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Detailed below are some of the changes applying to aspects of financial planning for your perusal:-

Pensions

The Lifetime Allowance will rise to £1.6 million and the Annual Allowance to £225,000 in tax year 2007/08. There is an effective tax charge of 55% on benefits above the Lifetime Allowance and 40% tax where contributions exceed the Annual Allowance.

Maximum allowable personal contributions are 100% of earnings, excluding dividends, on which full income tax relief is automatic. Employer contributions may be made in addition to, or instead of, personal contributions with tax relief subject to the ‘wholly and exclusively ’ for business purposes test.

Contributions of up to £3,600 p.a. may be made into pensions irrespective of earnings for any individual, including children or grandchildren.

Pension tax relief will no longer be available on personal premiums to new life assurance policies although existing policies are unaffected as are employer contributions to such plans.

Changes have been made to Alternatively Secured Pensions (ASPs), the vehicle used from age 75 for persons who do not wish to purchase an annuity by that age. One of the most important is that, on death of the member, it will now be prohibitive to transfer the remaining funds to another member of the scheme thus ceasing the notion of using ASPs to pass pension assets between generations.

Individual Savings Accounts (ISAs)

There is no change to the investment limits for the forthcoming tax year tax year which remain at £7,000, of which £3,000 may be invested in a mini cash ISA.

From 6th April 2008, the cash element will increase to £3,600 with an overall maximum limit of £7,200. Many of the previous distinctions between mini and maxi ISAs will be removed from this date.

Personal Equity Plans (PEPS) will be brought within the ISA regime and there will be the ability to transfer cash ISA funds to the equity component without affecting the current year’s investment limit.

Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EISs)

Investment limits for tax relief purposes remain at £200,000 for VCTs and £400,000 for EISs with income tax relief at 30% and 20% respectively. Capital gains may be reinvested in EISs thus deferring the capital gains tax accordingly.

Inheritance Tax (IHT)

The threshold for IHT has risen from £285,000 in 06/07 to £300,000 in 07/08. The figure will rise to £350,000 by 2010.

Capital Gains Tax (CGT)

The exemption allowance has been increased from £8,800 currently to £9,200 from 6th April 2007.