Tax Planning – planning throughout the tax year rather than just at the end

At the end of last tax year we sent out our newsletter to explain the end of tax year opportunities.  However, we don’t need to wait until the end of the year to make sure we utilise our allowances.

Top 10 tax year end opportunities

There were no surprises in the last Budget, meaning you can continue to benefit from the existing range of tax relief options and allowances.
This is good news and makes this tax year end very much business as usual. It’s simply a case of reviewing the year to date and identifying where there is still scope to save by maximising unused relief options and allowances.

The core elements of tax year end planning remain the same:
• Make full use of available tax advantaged savings, such as pensions and ISAs
• Ensure tax allowances are fully utilised and opportunities to extract savings tax efficiently aren’t wasted
• For families, don’t ignore the respective tax rates and unused allowances of both partners.
Below is a checklist of the top 10 opportunities that we can assist with. We have also added the key information required to help you prepare, so if you do need our assistance, then please get in touch right away.

1. Pension saving at highest rate of relief
• Successive Chancellors have decided against cutting the rate of tax relief on pension savings for individuals. But with the spotlight constantly falling on pension saving incentives at each Budget, relief at the highest rates may not be around forever.
• Additional and higher rate taxpayers may wish to contribute an amount to maximise tax relief at 40%, 45% or even 60% (where the personal allowance is reinstated) while they have the opportunity. ‘Carry forward’ can allow contributions in excess of the current annual allowance. For couples, consider maximising tax relief at higher rates for both, before paying in an amount that will only secure basic rate relief.
Key information required

• Total taxable income.
• Relevant UK earnings – e.g. earnings from employment or trade only.
• Pension annual allowance available from the current year and previous three years.

2. Keep the pensions annual allowance for high earners
• Some high income earners have a reduced amount of tax-efficient pension saving they can make. The standard £40,000 annual allowance is reduced by £1 for every £2 of ‘income’ you have over £150,000 in a tax year, until your allowance drops to £10,000.
• It is possible that you may be able to reinstate your full £40,000 allowance by making use of carry forward. The tapering of the annual allowance will not normally apply if income less personal contributions is £110,000 or less. A large personal contribution utilising unused allowance from the previous three tax years can bring income below £110,000 and restore the full £40,000 allowance for 2017/18. For some taxpayers the amount may attract 60% tax relief too.
• Remember that if you are a high earner, you may also have a reduced annual allowance from 2016/17.
Key information required

• Adjusted Income for this year and last year (broadly, total income plus employer contributions).
• Threshold Income for this year and last year (broadly, total income less individual contributions).
• Pension annual allowance available from the current year and previous three years.

3. Boost SIPP funds now before accessing flexibility
• If you are looking to take advantage of income flexibility for the first time you may want to consider boosting your fund before April, potentially sweeping up the full £40,000 from this year, plus any unused allowance carried forward from the last three years.
• The Money Purchase Annual Allowance (MPAA) will mean the opportunity to continue funding will be restricted. The MPAA is now £4,000 a year as of April 2017. If you are subject to the MPAA, you cannot use carry forward.
• If you require money from your pension you can avoid the MPAA and retain the full £40,000 allowance if you only take your tax free cash.
Key information required

• ‘Income’ required.
• Non-pension sources that could support ‘income’ required.

4. Sacrifice bonus for an employer pension contribution
• March and April is typically the time of year when many companies pay annual bonuses. Sacrificing a bonus for an employer pension contribution before the tax year end can bring several positive outcomes.
• Any employer and employee NI savings made could be used to boost pension funding, giving more to the pension pot for every £1 lost from take-home pay.
Key information required

• Size of bonus.
• Pension annual allowance available from the current year and previous three years.
• Employer willingness to pay in NI savings.
• Provisions for changing contract of employment.

5. Dividend changes and business owners
• If you are a director of a small or medium sized company, you may be facing an increased tax bill following changes to the taxation of dividends. This could be amplified next year when the tax free dividend allowance drops from £5,000 to just £2,000. A pension contribution could be the best way of paying yourself and cutting your overall tax bill.
• If you are over 55 you will of course have full unrestricted access to your pension savings if you wish.
• There’s no NI payable on either dividends or pension contributions. Dividends are paid from profits after corporation tax and will also be taxable in the director’s hands. By making an employer pension contribution, tax and NI savings can boost a director’s pension fund.
• Employer contributions made in the current financial year will get relief at 19% (this is also the planned rate for the next two years), but the rate is set to drop to 17% in 2020. So for those business owners who cannot fund a pension every year, you may wish to pay sooner rather than later if you have the profits and the cash available.
Key information required

• Company accounting period.
• Company pre-tax profit.
• Pension annual allowance available from the current year and previous three years.

