Spring 2005 Newsletter Content Home Sweet Pension Anything To Declare? Death And Taxes His And Hers Oh, Gross! We Didn't Mean It Agassi Wins Time To Go It Could Be Worse... Trivial Pursuit Re: Mortgages A Marriage Made In... Time's Money Show Business Scam Of The Decade? Gift Aid Vat's Hot! Wait For It A Good Buy? Know Your Articles Rights And Wrongs

Home Sweet Pension The rules for tax-approved pension schemes are changing radically on 6 April 2006. The amount you can put in each year to enjoy tax relief will in many cases go up - although there will be an overall cap on how much money you can build up in the fund by the time you retire. Anyone who is at all interested in pension planning will need to think carefully about what they do in the last year of the old rules, and what they want to do under the new rules. One of the most interesting developments is likely to be permission, for the first time, for tax-approved pension schemes to invest in residential property. It's likely that many people will want to use pension funds for buy-to-let, or for holiday accommodation which they might use themselves. The rules haven't been finalised yet, but already there are suggestions that pension money could fire up the property market again. It will be worth looking at - and, of course, it's worth looking at in good time in order to be ahead of the game. It's no use realising later that everyone else has done very nicely. There will be limits that are likely to make some obvious wheezes unattractive or impossible. The pension fund will have to charge a market rent for the use of the property, so it won't necessarily be a good thing for your own second home - but even then, it might be worth checking the numbers. Selling a property you already own to your pension fund is likely to be tightly controlled to make sure the values are fair. You are likely to read quite a lot about pension changes and property investment over the next year. If you want to discuss whether what you read really works, we will be happy to advise you. The pension changes on 6 April 2005 are sweeping, and the final details are not yet in place. Most of the rules for tax reliefs and what pension funds can be used for were in the Finance Act 2004, but the regulations on what funds will be allowed to invest in have not yet been issued. It is reasonably certain that investment in residential property will be allowed. One major advantage of investing through a pension fund is exemption of capital gains. For that reason, it is unlikely to be a suitable vehicle for owning the taxpayer's only or main residence, which is already exempt from CGT. But second homes, holiday rental and buy-to-let properties may well be very attractive investments - the money going into the scheme will enjoy tax relief at the taxpayer's marginal rate, and income and capital gains after that will be exempt. Of course, there is the disadvantage that the fund must be used to secure a pension, rather than being available in full as a cash lump sum. But 25% of the fund can still be taken as a lump sum. This is too large a subject to do more than outline particular details in this newsletter. There will be more details emerging throughout the period up to April 2006.