Child Benefit

How the latest Budget has  squeezed middle England

and affected Child Benefit.

It has been estimated that there are about 29 million tax payers in the UK and from this group nearly 2 million are earners who generate an income of £50,000 a year or more. This means that 93% of tax payers earn less than £50,000 (source Wikipedia “Income in theUK” article)

We can therefore deduce that only a small percentage will have the opportunity to find true financial freedom. Unfortunately this kind of freedom is nothing but a dream for the majority; indeed nearly 24% of people have an income of less than £10,000 per annum (source Wikipedia “Income in theUK” article)

The Coalition government’s ambition to take people on low incomes out of the tax system took a leap forward in the recent Budget. The Chancellor increased the income level at which people start to pay tax by £1100.  This means that another 800,000 will be taken out of the tax system and since coming to power nearly 2 million people are no longer paying tax as a result of the Coalition’s tax policies.

These measures will surely help the most disadvantaged in the country. Those at the other end of the spectrum that is the 7% on income exceeding £50,000 are relatively comfortable.

The media makes much of the so called “squeezed middle”, it is this group that seems to bear a disproportionate burden at times when a Chancellor has to make tough decisions on where to make unpopular cuts.

Removal of Child Benefit

Before the Budget there was much speculation as to how the removal of child benefit would operate. The original intention was to remove it from higher rate tax payers (income exceeding £42,000).

Clearly this would have been unfair to families with a single earner; where if the income exceeded £42,000 by just £1 they would lose the total child benefit; this did not compare well with families with two earners on £42,000 each who would have kept the benefit in full.

The Chancellors answer has been to raise the threshold so that child benefit is only effectively lost when an income reaches £60,000.

Despite this solution the “squeezed middle” is still being pinched.

Financial planning may not bring financial freedom but can “make do” and mend resources that have not received the attention they deserve.

The results are often surprising and invariably put people in an improved financial position.

In austere times everyone has a responsibility to make the most of their finances.  If you would like to know more about how to  make do and mend your financial recources,

Give your independent financial adviser a call now to find out your child benefit options.

Age Allowance

The Effectsof the 2012 Budget on the elderly and the Age Allowance

A group that is being pressed financially by the latest budget proposals are those who are entitled to what is known as the “age allowance”.

People aged 65-74 and those aged 75 or over enjoy a tax free allowance of £10,500 and £10,660 respectively as long as the level of income does not exceed £25,400.

Where income exceeds the £25,400 the amount of age allowance is clawed back by £1 for every £2 of extra income until it reaches the standard personal allowance of £8105.

The Budget announced that those who attain the age of 65 after 5th April 2013 will not benefit from the higher tax free allowance.

Those who are already entitled to the extra tax free income will retain it but find that the age allowance will be frozen and replaced by the standard personal allowance when it matches the level of the higher figure.

People who find themselves in these groups therefore have the greatest need to nurture everything that they have accrued.

Financial planning may not bring financial freedom but can “make do” and mend resources that have not received the attention they deserve.

The results are often surprising and invariably put people in an improved financial position.

In austere times everyone has a responsibility to make the most of their finances.  If you would like to know more about how to presenrve your tax free Age Allowance

Give your independent financial adviser a call now.

Extra Income

 “Shopping for Extra Income”

There are a great number of people who, when it comes to deciding how best to derive an income from their retirement savings, may not get the best deal if they do not shop around.

The wrong choice at a time when financial pressures should be reducing can result in less income being paid than could actually be achieved.

This can easily be avoided.

It is estimated that many retirees are entitled to a better retirement income than they are currently being offered – in other words even though they could qualify for a better income they don’t know how to get it. One of the reasons for missing out could be that this group is not given enough information about how to use their pension fund on which they can make an informed decision.

During the course of their working lives many people have saved money into one or more pension plans. As they approach retirement there are a range of options available to use these funds to generate an extra income.

The most simple of these is to understand that there is no obligation to have to take the retirement income from the pension company where the money has been saved. The service that is known as Open Market Option (OMO) is a facility to shop around for a better rate and this can help improve retirement income significantly.

It has been estimated that up to an extra 19%* extra income could be generated through researching for an annuity (income) rate that is better than the one offered by the original pension company. Nearly 750,000* people will reach retirement age this year and many will be wasting the opportunity to get the best out of their retirement savings. This puts them at risk of having a less financially secure retirement than they deserve.

The choices that people face when having to decide how best to benefit from the pension savings that they built up through their working lives is challenging.

This is a complex matter because beyond shopping around for the most competitive rate, there are 11 different income options and each of these can be tailored to a meet a retiree’s particular circumstance.

Make the wrong choice and not only could there be less income but more tax than is necessary could have to be paid. Some people can find themselves locked into an option where once committed there is no way back or not having made adequate provision for dependents.

Shopping for extra income is as simple as searching any annuity comparison website, getting advice on an appropriate at retirement income option however needs input from a specialist independent financial adviser.

For an initial consultation about acheiving extra income at our expense please contact Gordon Tate Associates on Tel: 023 92 571183

 

* Information supplied by Just Retirement.