Happy New Tax Year!
In addition to being a lovely Spring day and the perfect day to visit the Queen, today marks the start of the 2010/11 tax year.
Whilst probably not a key date in your calendar, it is an important date from a financial planning perspective.
The Individual Savings Account (ISA) limit increases from £7,200 to £10,200 from today. Up to half of this (£5,100) can go into the cash ISA component, with the balance up to £10,200 available to invest into an investment ISA.
Investors who were 50 or older by the end of the previous tax year have already enjoyed this new higher ISA limit. For younger investors, today marks the first time they can invest over £10,000 into an ISA during a tax year.
Today is also the day when the new highest rate of income tax is introduced at 50% for earnings over £150,000. A wider-reaching and stealthier form of tax rise from today is the removal of the personal allowance for people with earnings over £100,000. This will be gradually phased out, with £1 removed for every £2 of earnings over the threshold.
Pension allowances remain the same for this tax year. It will be possible to contribute up to 100% of earnings into an approved pension and receive income tax relief, although remember that restrictions remain in place for higher earners, namely those with income exceeding £130,000 in this or either of the previous two tax years.
Now is a good time to be gathering all of your numbers for the 2009/10 tax year, in preparation for your self-assessment tax return, rather than leaving it to the last minute. Some proactive accountants I know are issuing self-assessment preparation packs to their clients this week. If you need any numbers to aid in the completion of your tax return, do ask and we can provide these promptly for our clients.