Year End Tax Review 2009/2010 Contents Lead articles The year ahead... This year, next year Pension hit Employees Too much NIC NIC and pensions Company cars Tax-free benefits Business - General Time to incorporate? His and hers Family bonus Profit and loss Show me the money Can't pay, won't pay? Turning back the clock Business - VAT Standard VAT or flat VAT? VAT goes down - must come up? European revolution A good start for VAT Happy returns? Investments Top-up savings Rainy day money Capital Gains Gains favoured Splitting gains A place in the country Holiday lets end Families Family fortunes Where there's a Will Credits and debits Piggy banks Still trustworthy? Administration Penalty shoot-out Paperwork, paperwork Pay tax later Opportunity knocks again Charity Give and save Non-Domiciled People Home and away Interest Interesting times

Rainy day money The tax reliefs for pension contributions are there to help you provide for retirement. Most people are reluctant to put enough away, so the taxman offers a big incentive - if you are a higher rate taxpayer, then putting £600 in will buy you £1,000 of investments which are held in a tax-free fund. The special rules for people who earn over £150,000 have been covered in an earlier article, but for everyone else there are no changes at the moment. You get tax relief on most pension contributions by paying them net of basic rate tax, and the government pays the other 20% into your policy. A higher rate taxpayer gets the other 20% through the self-assessment return. If you're having a good year this year - paying 40% tax - but you are expecting to suffer a downturn and might only pay at 20% next year, you should consider advancing your normal pension payments before 5 April so that you get higher rate relief. The money is saved up to give you a tax-free lump sum of up to 25% of the fund on or before your 75th birthday and a taxable income after that. Annuity rates have not been attractive in recent years, but if you are going to live a long time there are few better ways to save up the money to live on. The other big issue at the moment is the fall in stock values. Pensions are long-term investments, and if you are several years from retirement, you have to hope that the funds will have recovered by the time you cash them in. If you are close to retirement, it will be important to take advice on the best way to protect your position - do you cash in now, or wait in hope of a recovery? You can get pension relief on up to 100% of your current earnings, so you can make the whole of your tax liability for the year disappear. Of course, you need something to live on, but if you receive a cash windfall - say a legacy - then bumping up your pension fund might be something to think about. Action Point! Are you saving enough in pension funds?