limit.

It is possible that this proposal was a last minute sop to the Lib Dem part of the coalition and might not have been fully thought through. There has already been a certain amount of back-pedalling on the potential impact on large charitable gifts.

So it looks as if 2012/13 will be a very busy time for tax planners with high income clients. There will be opportunities to benefit from tax relief on pensions, especially if there is unused relief to carry forward into this ultimate year of 50% tax relief. And it could be the last year to be able to use unlimited tax reliefs from many other sources.

Child tax credit changes

The Budget introduces a number of other tax saving opportunities. For example, for people rather lower down the income scale, the Budget also introduces a new set of marginal tax rates on the withdrawal of child benefit through a special tax charge, depending on the number of children in the household. The charge (starting 7 January 2013) will be at the rate of 1% of the amount of child benefit for every pound of income between £50,000 and £60,000.

The child tax credit for two children is £1,752 a year so the effective extra tax rate will be £17.52 for every £100 of income – ie 17.52%, on top of the 40% higher rate tax. A marginal tax rate of 59.52% with the 2% employee/self-employed NIC.

The Taxbriefs conference on high net worth tax planning on 12 June 2012 in the City of London will examine all these issues and many more. To find out more and book your place visit www.highnetworthconference.com.

 


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Danby Bloch

Editorial Director, Taxbriefs

Danby Bloch is the editorial director of Taxbriefs, chairman of city-based IFAs, Helm Godfrey and director of Nucleus, an independent wrap provider.

Over a period of more than 40 years, Danby has established himself as one of the industry's leading thinkers and  is a respected author, lecturer and trainer on tax and financial planning.

 

 

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