Viewpoint

Issue 14 Winter 2016

Your latest newsletter from Seneca Reid Limited

Pension savers face

Lifetime Allowance cut

When the lifetime allowance was first introduced

in 2006, it only affected high earners in the UK who
could afford to grow seven-figure pension pots.
But as the limit has reduced in recent years many more
thousands of people have been affected especially
those in final-salary schemes who have built their
entitlement through many years work.

Tax charges

If your pension savings are worth more than the 1m lifetime

allowance when you take your benefits, youll have to pay the
lifetime allowance tax charge on the excess. The tax charge is
55% if you take the excess pension pot as a lump sum, or 25%
if you take the pension as a regular payment.

Pensions savings allowances

Tax Year
2013/14
2014/15
2015/16
2016/17

Seneca Reid Limited

info@senecareid.co.uk

1.5m
1.25m
1.25m
1m

Annual Allowance
50,000
40,000
40,000
40,000

Protecting your money

If you had a pension pot of more than 1.25m as at 5 April

2014 you may be able to claim Individual Protection 2014.
This will provide a protected lifetime allowance equal to the
value of your pension rights on 5 April 2014 (up to an overall
maximum of 1.5m).
You will not lose Individual Protection 2014 by making further
savings into your pension scheme, but any pension savings
in excess of your protected lifetime allowance will be subject
to the lifetime allowance charge.

Applying for Individual Protection 2014

You became eligible to apply for Individual Protection 2014 from

18 August 2014. Applications are still open but must be received
by HMRC no later than 5 April 2017.
We expect to see similar transitional protection regimes
announced ahead of the lifetime allowance cut.

Annual allowance

The amount you can pay into your pension every year (the
annual allowance) is currently 40,000 . You usually pay tax
if savings in your pension pot exceed the annual allowance,
but you can top up your allowance for the current tax year
(6 April to 5 April) with any allowance you didnt use from
the previous three tax years.

Lifetime Allowance

If you are worried that your pension pot may be affected by this
change and would like more information, please get in touch.

HM Revenue and Customs practice, and the law relating to taxation

are complex and subject to individual circumstances and changes
which cannot be foreseen.

01279 874480

COPEN1042 Exp. 31/03/16

From 5 April 2016, your tax-free

pensions savings limit will be cut
from 1.25m to 1m. This cap is
called the lifetime allowance and
applies to your entire pension savings
(apart from the state pension).

Autumn Statement
What it means for you
The balance of economic changes had
been moving in the Chancellors direction,
giving him some wriggle room to make
a number of surprise announcements in
his 2015 Autumn Statement.

Inheritance tax

Tax credits

Energy

One of the biggest of those was the Chancellors U-turn on tax

credits. He was widely expected to water down his summer cuts,
but instead, abandoned nearly all of the measures, leaving the
main taper rate and income thresholds unchanged.

The housing market

Mr Osborne also returned to the stamp duty land tax (SDLT)

rules for residential property, announcing that, from 1 April 2016,
the rate of SDLT on purchases of additional residential property
(eg. second homes and Buy to Let) will increase by three
percentage points.

There were two small pieces of good news on the IHT front:
No action will be taken over the use of deeds of variation
to make post-death amendments to wills.
The legislation on pension plans in drawdown is to be clarified
to ensure normally no IHT is payable on funds remaining at death.

The current Energy Companies Obligation, a government scheme

for larger suppliers to deliver energy efficiency measures
to British homes, will be replaced from April 2017. Instead, a new
cheaper energy supplier obligation to reduce carbon emissions
will run for five years, which should see 24 million households
save an average of 30 a year on their energy bills from 2017.
The Warm Home Discount scheme will also be extended to
2020-2021. This currently gives certain low-income households
a one-off reduction of 140 on their electricity bill.

Flood protection

He also revealed further initiatives for homebuyers, promising

a total of 400,000 affordable housing starts by 2020/21, half
of which would be starter homes sold with a 20% discount
to young first-time buyers.

300,000 homes will be better protected from flooding by 2021,

with 2.3 billion for over 1,500 flood defence schemes across
the country.

In the city, a new Help to Buy equity loan scheme will give London
buyers 40% of the home's value from early 2016, as opposed to
the 20%, offered by the current scheme. The government is also
announcing a series of other schemes, including Help to Buy:
Shared Ownership to help more people get onto the housing ladder.

Tax concessions are not guaranteed, may change in the future

and are subject to individual circumstances.
Contains public sector information licensed under the Open Government Licence v3.0.

