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Income Tax


The basic rate of Income Tax will be reduced from 22% to 20% from April 2008. However, the starting rate of 10% will be removed for earned income and pensions from the same date but will continue for savings income and capital gains. The higher earners will be marginally better off (up to £424 per annum); however this will be at the expense of those who earn less then £18,600, as they will be worse off.

Investment limits for Individual Savings Accounts (ISA’s) relaxed


From 6th April 2008 the amounts that can be invested into ISA’s will increase up to:
  • £3,600 per tax year for a cash ISA,
  • and up to £7,200 per tax year into a stocks and shares ISA,
subject to an overall limit of £7,200 to both ISA’s in a tax year. This will increase the amount an individual can save without suffering income tax or capital gains tax on their investment.

Tax incentives withdrawn for Pension Term Assurance


Subject to certain conditions, pension contributions used to fund a personal term assurance policy have qualified for tax relief. This relief has now been withdrawn for individuals taking out new policies, thereby increasing the cost of such policies.

For contributions under occupational pension schemes, the relief is withdrawn for all new policies paid on or after 1 August 2007 subject to certain applications made before 29 March 2007. For contributions under other registered pension schemes, the relief is withdrawn for all policies paid on or after 6 April 2007 except particular applications made before 14 December 2006.

Where relief remains available, the policyholder will cease to be entitled to the relief if the policy is varied to increase the sum assured or extend the term of the policy, unless there is an option under the policy which is then exercised.