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Pension Planning – What are your options?

Pension Planning - What are your options?

Pension planning is one of the most important, but forgotten, areas of estate planning.

When someone thinks about planning for the future to ensure their assets pass to their loved ones, the first thing they consider is ensuring they have a Will in place which is up-to-date and meets their wishes.

However, pensions fall outside of your estate and therefore do not pass via your Will meaning this planning doesn’t provide any structure of your intent for who should receive your pension.

Often, people’s pensions make up a large part of their total estate, but they are left with no nomination form or trust planning, so the pension provider makes the decision at the time of death as to how it is paid out.

Do you really want them to make those important decisions for you? They may not know about your close relationship with your godchild, or the sibling that you don’t get on with and wouldn’t want to receive it.

Even if you do have a nomination form in place, from the moment your spouse, child or other loved one takes a lump sum, that full value sits inside their name at risk of the following threats

If your spouse takes a lump sum

Marriage After Death (MAD):

This risk can affect the family in many ways. For example, say you passed away your spouse was to re-marry soon after when grieving and then realise it wasn’t what they wanted. On divorce, half of the funds could be lost. Alternatively, it may be a situation where the survivor meets someone else some time later and remarries. There would still be the risk that upon second death, their estate would pass to the partner (as the funds are now in their estate, and marriage revokes previous Wills). On the new partner’s own death, it’s likely they would leave it to their own children and it may never reach your children.

Care Home Fees:

If your spouse took funds into their name, and then needed to go into care, the funds would be taken into consideration and assessed for care fees.

Inheritance Tax:

Although the funds are Inheritance Tax free on your own death, if your spouse took funds into their name, they could end up paying Inheritance Tax on the funds when they die.

If your children take a lump sum

Divorce:

If either of your children were to get a divorce further down the line, half or more of the funds you left them could be lost to the ex-partner.

Future:

We all hope our chosen beneficiaries will do the right things and are ready to receive funds but when there are large sums involved however, you may wish to stagger the age at which funds become available, rather than the full amount being available to them at 18.

Bankruptcy or Creditors:

Again, assets taken could be lost if your beneficiaries ever got into financial difficulties. Again not always a common thing but in a world where beneficiaries may run their own business etc. it’s a risk that can simply be protected by the use of the Trusts we will recommend.

Inheritance Tax:

Although the funds are Inheritance Tax free on your own death, again if your children took funds into their name, they could end up paying Inheritance Tax on the funds when they die.

Pension Planning is a very complicated area but certainly something that you need to ensure you have thought about.

Please contact us on 01344 851 250 or enquiries@ascotep.com if you would like to discuss this further, or click the button below.

Ascot Wealth Management Limited is authorised and regulated by the Financial Conduct Authority reference 551744. Our registered office: Scotch Corner, London Road, Sunningdale, Ascot, Berkshire, SL5 0ER. Registered in England No. 7428363. www.ascotwm.com Unless otherwise stated, the information in this document was valid on 3rd February 2017. Not all the services and investments described are regulated by the Financial Conduct Authority (FCA). Tax, trust and company administration services are not authorised and regulated by the Financial Conduct Authority. The services described may not be suitable for all and you should seek appropriate advice. This document is not intended as an offer or solicitation for the purpose or sale of any financial instrument by Ascot Wealth Management Limited. The information and opinions expressed herein are considered valid at publication, but are subject to change without notice and their accuracy and completeness cannot be guaranteed. No part of this document may be reproduced in any manner without prior permission. © 2017 Ascot Wealth Management Ltd. Please note: This website uses cookies. To continue to use this website, you are giving consent to cookies being used. 

Tax and Furnished Holiday Lets

Tax and Furnished Holiday Lets

With British Summer in full swing, many of us are thinking of our next holiday destination. Statistics show that 1 in 10 of us have a holiday home, often used for rental and family use. From the visitor’s perspective, a holiday home offers you familiarity, comfort and ease; but the owner is likely benefiting from the largely unknown tax benefits associated with Furnished Holiday Lettings (FHLs).

If you own a holiday home in the UK or European Economic Area that is furnished and commercially let, there may be tax advantages you’re not aware of.