Pensions

If you'd like to know more about how the announcements made

in the Autumn Statement affect you, please get in touch.

While making no fresh major pension tax announcements, the

Chancellor did execute a subtle cut to the cost of pension tax relief
for the government by pushing back six months the dates on which
auto-enrolment contributions will increase. The rise from 2% to 5%
total contributions will now occur in April 2018, with the final move
to 8% a year later.

COPEN1172 Exp. 10/03/16

From April 2016, the basic state pension will rise to 119.30
per week, an increase of 3.35 - the highest real terms increase
to the state pension for 15 years.

Seneca Reid Limited

info@senecareid.co.uk

01279 874480

5 reasons why you should

use your full ISA allowance
Isa FActs

With the tax-year end fast approaching, the clock is ticking for
you to use up all of your 15,240 ISA allowance for this tax-year.

To open an ISA, you must be:

But why is it so important to use up your allowance? Here are

five great reasons:

18 or over (for a Stocks and Shares ISA)

More generous allowances


The ISA annual allowance now stands
at a record 15,240 all of which can
be invested in a Cash ISA, a Stocks and
Shares ISA, or a combination of the two.
This figure is almost 30% more generous
than the 2013/14 allowance of 11,520
(of which only 5,760 could be invested
in a Cash ISA), giving you a much greater
opportunity to shelter more of your
savings from tax.

Your ISA is tax-efficient

 nlike some other investments your

U
returns are not subject to tax. That means
every extra pound you save (within your
allowance) will be sheltered from the
taxman. This tax-year, you can invest
up to 15,240 tax-free.

Increased flexibility

In years gone by, if you used up

your annual ISA limit but then made
a withdrawal during the same tax-year,
youd be unable to replace it. As of April
2015, you now have the freedom to take
money out, and put it back in later in the
year, without losing any of your tax-free
entitlement. That means you neednt
worry about missing out on lost interest
if you need to make a short-term raid
on your savings, but can afford to
replace it later.

The miracle of
compound interest

 aximising your ISA savings can

M
deliver huge benefits over the longer
term. For instance, assume you invested
the current maximum allowance of
15,240 in a Cash ISA, every year,
for 25 years. Even if your investment
grows at a modest 2.5% each year, your
381,000 total investment would have
grown to 528,542.54. The same
investment with a 5% annual growth
rate would return 756,297.33.

You cant carry over your

ISA allowance

 nlike some other personal allowances

U
(such as your pensions annual allowance),
you cannot carry any unused ISA
allowance over to the following tax year.
That makes it doubly important to invest
your full allowance, if you can afford to.

If you havent used up your ISA

allowance for 2015/16 yet, please get in
touch to discuss your options.

16 or over (for a Cash ISA)

Resident in the UK
A Crown servant (eg. diplomatic or
overseas civil service) or their spouse
or civil partner if you dont live in the UK

There are two types of ISAs:

CASH ISA

You dont pay tax on savings
account interest.
STOCKS AND SHARES ISA


You dont pay tax on any income
or capital gains youve made on
your investments.
If you complete a tax return, you dont need
to declare any ISA interest or profits on it.
You can put money into one Cash ISA
and one Stocks and Shares ISA each
tax year.
You can save up to 15,240 in one type
of account or split the allowance across
both types.
The tax efficiency of ISAs is based on
current rules. The current tax situation
may not be maintained. The benefit
of the tax treatment depends on the
individual circumstances.
The value of your stocks and shares ISA
and any income from it may fall as well
as rise. You may not get back the amount
you originally invested.

Contains public sector information licensed

under the Open Government Licence v3.0.

Seneca Reid Limited

info@senecareid.co.uk

01279 874480

COPEN1163 Exp. 05/04/16

If you havent used up your ISA allowance

for 2015/16, you have until 5 April to do so.

Tax credit on dividend income

Dividends are currently paid with
a 10% tax credit. For every 1,000
of dividend income received, it's
assumed that 111 in basic rate tax
has already been paid, making the
total dividend 1,111. From 6 April
2016, this tax credit will be scrapped.
From April 2016, all dividend income will be treated
as gross and the rate of tax payable on dividends will
depend on the investor's other taxable income. Every
investor will have a 5,000 tax-free dividend allowance
as well as their personal allowance. Beyond this, the
personal tax liability for taxpayers increases by 7.5%
(basic rate), 32.5% (higher rate) and 38.1% (additional
rate) compared to 2015/16.

So what does this mean for you?