6. Maximise ISA subscription limits
• ISAs offer savers valuable protection from income tax and CGT, and for those who hold all their savings in this wrapper, it is possible to avoid the chore of completing self-assessment returns.
• The allowance is given on a “use it or lose it” basis, and the period leading to the tax year-end, often referred to as ‘ISA season’, is the last chance to top up. Savings delayed until after 6 April 2018 will count against next year’s allowance.
Key information required

• Remaining annual ISA allowance.

7. Recover personal allowances and child benefit
• Pension contributions reduce your taxable income. In turn, this can have a positive effect on both the personal allowance and child benefit for those of you that are higher earners, resulting in a lower tax bill.
• An individual pension contribution that reduces income to below £100,000 will mean you will be entitled to the full tax-free personal allowance. The effective rate of tax relief on the contribution could be as much as 60%.
• Child Benefit is eroded by a tax charge if the highest earning individual in the household has an income of more than £50,000 and is cancelled altogether once their income exceeds £60,000. A pension contribution will reduce income and reverse the tax charge, wiping it out altogether once income falls below £50,000.
Key information required

• Adjusted net income (broadly total income less individual pension contributions).
• Relevant UK earnings.
• Pension annual allowance available from the current year and previous three years.

8. Take investment profit using CGT annual allowance
• If you are looking to supplement your income tax efficiently you could withdraw funds from an investment portfolio and keep the gains within their annual exemption.
• Even if an income is not needed, taking profits annually within the CGT allowance and re-investing the proceeds means that there will be less tax to pay when you ultimately need to access these funds for your spending needs.
• Proceeds cannot be re-invested in the same mutual funds for at least 30 days otherwise the expected ‘gain’ will not materialise. But they could be re-invested in a similar fund or through a pension or ISA. Alternatively, the proceeds could be immediately re-invested in the same investments but in the name of your partner.
• If there is tax to pay on gains at the higher 20% rate, a pension contribution could be enough to reduce this to the basic rate of 10%.
Key information required

• Sale proceeds and cost pool for mutual funds/shares.
• Income re-invested into mutual funds (for income and accumulation units/shares).
• Details of any share re-organisations.
• Gains/losses on other assets sold, e.g. second homes.
• Losses carried forward from previous years.

9. Cash in bonds to use up PA/Starting Rate Band/ PSA and basic rate band
• If you have any unused allowances that can be used against savings income, such as Personal Allowance (PA), Starting Rate Band or the Personal Savings Allowance (PSA), now could be an ideal opportunity to cash in offshore bonds, as gains can be offset against all of these.
• For those that have no other income at all in a tax year, gains of up to £17,500 can be taken tax free.
• If not needed, proceeds can be re-invested into another investment, effectively re-basing the ‘cost’ and reducing future taxable gains.
• If you do not have any of these allowances available but your partner (or even an adult child) does, then bonds or bond segments can be assigned to them so that they can benefit from tax free gains. Remember, the assignment of a bond in this way is not a taxable event.
Key information required

• Details of all non-savings and savings income.
• Investment gains on each policy segment.

10. Recycle savings into a more efficient tax wrapper
• As mentioned in items 8 and 9 above, allowances are a great way to harvest profits tax free. By re-investing this ‘tax-free’ growth, there will be less tax to pay on final encashment than might otherwise have been the case. That is to say, when you actually need to spend your savings, tax will be less of a burden.
• But there may be a better option to re-investing these interim capital withdrawals in the same tax wrapper. For example, they could be used to fund your pension where further tax relief can be claimed, investments can continue to grow tax free and funds can be protected from IHT.
• Similarly, capital taken could be used as part of this year’s ISA subscription. Although there is no tax relief or IHT advantage as with a pension, fund growth will still be protected from tax.
Key information required

• Unused personal allowances for extracting investment profits.
• Remaining annual ISA allowance.
• Pension annual allowance available from the current year and previous three years and relevant UK earnings.