Furnished Holiday Lets Advantages

  • The cost of furnishings can be offset against your pre-tax profit, potentially increasing your rentability (this isn’t an option for long-term rentals).
  • Any income generated via lettings is relevant earnings for the sake of pension contributions, meaning you could be saving more into a registered UK      pension up to the annual income earned from your letting.
  • Profits can be distributed across all owners in the way you desire, as opposed to having to meet a 50:50 split on Land Registry basis for long term lets.
  • Selling the property opens up the opportunity of entrepreneur’s relief, roll-over relief and hold-over relief, all of which save you Capital Gains Tax.
  • Small Business Relief means you can save council tax

In showing the benefits of FHLs, it is important to note the downsides. Importantly losses cannot be offset against other taxable income. It’s not all bad news, and rather losses are just carried against future profits for the next four years. Secondly VAT may apply depending on the level of income.

 

 

So, does your property qualify?

 

If you answer yes to all of the below, you could be saving thousands in Tax

 

  • The property is furnished
  • Intention for profit
  • The property is available for 30 weeks of the year
  • Let commercially for 15 of those 30 weeks

Get in touch to find out how FHL regulation could benefit you.

Ascot Wealth Management Limited is authorised and regulated by the Financial Conduct Authority reference 551744. Our registered office: Scotch Corner, London Road, Sunningdale, Ascot, Berkshire, SL5 0ER. Registered in England No. 7428363. www.ascotwm.com Unless otherwise stated, the information in this document was valid on 3rd February 2017. Not all the services and investments described are regulated by the Financial Conduct Authority (FCA). Tax, trust and company administration services are not authorised and regulated by the Financial Conduct Authority. The services described may not be suitable for all and you should seek appropriate advice. This document is not intended as an offer or solicitation for the purpose or sale of any financial instrument by Ascot Wealth Management Limited. The information and opinions expressed herein are considered valid at publication, but are subject to change without notice and their accuracy and completeness cannot be guaranteed. No part of this document may be reproduced in any manner without prior permission. © 2017 Ascot Wealth Management Ltd. Please note: This website uses cookies. To continue to use this website, you are giving consent to cookies being used. 

All you need to know about ISAs

All you need to know about ISAs

What is an ISA?

An ISA (Individual Savings Account) is a tax-free way to save or invest. If you’re starting to think about saving or investing, ISAs could be a good place to start. On other savings accounts, you may have to pay income tax on the interest you earn. The interest on a cash ISA is free from tax, so all the interest you earn, you keep. In fact, these investments are often referred to as a ‘tax-free wrapper’. The
benefits can be used on a range of investment types, as shown below in the variety options you have access to.

Advantage of ISA

Tax advantages fall into two categories: capital gains tax and income tax benefits.

ISA Income Tax Benefits
In most situations, any income you earn, through wages, interest or dividends, is subject to income tax. However, that is not the case with ISAs. All of the money you earn on these savings vehicles is completely tax-free. Income tax benefits are just part of the equation when you are considering an ISA, however. The other advantage to these accounts is the capital gains tax benefits you can enjoy.
ISA Capital Gains Tax Benefits
Capital gains tax benefits specifically apply to Stocks and Shares ISAs. Most investment products are subject to a capital gains tax if the amount of earnings from your shares in a single year exceeds the set limit. This tax rule is waived for investments in ISAs, making them definitely worthwhile for those who plan to sell or make a a large gain.

Know your options

ISAs have evolved into five different shapes, Cash ISAs, Stocks & Shares ISAs, Innovative Finance ISAs, Lifetime ISAs and Junior ISAs. Clients should consider what their savings goals are before choosing their preferred self-investment vehicle, or by seeking financial advice.

Key facts:

  • The ISA allowance is £20,000 per annum for the 2018/19 tax year.
  • HMRC states you cannot contributue into two of the same ISA type in the same tax year.
  • All income and growth within your ISA is completely tax-free.
  • ISAs are taxable for inheritance tax unless they invest in qualifying investments for inheritance tax relief.

Types

Cash ISAs

  • Lets you manage your money like a typical savings account.
  • They could offer instant access or pay a fixed rate of interest over a few years if you don’t think you’ll need access to your savings.
  • Designed as low risk, no chance of loss products operating at a defined interest rate.
  • Interest rates align with the Bank of England base rate, so at present, offer very low interest.
  • Some ISAs allow you to lock in for a fixed term, thus increasing the interest payments.
  • Speak to us for the best rates. 

