News: March 2012

Savings and investments

Enterprise Investment Schemes

From 6 April 2012 there are two schemes which you can use to achieve tax relief for investing in small unquoted companies: the seed enterprise investment scheme (SEIS) and the enterprise investment scheme (EIS). The tax relief given under each scheme is shown below for 2012/13:

• Rate of income tax relief: SEIS – 50%, EIS – 30%
• Annual maximum investment qualifying for income tax relief: SEIS – £100,000, EIS – £1,000,000
• Capital gains tax relief on investment: SEIS – 18% or 28%, EIS – deferred relief

Both the company and the investor have to qualify in order to receive tax relief under SEIS or EIS. The rules for both schemes are very complicated, so please talk to us before deciding to use either scheme.

Pension Contributions

In spite of much speculation about a reduction in tax relief for contributions to registered pension schemes, there has been no change in the tax relief rates or annual allowance for 2012/13. The annual allowance is the limit on pension contributions that attract tax relief, whether those contributions are paid by the individual, his employer, or calculated as a deemed rise in the value of a final salary scheme.

Each individual has a personal annual allowance of £50,000, plus unused annual allowance brought forward from the previous three tax years. If the value of the contributions made to the pension scheme exceed the taxpayer’s annual allowance, an annual allowance tax charge applies on the excess contributions, set at the taxpayer’s highest rate of income tax.

• Annual allowance: 2012/13 – £50,000 (2011/12 – £50,000)
• Lifetime Allowance: 2012/13 – £1,500,000 (2011/12 – £1,800,000)

Independent Savings Accounts (ISAs)

The ISA savings limits applicable in 2012/13 for those over 18 are:

• Overall limit – £11,280
• Cash up to – £5,640
• Balance in stocks and shares up to – £11,280

For those aged 16 & 17:

• Overall limit – £5,640
• Cash up to – £5,640
• Balance in stocks and shares up to – nil

For Junior ISA:

• Overall limit – £3,600
• Cash up to – £3,600
• Balance in stocks and shares up to – £3,600