Savings and Investment
Pension contributions (Table B)
There was some speculation in the period leading up to the Budget that further restrictions might be made to tax relief for pension contributions, but in the event no changes were announced. This means that the limit on contributions remains £50,000 or 100% of earnings, whichever is the smaller
It was announced last year that the limit on the value of a tax-advantaged pension fund will fall from £1.8m to £1.5m on 6 April 2012.Anyone with a larger fund taking benefits after that date could suffer an income tax charge on the excess at 55% unless a claim for ‘protection’ has been made.
| Tax Tip |
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| If you are a high earner, relief in 2012/13 at 50% will be better than 2013/14 at 45% |
Individual Savings Accounts (ISAs)
The annual limit on investment in tax-free ISAs increases by £600 to £11,280 for 2012/13. This limit increases in line with the Consumer Prices Index each year, adjusted so that the result divides by 12 to allow for regular monthly contributions.
Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT)
Subscriptions for new shares qualifying for EIS or VCT relief enjoy a 30% income tax rebate. As announced last year, the limit for EIS investment will rise from £500,000 to £1m for 2012/13. A number of other changes are being made to make the reliefs simpler and easier to claim, including the removal of the £500 minimum for EIS and relaxation of some of the rules about being ‘connected’ with the company through owning its loan capital.
Seed Enterprise Investment Scheme (SEIS)
No further details of the SEIS were given on Budget day, in spite of it appearing to be a very generous new relief that will apply for 2012/13. It has been announced in advance that a subscriber for shares in a new small trading company (less than 2 years old) will enjoy a 50% income tax rebate on up to £100,000 invested. If capital gains of up to the same amount are realised in 2012/13 and invested in a SEIS company in 2012/13, the gains will be exempt. These reliefs will become permanent provided a number of conditions are satisfied, but may be lost if the shares are sold or the company is liquidated in a short time. The combination of these reliefs mean that an investor can put £100,000 into a company at a cost of only £22,000.
| Tax Tip |
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| The relief for SEIS is very generous – can you benefit? |