pension Archives - London Chartered Accountants Blog | Goodman Jones London Accountants

Are the latest changes to pensions announced last week the first step towards the widely anticipated abolition of the 25% tax-free lump sum. The “opportunity” to take each draw down with 25% tax free instead of a one off lump sum has been introduced as an additional flexibility, but is also a further incentive for those who can afford to do so to leave funds invested rather than taking a pension.

These new rules added to the recently announced option to gift away pension funds on death tax free to the next generation make the of the one-off tax free lump sum appear increasingly over generous and potentially more vulnerable to abolition.

The new rules are to be introduced from 6^thApril 2015. What we end up with is an effective lower rate of tax on sums drawn from a pension of 15% for a basic rate tax payer and 30% for a higher rate tax payer.

My own view is that anyone who is able to do so should be considering whether it is appropriate for them to take their 25% tax free lump sum before 5^thApril 2015. As always please take proper advice first before making any significant financial decisions.

The month of Easter brings with it the excitement of egg shaped chocolate, cute little bunnies and bank holidays. But, more importantly the new tax year has begun!

So for the final part of my free tax advice series here are some reliefs to bear in mind for 2014/15:-

Spend, spend, spend – A client of mine delivered 3 huge sacks of receipts to our office last year for me to sort through, which well & truly brought tears to my eyes! But it does highlight the importance of self-employed individuals keeping their receipts as it’s so easy to forget what expenses you have incurred. And please, be as savvy as my client was and organise as much of it as possible as you’re going along, you’ll be glad you did when it comes to filing your tax return at the end of the year.
More rewarding than a Saturday night takeaway – Putting the money away into a pension pot. Not only will this help keep your heart in good health but the Treasury will also add an extra 25% to your pot for every pound you pay in. In addition, if you pay higher or additional rate tax you can claim tax relief for the same amount.
Rent (no not the musical) – Urbanites like me will happily pay to live somewhere the size of a small shoe box so, if you have a spare cupboard or perhaps a spare room in your main residence and are willing to take on a lodger the Rent-a-room rules, exempt from tax, rental income of less than £4,250. Additionally anything received over this amount is taxed on a more favourable basis, more details can be found on HMRC’s website here.

That concludes my 3-part series. As mentioned at the start of the series there is plenty of free tax advice available and not least of all on our very own Goodman Jones Blog page where our Google like search box will help you to explore or narrow the advice.