A week in tax and politics
Sunday 30 March 1997
Clampdowns on PEPs, pension tax relief and a range of other tax breaks are all on Gordon Brown's hidden agenda, these financial experts would have us believe - all the more reason to act (for which read buy) now, they say. Well, maybe.
Certainly the panic tactics haven't worked yet. People aren't piling into PEPs in the numbers expected, suggesting investors are more worried about the stock market bubble bursting than what Labour might do to PEPs and tax on investments.
But hype aside, what wheezes are worth considering before the end-of- tax-year deadline on 5 April?
Buying a PEP with the stock market at its present level may well mean signing up to lose money this year. This may not be of great concern for those investing for the long term - say, a minimum of five years. Over this period the stock market should still be a better home for savings than the building society.
So if you're prepared to take these short-term risks and you're determined to use this year's PEP allowance then go ahead. But most people are probably better off waiting.
If Labour wins and decides to clamp down on PEPs then it might do something as early as June, but any earlier change is unlikely. In the meantime, PEPs will still be available and the stock market could be lower.
If you still want to go ahead this tax year - perhaps because you want to ensure you get at least two years' PEPs in before any change - then my recommendations for all but the professionals are as follows: for pounds 6,000 or less, the Legal & General UK Index Tracking PEP using its phased investment option. This will drip-feed your money into the stock market over the next year, which should benefit you if the market tumbles and then struggles to recover.
As well as a pounds 6,000 PEP, you can put another pounds 3,000 into a single-company PEP. These are often not worth the risks but Legal & General's Election PEP offers a relatively low-risk way of taking up this allowance. I covered both these deals in detail last week.
If you are sitting on big profits in a share portfolio and haven't used up this year's capital gains tax allowance, it is worth looking at selling this week (utility companies facing Labour's windfall tax might be good candidates), "bed-and-breakfasting" or even "bed-and-PEPping". Never mind what Labour might do, this is good financial housekeeping, full stop. And if you sell you'll also be less exposed to any stock market fall.
The argument for paying more into a personal pension before the end of the tax year seems weaker: unused allow-ances can be carried forward up to six years, and a Labour move to cut tax relief would be surprising given the consensus that people should be encouraged to make their own retirement provision.
Inheritance tax is an area where Labour has said it wants to close "loopholes". There is a pounds 3,000 tax-free annual allowance on gifts, which may be worth taking up. But this is a complicated subject that probably requires advice.
Simon Read: The point of having protection insurance? The right cover can help reduce your financial concerns at a time of extreme worry
19 December 2014 07:30 PM
In May Nicola Groves got a massive shock. The 45-year-old mother of two was told, bluntly, that she had breast cancer. "When I heard the words, 'You do have breast cancer and you are going to lose your breast', I felt as if time stood still," she says.
19 December 2014 07:30 PM
It's that time again when the media looks back over the past year and forward to the next. I am reminded of an old film, The Day the Earth Caught Fire (1961). Near the end of the film a newspaper prints two headlines – which one it uses will depend on whether the world is saved or doomed.
12 December 2014 05:42 PM
The supermarket banks have always excelled at offering simple, no nonsense products, and savings accounts is another area in which they fare well
12 December 2014 06:17 PM
The sun is shining on people who struggle to heat their homes and it’s thanks to a sense of community
12 December 2014 06:23 PM
Struggling people need help, understanding and forbearance, not ill-thought-out pronouncements
12 December 2014 06:20 PM
You won’t find me bashing the banks for the sake of it, but sadly they’ve deserved all the criticism that’s been sent their way in recent years
12 December 2014 06:02 PM
Gillian Guy, chief executive of Citizens Advice: 'The injustice of shock bills for crime victims must end. The Government must stand up for consumers and cap bills from lost or stolen phones at £50'
12 December 2014 05:57 PM
Stirring the pot: the Indian Government’s reforms of labour rules offer hope of a brighter future for businesses
12 December 2014 05:53 PM
Knight of the road, look out: you’ve got a new rival
06 December 2014 12:00 AM
Simon Read: The Chancellor has stamped on an unfair tax. But will the delight of homebuyers mean misery for others?
06 December 2014 12:00 AM
Were you surprised by the sudden reform of the rules for stamp duty on property purchases? I certainly was. I've been calling for ages for a change in the tax to make it more fair – and, at a stroke, George Osborne did just that on Wednesday in his Autumn Statement.
29 November 2014 12:00 AM
21 November 2014 04:33 PM
With some people are weighing up whether they will be better off cashing in their final salary pension next spring, Samantha Downes asks the experts
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- 5 Orange Wednesdays are no more
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Shock poll shows voters believe Ukip is to the left of the Tories
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
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