 Stocks & Shares ISAs

  • Your money is invested in the stock market.
  • They’re designed for people who are happy to invest over a long period of time and are looking for potentially higher returns. You need to accept risks that come with investing in the stock market.
  • The funds AWM would look to invest you in are low cost managed solutions to reduce fees where possible.

Innovative Finance ISA

  • Designed for sophisticated Peer to Peer lending.
  • This vehicle has been available since 6th April 2016, allowing investors tax-free gains on the capital invested.
  • The IFISA is designed for higher risk clients, as their capital is exposed to default risk or missed payments, as opposed to equity or fund based risk.
  • Due to the new nature of IFISA, we strongly suggest contacting us for more information.

Lifetime ISA

  • For those saving for a property, the Lifetime ISA (LISA) provides government bonuses for savers to get on the ladder.
  • Rather than being capped at £20,000, the LISA is capped at £4,000, however, this forms part of your £20,000 overall allowance.
  • For those who have already bought their first property, the LISA can be used as an additional retirement vehicle, but cannot be withdrawn until 60 years of age without penalties applying.
  • The LISA has an exit penalty if you’re withdrawing for any reason other than a first time purchase or before 60 years old. The only break of this rule is if one is terminally ill.
  • For each time you contribue into your LISA, the government will add 25%of your contribution.
  • A LISA can only be opened up to the age of 40 years old and if you contribute after you are 50 years old you will not receive the government bonus.
  • The LISA can be invested in either cash or stocks and shares.

Junior ISA

  • Act as long-term, tax-free savings accounts for children.
  • Your child must be under 18 and live in the UK.
  • If the child lives outside the UK, you must either be a Crown servant or the child depends on you for care.
  • You can’t have a Junior ISA as well as a Child Trust Fund.
  • The savings limit for Junior ISA for the 2018/2019 tax year is £4,260
  • You can invest into cash or stocks and shares.
  • Control of the account will be transferred to the child when they reach 16, but they can’t withdraw the money until they turn 18.

Ascot Wealth Management Limited is authorised and regulated by the Financial Conduct Authority reference 551744. Our registered office: Scotch Corner, London Road, Sunningdale, Ascot, Berkshire, SL5 0ER. Registered in England No. 7428363. www.ascotwm.com Unless otherwise stated, the information in this document was valid on 3rd February 2017. Not all the services and investments described are regulated by the Financial Conduct Authority (FCA). Tax, trust and company administration services are not authorised and regulated by the Financial Conduct Authority. The services described may not be suitable for all and you should seek appropriate advice. This document is not intended as an offer or solicitation for the purpose or sale of any financial instrument by Ascot Wealth Management Limited. The information and opinions expressed herein are considered valid at publication, but are subject to change without notice and their accuracy and completeness cannot be guaranteed. No part of this document may be reproduced in any manner without prior permission. © 2017 Ascot Wealth Management Ltd. Please note: This website uses cookies. To continue to use this website, you are giving consent to cookies being used. 

AWM Tax Corner!

No Will…but there is a Way !

What is deed variation and how can it help reduce inheritance tax?

Amazingly over 60% of people in the UK don’t have a Will in place. Poor estate planning could result in the Government taking a sizable chunk out of the money you leave your loved ones. Estates liable for inheritance tax (IHT) must pay 40% before the remainder can be passed on, leaving many of us with a sour taste in the mouth. There is however, a way to ‘beat the taxman’ from beyond the grave. A deed of variation (DOV) is a legal document that allows the beneficiaries of an estate to make changes to the will, in the name of the deceased, after their death. What this means, is that changes can be made to make it more tax-efficient.

In the case that you are about to inherit a windfall that will take your own estate over £325,000 – the personal allowance above which 40% IHT applies on your death – you can alter the deceased’s will so that money you stand to inherit passes directly to other beneficiaries, reducing or eliminating the amount of tax you would otherwise have to pay later.

So, how does inheritance tax work?

Upon their death, each individual is taxed at a rate of 40% on all their assets above a threshold of £325,000. The following things are subject to the tax:

  • Cash
  • Investments
  • Property
  • Vehicles
  • Life insurance payouts

Main residence for “family home allowance” is in the process of being phased in until 2020, applying to a family home going to direct descendants only. Ultimately, this means that married couples will be able to use their combined allowances to pass estates worth up to £1m onto their direct descendants.

