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Chartered Accountants

Tax questions Carmarthen Journal 27th October 2010

I am a professional person with a relatively high income, but I am concerned about the changes announced recently to the annual Pension allowances. What advice can you give me?

From April 2011, the maximum you can contribute to a pension scheme is being reduced from £255,000 to £50,000 per year. Clearly, if you normally pay more than £50,000 (gross) into a scheme, you will be worse off as your tax relief (at 40% or 50%) will be restricted to the first £50,000. If you think you will be affected by these changes then it would be best to plan ahead and make additional contributions in this financial year.

However, I believe that the government has also introduced plans for you to be able to utilise any unpaid contributions from the previous 3 years, which will help those with fluctuating incomes.

We are planning to spend a substantial amount of money on new equipment to allow our company to expand. Will we be able to claim tax relief on depreciation of these new assets?

The company will receive tax relief on the cost of the equipment and not its’ depreciation. The tax relief comes from capital allowances known as the Annual Investment Allowance (AIA) at a rate of 100%. Currently the company can spend £100,000 in each financial year (reducing to £25,000 from April 2012) and write off the whole cost of the equipment against your profits. Therefore it may be important to plan your expenditure so that the 100% is utilised fully in each year, especially if more than £100,000 is to be spent


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