Before yesterday’s Budget and the Chancellor’s plans for future tax planning become a distraction, Pagan Osborne, the legal, financial and property specialist, is urging people to take one more look at what they might gain from their tax allowances this y

By March 22, 2007

As the countdown to April 5th gathers pace, Pagan Osborne has pulled together a brief checklist of allowances that should be used before the end of the financial year 2006/7.

Bill Pagan, Head of Tax for Pagan Osborne, says:

“Personal tax and financial planning is increasingly complex and many people may not be aware of the allowances that are available. Certainly, before the Chancellor hits us with more regulations and tax burdens, we would urge people to go through a thorough checklist for this year, before it’s too late. They may be surprised to find unused allowances that could benefit them.”

Among the list of suggestions, Rachael Kelsey, partner and accredited family law specialist at Pagan Osborne, warns that couples thinking of separating should resist doing so until after 7th April. She says:

“Paying unnecessary Capital Gains Tax is a trap that many separating couples fall into. It is imperative that they organise their affairs before the end of the financial year in which they have separated. Assets transferred between spouses in the tax year in which the couple have separated don’t attract CGT; if the couple leaves it too long though, any transfer of assets will attract CGT. So, for example, if you separate on 1st April you only have a few days to transfer assets and make use of this exemption, whereas if you separate on the 7th of April you have a whole year to do so”

The full checklist includes:

Capital Gains Tax: If you are considering selling an asset which might attract Capital Gains Tax (CGT), the allowance for each individual this year is £8,800. But if assets are in joint names, then the allowance will double to £17,600 before CGT is payable.

CGT can also be due if assets are transferred rather than sold and there are particular considerations if you have separated from your spouse or are considering separating. If you are going to transfer assets to your spouse following your separation you should be wary of paying unnecessary CGT.

Investments: Check whether subscriptions should have been made to Stakeholder pensions, ISAs and Child Trust Funds in the tax year.

Trusts:  Whilst considering your personal affairs, you should also consider the recent changes to Trust Law, particularly in terms of their value and when they can be exited, which may affect you.

Anona Simpson-Greig in the Trusts and Charities team at Pagan Osborne explains:
“There have been various changes to family Trusts recently so now is the perfect time to review current trust structures to ensure your Trust achieves what it was intended to.  Trustees of Accumulation and Maintenance Trust must make important decisions about the Trust before April 2008 so discussions should start as soon as possible to ensure the right strategy is achieved.”

Life Assurance: Check policies to see whether any taxable benefits can be taken in a more favourable tax year.

Pensions: Consider whether there are opportunities for contributions to mainstream pensions or to Stakeholder pensions. This year, every individual is able to contribute up to £215,000 toward their pension.

Inheritance Tax: Check that annual gift allowances have been used and Normal & Reasonable gifts made, perhaps to fund other people’s Child Trust Fund, Stakeholder Pension or ISA.

Gifting: Regular gifts out of excess income attract an exemption that can also be very useful.

Offering further explanation, Fiona McDonald in the Private Client team at Pagan Osborne, said,

“If you haven’t already done so, now is the time to be generous. In one tax year you can gift £250 to as many people as you wish; it may not seem a lot but £250 still in your estate would attract £100 IHT if that estate exceeded the IHT threshold of £285,000. Every individual can also make one gift of up to £3,000 per tax year to any individual, to use your Annual IHT Exemption.

“If you have spare income that by gifting it away will not affect the standard of your living and provided you gift on a regular basis, that amount can be fully exempt from tax. The limit on the amount that you can gift regularly is dependent on your circumstances but the amount which could qualify is potentially unlimited. 

“Additionally, specific exemptions allow that if you have a child (or grandchild) getting married or entering into a civil partnership soon then you can gift them £5,000 (£2,500 by a grandparent) in consideration of that marriage or civil partnership.”

Notes to Editors:
Pagan Osborne is Scotland’s leading legal, financial and property specialists.

With offices across Fife and in Edinburgh, the firm has grasped the opportunities of today’s changing professional market to create a forward looking and modern business. By embracing a customer-focused ethos, Pagan Osborne has pioneered a cohesive, holistic approach to the management, development and ultimate protection of an individual’s personal assets and interests. It brings together legal, financial and property expertise with an understanding of how life’s important choices are inextricably interlinked.

The firm has 11 Partners, including 4 accredited specialists, and over 140 members of staff working within a business-driven management structure. The firm is headed by chief executive, Alistair Morris, with strategic and operational decisions agreed and implemented by an executive board comprising both partners and non-legal directors. The firm holds Investors in People accreditation and a number of legal and business awards.

For further information, call Lizzy Lambley on 0131 554 1230

22nd March 2007