What are the rules?

  • Any deed of variation must be drawn up within 24 months of the death of the deceased, and must be signed by all the executors and beneficiaries of the estate to be valid.
  • A DOV is separate from a grant of probate – the legal document that allows you to gather up and distribute the assets of the deceased – and can be obtained before or after probate is granted.
  • There are no formal documents to apply for; you can simply write a letter explaining the changes you wish to make. However, you must ensure the letter meets certain conditions – Her Majesty’s Revenues and Customs provides a checklist.
  • Provided everyone else involved agrees, you can redirect your inheritance to anyone you wish, even if they are not named in the deceased’s will.
  • Although you may be the one deciding what changes to make, through a DOV the changes are made in the name of the deceased as if they were making the changes themselves.
  • If a variation affects anyone under the age of 18, you will need court approval before making any changes.
    Extract: The telegraph

The next step…

Contact Ascot Estate Planning to get expert advice on setting up a Will or checking your IHT situation from Ascot Estate Planning Team.

Ascot Wealth Management Limited is authorised and regulated by the Financial Conduct Authority reference 551744. Our registered office: Scotch Corner, London Road, Sunningdale, Ascot, Berkshire, SL5 0ER. Registered in England No. 7428363. www.ascotwm.com Unless otherwise stated, the information in this document was valid on 3rd February 2017. Not all the services and investments described are regulated by the Financial Conduct Authority (FCA). Tax, trust and company administration services are not authorised and regulated by the Financial Conduct Authority. The services described may not be suitable for all and you should seek appropriate advice. This document is not intended as an offer or solicitation for the purpose or sale of any financial instrument by Ascot Wealth Management Limited. The information and opinions expressed herein are considered valid at publication, but are subject to change without notice and their accuracy and completeness cannot be guaranteed. No part of this document may be reproduced in any manner without prior permission. © 2017 Ascot Wealth Management Ltd. Please note: This website uses cookies. To continue to use this website, you are giving consent to cookies being used. 

Lost or hidden pensions… We can help

Can we help you find your lost or forgotten pensions?

We all lead busy lives and sometimes it’s hard to keep track of everything, especially if it’s not something we deal with on a day-to-day basis. Pensions are just too important to forget about.

If you think you may have ‘forgotten’ pensions from previous employers…or want help and advice tracking these down for possible transfer into your main pot – read below!

  • There are three billion pounds sitting around in unclaimed pensions in more than a million accounts. Don’t let your hard earned money be part of it.
  • With each of us now working an average of 11 jobs a lifetime it’s more likely than ever we will build up a number of different pension funds.

Two recent "lost" successes:

First case:
When a 63-year-old client mentioned at their review meeting they had worked as a secretary from 18 -23 she thought she may have paid a small monthly amount into a company pension fund.

Result: Because she had married and moved a few times the pension company had lost contact with her. We did track down the pension scheme and she was entitled to £135 per month back to her 60th birthday.

Second case:
Another client, again after a review meeting, dug out some old paperwork which looked like he had paid into a pension when working for a company 30 years ago. He tried three times himself to get questions answered…every time they inferred that there was no money due. So he passed this over to our AWM Team.

Result: We pursued this and have recovered a £130,000 pension pot.

 

Don't put it off any longer, contact us today!

Ascot Wealth Management Limited is authorised and regulated by the Financial Conduct Authority reference 551744. Our registered office: Scotch Corner, London Road, Sunningdale, Ascot, Berkshire, SL5 0ER. Registered in England No. 7428363. www.ascotwm.com Unless otherwise stated, the information in this document was valid on 3rd February 2017. Not all the services and investments described are regulated by the Financial Conduct Authority (FCA). Tax, trust and company administration services are not authorised and regulated by the Financial Conduct Authority. The services described may not be suitable for all and you should seek appropriate advice. This document is not intended as an offer or solicitation for the purpose or sale of any financial instrument by Ascot Wealth Management Limited. The information and opinions expressed herein are considered valid at publication, but are subject to change without notice and their accuracy and completeness cannot be guaranteed. No part of this document may be reproduced in any manner without prior permission. © 2017 Ascot Wealth Management Ltd. Please note: This website uses cookies. To continue to use this website, you are giving consent to cookies being used.