Essentially it will make life better for many small

investors seeking an income from their shareholding.
However, you should know:
1. whether your investment generates a yield (this
is the income generated by the underlying assets
which may be paid to you or reinvested in the fund).
2. whether the yield is taxed as dividend or interest.
3. how much that yield is.
Lets look at two hypothetical examples:
Fund A has a yield of 4%, taxed as dividend.
You can invest up to 125,000 in this fund, before
triggering a tax liability on the income generated.

It is important to make the right investment fund

choices to meet your own personal objectives
and that includes minimising your tax liability.
We can help you here.
Consider taking the following actions to help offset
the loss of the 10% tax credits:
1. Maximise your ISA and Pension investments these
are not subject to taxation on the yield generated by
the fund.
2. For couples, make the most of each persons 5,000
dividend income allowance by considering to split
your investments.
3. Use the new personal savings allowance for other types
of investment fund. In most cases, the income from fixed
interest funds and corporate bonds is subject to interest
tax, not dividend tax. From April 2016, the first 1,000
of interest income from these holdings will be free of
income tax under the new personal savings allowance
(500 for higher rate taxpayers).
4. Consider deferring taxation using an Onshore
or Offshore Investment Bond for part of your
investments.
The value of investments and any income from
them can fall as well as rise. You may not get
back the amount originally invested.
HM Revenue and Customs practice and the law
relating to taxation are complex and subject to
individual circumstances and changes which
cannot be foreseen
For a review of your investments and tax
allowances, please get in touch.

COPEN1171 Exp 05/04/16

Fund B has a yield of 1% taxed as dividend.

You can invest up to 500,000 in this fund, before
triggering a tax liability on the income generated.

Seneca Reid Limited

info@senecareid.co.uk

01279 874480

Whats your personal

financial wellness plan?
The outgoings we face today just
to keep on top of the mortgage or
rent, utilities, food and other regular
commitments such as loans and
childcare costs, can be significant.
So its important to plan for the
unexpected and avoid making
a potentially costly mistake.
We might worry about how we would pay the bills and
look after our families if we were to have an accident,
but the truth is many of us dont have cover in place to
protect against it. With 30% of households admitting they
wouldnt be able to pay their mortgage if they were to
unexpectedly lose their income1, its clear theres a real
risk of serious financial hardship if income stops - even
for a short time.

The importance of
appropriate protection

Most of us buy travel insurance when we go on holiday.

We insure our pets against illness and the sometimes
eye-watering vets bills this can incur. We insure our
mobile phones, washing machines, gadgets and cars.

Swiss Re2 estimates that the average person is

underinsured by as much as 100,000, with single parents,
couples with children and the under-35s the most likely to
not have the right cover. That is just an estimate it could
be higher and the pressures on average incomes mean it
probably is.

Is it time to review your circumstances?

There is real value in taking time to regularly think about

your personal circumstances. As you go through life, your
lifestyle will change and so too will your need for protection.
There are a number of affordable protection products
available that give you peace of mind in knowing your
finances would stay intact. These include life and critical
illness cover, income protection, insurance aimed
specifically at hospital stays and treatments, as well as
accident protection.

HSBC Survey 2015

http://www.swissre.com/media/news_releases/nr_20120611_Term_Health_Watch.htm

Make a commitment to your own nancial

wellness and talk to us about life and protection
insurance tailored to your circumstances.

COPEN959 Exp. 01/04/16

But all of these expenses need to be funded from

somewhere, and if a sudden event affects our personal
cash flow, it would be hard to see how we could keep these
other insurances going let alone all the other outgoings.

Seneca Reid Limited

info@senecareid.co.uk

01279 874480

Accident
protection
More accidents happen in the home than anywhere else.
And during the winter months more time at home means
more chance of an accident.
You may take extra care whilst taking down the
Christmas decorations or spring cleaning for Easter,
but can you be sure your family are being as vigilant?
Every year :
1

There are approximately 5,000 deaths as the result

of an accident at home with children under five
and people over 65 most likely to have an accident
200,000 people report injuries that result in more
than three days off work

Most importantly, dont rush things, as that's when

most accidents are likely to occur.

Take appropriate cover

You may think it wont happen to me but accidents,

by their very nature will happen. Accident protection
can provide a cash lump sum when you really need it
for a range of specified accidental injuries. It can give
you a little more financial security to help cope with
any loss of earnings through illness or injury.

