23 July 2013

AIM Shares, Your ISA, and Inheritance Tax

The government have just announced that it will be possible to include AIM shares in your ISA - probably from August.
 
What does that mean and why is it significant?
 
AIM shares are company shares traded in the usual way but on the "Alternative Investment Market". Because of the more relaxed regime than on the main London Stock Exchange, AIM shares basically mean smaller companies.
 
Such shares have not been allowed in your stocks and shares ISA before (unless they were also listed on some other exchange as well). Apart from restricting your choice of shares to buy, that has meant that your ISA is free of Income Tax and Capital Gains Tax but is not free of Inheritance Tax - it is assessed as part of your estate just like other investment assets, so your beneficiaries could end up paying 40% tax on your ISA.
 
But AIM shares offer the possibility of using Business Property Relief which, subject to certain criteria, means that you can pass on your part-ownership of   a small company without paying Inheritance Tax.
 
You could previously choose whether to avoid Income Tax / Capital Gains Tax, or Inheritance Tax. Now you have the possibility of avoiding both.

11 July 2013

Deeds of Variation - Changing Someone's Will

It's not commonly known but it's possible to change the contents of someone's will after their death.

Why might you want to do that? Well, tax is the reason very often - Inheritance Tax (IHT) generally. Here's a couple of examples.

Perhaps the children of the deceased already have plenty of assets of their own, and an additional substantial gift will simply add to their own IHT problems. So skipping a generation and passing assets to grandchildren might be preferable.

Or if there is a surviving spouse it may be better to leave assets to them (with no IHT payable) rather than pass it to others where there would be. And if that surviving spouse is young enough there may be scope for using their own allowances to gift the assets over a period of time.

Deeds of variation must be executed within two years of the death.

As ever with IHT, there is often scope for large tax savings, but advice is needed to avoid the pitfalls.

8 July 2013

Auto-Enrolment - some staggering numbers

Small businesses are not renowned for jumping at the opportunity to satisfy legislation. I know - I've been running a small business one way or another for quite a few years. It's just that there are better things to do, like trying to earn a living for you and your staff.
 
I've blogged before about Auto-Enrolment pensions and the various requirements it imposes on all employers (go to the main Money At the Speed of Life website if you're not there already - and find the Auto-Enrolment label on the right to find relevant blogs). But although the process has started already for larger employers, it will be 2014 and 2015 when it hits the vast majority of UK companies.
 
Given that there are around 11 million workers to be enrolled in pension schemes by the end of the process (by the DWP's estimate), that means a vast number of employers who will need to set up a new pension scheme in most cases.

At its peak, there will be 132,000 small companies per month who need a new pension scheme and all the associated processes to enrol staff.
 
But here's the problem, how will smaller employers know how to find the best pension for their staff, and to decide on the most cost-effective pension contribution strategy? There are not going to be enough advisers to go round and recommend what to do for everyone (and make no mistake this is complex stuff, with lifelong implications for staff).

All I can suggest to anyone is to start planning early. It could take 12 months to design and arrange a pension scheme which is really going to be beneficial to staff, so even if your "staging date" is not until 2014 or 2015, now is the time to think about it.

4 July 2013

More Good News on Annuities?

... or perhaps it's just less bad! But back in April I highlighted an increase in average annuity rates in the first quarter of 2013.
 
And now there are further signs of an upward trend, following a slight upward trend in gilt yields. We're starting from a very low base, though, and it may (or may not!) still be worth waiting if you are looking for the right time to buy an annuity with your pension money.
 
Here's a chart showing the trend over the last 5 years (click to expand) - the blue line is the yield on gilts (which determine annuity rates), and the red bars are annuity rates.
 

For advice on the best approach to getting an income in 2013, get in touch:
www.primetimefinancial.co.uk/retirement-planning-advice

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