Before you take any action, however, it is important to seek advice on how the relief options and exemptions above apply to your own personal circumstances.
If you are not currently a client of Plutus and you would like to take advantage of an initial consultation without charge then please do get in touch, just email to make an appointment with a member of the Plutus team.
If you are already a client and want to discuss your options again then we are here and happy to help.

Tax Planning – planning throughout the tax year rather than just at the end

Final Salary Pension Transfers

Final Salary Pension Transfers

Given the choice of £1.5 million now or £44,000 for life, what would you choose?

Since April 2015 Mercer has estimated that £50 billion has been transferred out of final salary pension schemes by 210,000 members.  Historically high Cash Equivalent Transfer Values (CETV), mainly due to low interest rates and gilt yields, and the introduction of pension freedoms means the temptation to transfer has arguably never been greater.

These cash sums can be used in two main ways, for those who are still saving for their retirement the cash sum can be transferred into a personal pension plan where it is invested. Or, for those who want to start living off the proceeds of their pension it can be transferred into a drawdown pension, where the money is invested and some is taken out as regular income and/or a lump sum.

However, it is a decision that should not to be taken lightly. Whilst many people like the idea of immediate wealth and having a large sum instantly in their control, the result of wishing to transfer is sacrificing a guaranteed, often inflation proofed, safeguarded income for life.

Five considerations to transfer

1. Flexibility
Whilst final salary pensions can be very valuable and attractive, they can also be inflexible, whereas if you transfer it then you can take as much or as little of your pension as and when you require it.

2. Potential for access to more tax-free cash
You can then take one quarter of your pension as a tax free lump sum and this is likely to be a larger figure after transferring out of your final salary scheme.

3. Succession tax planning
A final salary pension will provide a survivor’s pension to your widow when you die, subsequently after the widower dies the pension ends. But if you transfer out of your pension then you can nominate anyone to receive your pension upon your demise, and if you die prior to reaching age 75 this will be paid tax free.

4. Health
If you think you might be one of those whose life expectancy is below average then you might consider transferring it out, as the value offered should reflect average life expectancy and this may be a bigger amount of money than the amount it would have cost the scheme to pay your pension if you did not transfer and died relatively young.

5. Concerns about the solvency of the sponsoring employer
If the employer who sponsors your final salary pension is at risk of becoming insolvent, then there is a chance that you might not get all of the pension you were expecting, but if you transfer out then your pension pot is unaffected by what subsequently happens to your ex-employer’s business.

Five Reasons not to transfer

1. Certainty
One great advantage of having a final salary pension is that it lasts as long as you do, if you happen to live longer than average, then it is the scheme that has to find the money to fund this. By contrast, if you transfer your pension you are taking on the uncertainty about how long you will live.

2. Inflation
Your final salary pension will have some form of protection against inflation, the extent of which will depend on the rules of the scheme and when you were a member. Once you transfer the pension the inflation risk falls solely on you.

3. Investment Risk
In a final salary pension scheme the value of investments going up and down makes no difference to the amount of pension you receive, the employer has to bear the investment risk. By contrast, if you transfer the pension and invest it and the funds perform badly you may have to live on a reduced income.

4. Provision for Survivors
Since 1997 it has been a legal duty for final salary pensions to provide a pension for a surviving spouse if a scheme member dies after reaching retirement age. The CETV you receive if you were to transfer out may not reflect the full cost of the survivor benefits offered.

5. Pension Protection Fund
Should your ex-employer become insolvent the Pension Protection Fund (PPF) will pay 90% of the pension accrued.  The compensation is subject to a current overall annual cap of £33,678.38 at age 65 after the 90% has been applied. During deferment and once in retirement your pension will increase with inflation and there will also be compensation for certain survivors. But, if you were to transfer out then you will no longer be protected by the PPF.

Final salary pensions can be extremely complex and it is imperative to take sound independent financial advice before considering a pension transfer. Please contact us if this has raised any questions, or if you wish to discuss your options. Email:

Final Salary Pension Transfers

Mortgage News

BTL mortgage lenders increase stress tests.