Almost 7,000 people were admitted to hospital

after accidents involving a ladder

Accident protection can provide cover for:

Nearly 4,000 were admitted to hospital following

accidents involving furniture

Hospitalisation due to accident and sickness

3,053 were injured due to accidental poisoning

137,264 under 18s are admitted to hospital due
to injury

Broken bones
Permanent injuries
Permanent disablement
Accidental death

Seneca Reid Limited

info@senecareid.co.uk

Talk to us today about accident protection for you

and your family.
1

01279 874480

ROSPA & MetLife

COPEN1174 Exp. 14/12/16

Funeral costs
Spring cleaning may sound harmless but it can
involve many of the chores that lead to trips,
slips and falls. It is important to take the time
out to think about your safety. If you need to climb,
avoid using chairs and use a step ladder instead.

Protecting your
employees and assets
Whatever business
youre in, having the
right insurance in
place is essential to
protect your assets
and responsibilities.
Weve put together a
short description of the
most common types of
cover for small businesses,
along with a brief checklist,
to get you thinking about
your current arrangements.
If youd like help understanding
or reviewing your business
insurance, please get in touch.

Common types of business insurance

Employer's Liability insurance is a legal requirement. It protects you in the event
a member of your staff is injured or becomes ill as a result of the work they do.
Public Liability insurance protects you should a member of the public suffer an
injury or damage their possessions whilst visiting your premises. It also covers you
when you carry out work away from your premises.
Professional Indemnity insurance covers the costs of legal action taken against you,
should a client feel they suffered financial loss as a result of your professional opinion.
Depending on your circumstances, you may also need to consider things like buildings
insurance, business interruption, business fleet insurance and insurance cover for tools.

Your business insurance checklist

1
2
3
4

Check your cover levels and limits

Check and double-check the levels of cover you have. Are your liability limits
appropriate? Are there any exclusions that might apply in the event of a claim?
You may find it useful to seek professional advice if youre unsure.
Ask questions when things seem unclear
Dont be afraid to ask questions. Do you know what Business Interruption or Goods
in Transit really means for your business? If your policy is heavy on jargon and hard
to understand, ask your provider for help. A good insurance provider will be happy
to explain what you are paying for.
Tell your insurer if your circumstances change
Make sure you tell your insurance provider if something changes in your business.
If youve taken on staff, diversified, grown or downsized, its important to let your
insurer know. If you dont, you could find yourself under-insured or find your policy
is no longer valid.
Seek professional advice
Buying insurance can sometimes appear simple, but its easy to overlook policy
features that could make a big difference if you ever need to make a claim.
Seeking professional advice will help ensure youre fully informed about your policy.

COPEN1039 Exp. 17/06/16

Take the time to understand your policy/s

Whether taking out new cover, or renewing your business insurance, take the time
to understand your policy. Look at exactly what it does and doesnt - cover you
and your business for.

Seneca Reid Limited

info@senecareid.co.uk

01279 874480

Business survival planning

If something happened to you,
your co-owners or employees,
could your business survive?
A study by Legal and General shows 46%1 of new
businesses would fold immediately following the death
or critical illness of a key person.
The loss of a key person within a small or medium-sized
business can cause unexpected costs at what would be
a difficult time. Not only would the business have to fund
the cost of recruiting and training a replacement, but it
would also risk suffering:
Loss of profits

Loss of important business contacts

Loss of knowledge

Business protection insurance can help

mitigate or even avoid these risks altogether.
As a business owner, you should know there are
three main types of business protection:

Key Person Insurance provides a lump sum to
the business on the death of an important member
of the business.

Shareholder Protection Insurance provides
a lump sum that will allow remaining shareholders
to buy the shares of a deceased shareholder.

Business Loan Protection provides a lump sum
to help a business pay any outstanding business loans.
There is also the option to take out relevant life
insurance in trust. Although this is not technically
business protection an agreement can be made
which specifies the terms on which proceeds can
be used.
Critical illness cover should also be a consideration,
as long-term or permanent absence from work,
could cause serious financial pressures to you
and your business.

Protect your bottom line

For further information or advice on setting up a business
protection policy please get in touch.

Legal & General - State of the nations SMEs report

Seneca Reid Limited

Thremhall House,
Thremhall Park, Start Hill,
Bishop's Stortford,
Hertfordshire,
CM22 7WE.

01279 874480
info@senecareid.co.uk
www.senecareid.co.uk
COPEN1175 Exp. 14/12/16

People are the biggest asset to any business and

Business Protection Insurance is designed to keep
your business trading should you lose the people
responsible for your profit margin.