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Personal Finance Tax advice

As Joe Coten contemplates life away from the Barbican he also proffers advice on moves you may want to take ahead of the end of the current tax year.


s you read this I will be either adapting to becoming a member of the Bloomsbury set or else seeking literary inspiration from my erstwhile

neighbour, Michel de Montaigne, who moved out definitely from his chateau, and also his life, some several centuries ago not far from our home in the Gironde. I could get emotional at the thought of leaving the Barbican but it won’t get the baby bathed!

So before anything else I’ll give you my thoughts as to what you might want to be thinking about with the tax year end approaching fast:

1) It is only a matter of time before higher rate tax relief on pension contributions is axed in this age of penury. If you are considering a contribution before 5th April, do so before budget day on 21 March, as any changes are often effective from midnight the same day. In addition you might be in a position to make use of pension contribution allowances from previous years.

2) If you have any unused ISA allowance available it why not maximise it? One idea also is to transfer your share portfolio into an ISA. It will make the dividend income tax-free and also remove liability to Capital Gains Tax when you come to sell your shares.

3) Resources permitting, it also

makes sense to use your annual inheritance tax-free gift allowance of £3,000 and pass on some money to the next generation. Do remember that if you haven't made such a gift in 2010- 11, you can give two lots of allowance. So for a married couple in this situation, you could use your allowances to pass on £12,000 free of tax to your children or grandchildren. This simple planning strategy saves £4,800 in tax.

4) Do you have a share portfolio that has done well over the years? Why not make use of your annual CGT allowance and taking £10,600 of profit tax-free from your portfolio? Remember also that this allowance

can’t be carried forward, so it's a case of use it or lose it. You will be able to sell substantially more than £10,600 as part of the exercise, as the allowance refers to the gain only. The proceeds could then be reinvested in a more tax- efficient manner and with greater spread of risk.

Anyone who has perused my articles over the years will know that although there is a deal of financial content in them, I have never overdone that side of things by getting overly technical or else trying to give too detailed an analysis of changes in financial legislation. I’m only too aware that there is a cornucopia of information about such topics on the internet, in the weekend broadsheets and on the broadcast media. There is a time and a place for everything and if I have to choose between education and entertainment, the scalepan for the latter will always weigh heavier, or such is the aim. At the risk therefore of inducing yawns, I’d like to draw to your attention changes coming into force at the end of this year regarding the way financial products are sold to the general public. This is known as the Retail Distribution Review, or RDR for short, and will be effective from 1st January 2013. One really good thing that will happen is that the level of qualifications required for advisers is going to be far higher. This means that anybody who legally can offer you financial advice will by definition be far more knowledgeable than previously. This has to be a positive development. Further changes will be more far- reaching even if the impact will not be felt fully for a few years yet. The phasing out of large initial commissions and the movement towards fee-based or fund-based adviser remuneration will knock the stuffing out of those advisers who have kept their head in the sand on this question. There will also be associated VAT implications that will drive up the cost of financial planning advice. These changes will affect the

commercial viability of advisory companies and the upshot is that advisers that we may kindly call longer in the tooth, have been selling up their businesses and quitting in droves. And there is more that will cause upheaval but space doesn’t permit. In addition to those quitting in droves to date therefore there will be an exodus of large numbers of the remaining advisers 2 or 3 years down the road when these ramifications really hit home. The sad thing is that all of these measures intended to protect the public will have the effect of making financial advice available only to the few. The vast majority will have nowhere left to go for independent advice. And as for the advisers who similarly have nowhere to go, perhaps they can find jobs with the new regulators. In the meantime the catastrophes of recent years – Equitable Life, RBS, Arch Cru etc – will continue no doubt, as those responsible always seem able to walk away scot-free.

So much then for financial matters.

Adapting to fatherhood later in life has been far less of an ordeal than I imagined it would be, mainly due to the heroic efforts of my long-suffering wife, Nina. With Bloomsbury and France beckoning, personal upheaval is best embraced as a time of opportunity. Nina is applying for membership of the Bordeaux Ladies Club and I’m busy honing my childcare skills so I can muck in and help with domestic duties. As my daughter, Alice Rose tells me at nappy time, “A change is as good as a rest”!

Joe Coten

is a member of the Personal Finance Society.

He may be reached on 0207 588 9626.


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