Buy-to-Let investors face the prospect of new curbs on their ability to borrow. The Bank of England’s Prudential Regulation Authority (PRA), which monitors the soundness of banks and other lenders, has recently published a consultation paper. Its aim is to lay down underwriting standards that it thinks will prevent landlords getting into mortgage payment difficulties if they have a shock to their system or if interest rates rise.

The PRA wants lenders to assess either whether the monthly rental income from the property is enough to cover the mortgage, or whether the landlord has enough money – along with rental income – to keep paying the mortgage. It makes clear that affordability should never be based on the value of equity in the property used as security for the mortgage, and nor should lenders rely on predictions of rises in house prices to justify loan sizes.

The first of these tests requires lenders to calculate an interest coverage ratio, the relationship of the expected monthly rental income to the monthly interest payments. The PRA says this should be a minimum of 125% but recently we have seen lenders increasing this to 145%. The calculation takes into account all costs of the buy-to-let, including estimated voids, council tax, repairs, letting agent fees and utility costs.

Tax liabilities also need to be incorporated into the sums, including the changes resulting from the government’s limits on mortgage interest tax relief, due to start next year (from 2017 onwards the tax liability will step up year on year until 2020).

A borrower’s affordability is assessed under a hypothetical borrowing rate of at least 5% over a minimum of 5 years from the start of the mortgage. Many lenders have already increased the rate of interest it uses from 5% to 5.5%. In addition to this, some lenders are going so far as to access a borrower’s income in addition to these stress tests which could prove problematic for some buy-to-let landlords.

If you are already a have a buy-to-let property or you are thinking of buying one then talk to us first so we can discuss your options. To arrange a meeting, or an initial chat over the phone, with one of the mortgage team email your details to

Autumn Statement 2016

Autumn Statement 2016: all change for the Chancellor

The UK has experienced plenty of political upheaval this year with the EU referendum followed by a change of leadership. The Chancellor, Philip Hammond, delivered his first Autumn Statement on 23 November– which also turned out to be his last. His surprise announcement was that after two Budgets in 2017, from 2018 onwards we will have a Spring Statement and an Autumn Budget.

The Chancellor presented his Autumn Statement against a background of reduced growth forecasts and the ‘urgent’ need to tackle the long-term weaknesses of the UK economy. His declared ambition is to make UK ‘match-fit’ for Brexit.

The emphasis of the Chancellor’s speech was on increased infrastructure spending, a stop on further new welfare savings measures and an acceptance that government borrowing will be significantly higher than previously projected.

Non-tax provisions included a proposed ban – as in Scotland – on letting agents charging fees to renters, a continuing freeze on fuel duty, and a 30p an hour increase in the national living wage from April 2017 to £7.50.

On the tax front Mr Hammond announced the removal of tax and NIC advantages from salary sacrifice schemes (excluding pension contributions) and confirmation of the government’s commitment to reducing corporation tax to 17% by 2010. In a statement with little pensions news the Chancellor snuck in a reduction in the money purchase annual allowance (MPAA) from £10,000 to £4,000 from April 2017.

In a speech that ranged from welfare change to insurance premium tax by way of saving Wentworth Woodhouse, an historic stately home said to be the inspiration for Jane Austen’s Pemberley for the nation, Mr Hammond mixed in the serious challenges with some quirky touches. Perhaps he has started as he means to go on.

Read our Autumn Statement summary here

#autumnstatement #financialadvice #london

Autumn Statement 2016

What does it mean to be a Chartered Financial Adviser

Chartered Financial Planner

The title Chartered Financial Planner is the most widely accepted “gold standard” qualification available for professional financial planners/ financial advisers in the United Kingdom. Only about 10% of Financial Advisers hold this title; those that do are the most qualified professionals in addition to having the best experience. At July 2013 there were 32,690 advisers in the UK; as of October 2014, there are 4,303 individuals who hold the title Chartered Financial Planner.

The titles of Chartered Financial Planner and Chartered Financial Planners ware granted by the Chartered Insurance Institute (CII). The Privy Council authorised the CII to issue the Chartered title in 2005. Thus, a Chartered Financial Planner now carries equivalent qualifications and other established professions such as Chartered Accountants and Chartered Surveyors, etc. Membership of the Personal Finance Society, the leading professional body for financial planners, is required to be able to use the professional designation Chartered Financial Planner.

The qualification fits into the National Qualifications Framework at Level 6, equivalent to a Bachelors (first) Degree.


To attain Chartered Financial Planner status as an individual, one must study for and pass approximately 14 exams in various aspects of financial services and related subjects. Each exam offered by the Chartered Insurance Institute carries a certain number of “credits” in their qualification scheme. Credits can also be granted for equivalent exams passed form other awarding bodies. A total of 290 credits is required before Chartered status can be applied for. This generally takes several years to achieve.

One is also required to have five years relevant professional experience, and to demonstrate ongoing learning by completing a certain amount of Continued Professional Development each year. In addition, one is required to be a member of the Personal Finance Society, the professional body for Financial Planners, part of the CII Group.

What does it mean to be a Chartered Financial Adviser

Questions you should ask a financial adviser

What questions should I ask an adviser? by MONEYSAVINGSEXPERT

Don’t feel embarrassed. You’re potentially going to be transacting a lot of money via this person, so you have every right to ask questions and make sure you’re confident in your decision.

Usually your first meeting with a financial adviser is free, so you’re under no pressure to use them if you’re not impressed, or you simply don’t ‘click’. If you go in armed with the below list of questions (and any others you have of your own) you’ll be best placed to make a decision.

  • Q. Are you independent or restricted?

    A. This is probably the most important question you can ask and it’s best to make it your first so you know where you stand. An independent financial adviser will be able to search the whole of the market to get the best product for you, and must be entirely unbiased to call themselves independent. Read more on the difference.

  • Q. How will I receive the advice?

    A. You should ask whether the advice will be given to you face-to-face, on the phone, via email or in a report. If you have a preference, ask if there are different prices for each.

    The adviser should send you an outline of their recommendations, which is usually called a ‘suitability report’. Read and check this carefully to ensure it reflects the discussion you had with the adviser and that you understand why they recommended a particular product.

  • Q. Are you authorised?

    A. The FCA monitors firms to check they are qualified and above board. Before you meet any IFA, do a quick search on the FCA’s website to check they’re fully authorised.

  • Q. What qualifications do you have?

    A. The FCA requires all IFAs to pass what they call ‘Level 4 qualifications’ – so you should be looking for a diploma-level certificate, such as the Diploma in Financial Planning (DipFP) (formerly the Advanced Financial Planning Certificate), or even better, the Advanced Diploma in Financial Planning

Questions you should ask a financial adviser

Pension rule changes

As we approach the end of the tax year and the impending changes to pension rules on April 5th, one of our advisers Tom Dean, talks us through the important points.


On retirement individuals typically crystalised a 25% tax free lump sum and drew an income from the remainder (via drawdown or annuity). From April, those over age 55 will be able to access money purchase pensions in their entirety. It will be down to the individual to assess whether this is suitable, the main issues to consider will be whether they will retain enough assets to fund their income in retirement and their marginal rate of tax.

Death benefits

Before the new legislation, the most significant change to pension death benefits occurred at the point the pension was vested, that is to say moving from uncrystalised to crystalised. This has now changed and a new line has been drawn at age 75, prior to this age, regardless of whether any benefits have been taken, the fund is returned tax free to the beneficiaries.

Post age 75, the beneficiary can draw the benefits at their marginal rate of income tax.

Annual Allowances for those in Drawdown

The conventional annual allowance remains at £40,000 but there is now a new ‘money purchase annual allowance’ (MPAA) which is £10,000, the introduction of the MPAA has been deemed necessary to limit the scope for pension fund recycling.

This will apply to those already in flexible drawdown who have received a payment before 6th April 2015, those who use flexi-access drawdown after April 5th and subsequently draw income from the fund, those taking more than 25% of an uncrystallised lump sum and those in capped drawdown who exceed the maximum income limit after April 5th.

The lower annual allowance will not apply to those already in capped drawdown who do not increase their income level, neither will it apply to those entering flexi-access drawdown who only take their 25% tax free lump sum.

Pensions – so misunderstood!

Pensions and their rules can be confusing, everyone’s situation will be different and before you make any decisions about your pension you should talk to a professional. So please do talk to us if you would like to know more.

This from The Freedom and Choice in Pensions research paper survey:

“Would you like to buy a guaranteed income for life with your pension pot? YES 70%

“Would you like to buy an annuity with your pension pot? YES 17%


Pension rule changes