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Personal effects

Tax return

This needs to be submitted by January 31 in order to avoid an automatic £100 fine. It is a common misconception that if you have not been sent a return by the Inland Revenue you are not required to submit one. You are required to declare all sources of income and capital gains.

If you are a basic-rate taxpayer and you receive a small amount of bank or building society interest, you will not need to submit a return. However, if you receive any benefits in kind, for example, company car, fuel and medical insurance, you will need to declare this.

If you are a higher-rate taxpayer due to your earnings, any additional sources of income will be subject to additional tax and will need to be dec lared. You may even get some money back. In order to obtain higher rate relief on personal pension contributions, it is necessary for you supply the Revenue with your form PPCC or SEPPC (if you are selfemployed).

You can also inform the Revenue of your contributions on your return. Unless you do this, you will either receive no relief if you are self-employed or basic-rate relief only if you are an employee.

Pensions

Major changes are coming into effect from April. If you are selfemployed or employed but not eligible for company pension scheme membership, you may wish to make a personal pension contribution before April 5, 2001.

This could be used to mop up relief that you have not used for the current tax year and possibly the previous seven years. This facility will effectively be lost after April 5 although under the new regime different arrangements will be available to make substantial pension contributions.

You can make an election for the contribution to be carried back to the previous tax year (ended April 5, 2000). If you make the contribution sufficiently in advance of January 31 (when you will be due to make your final tax payment for that year) you may be able to reduce the amount of the cheque that you will have to write out.

You should note that this will not reduce your payments on account in respect of the tax year ended April 5, 2001. These will still be based on the full amount of tax that you were due to pay for the tax year ended April 5, 2000.

If you allow the contribution to be relieved in the current year, this will reduce your tax for the year. If the payment is made reasonably in advance of January 31, 2001, you should be able to reduce your payments on account due January 31, 2001 and July 31, 2001.

If you miss the deadline of January 31, 2001, you can still submit an election for the payments of account to be red uced. The Revenue will not normally dispute this.

However, if the actual amount of tax that you have to pay in respect of the tax year ended April 5, 2001 turns out to be more than the amount you indicated on the election, you will be charged interest.

Isas

You can invest up to £7,000 in an Isa before the end of the tax year. This provides a shelter against income and capital gains tax. Isas are not investments but are shelters through which access can be gained to a variety of investments. These include cash deposits (maximum £3000), equities and collective investments (maximum of £7000) and life insurance funds (maximum of £2000).

The whole allowance can be invested in stocks and shares. This is known as a maxi-Isa. Alternatively, mini-Isas can be arranged for each of the individual components. The maximum stocks and shares mini Isa is £3,000.

The limits on Isas have been held at the above levels for the current and next tax years. Thereafter, they are likely to reduce.

General issues

You should review your wills. If you have small children, you need to appoint guardians and ensure that arrangements are in place to administer any money that they might inherit from you while still minors.

Although statutory provisions exist, these can be cumbersome and inflexible. They may also require intervention by a court, which could be costly and not give effect to your wishes.

If your estate is substantial, you could consider making gifts to use your inheritance tax annual gift allowance. Your wills could also be structured to make use of your nil-rate bands.

If you have a substantial investment portfolio, you should try to make use of your annual capital gains tax exemption. Consider reinvesting the proceeds in Isas.

You could invest in a portfolio of zero-coupon preference shares, which provide a fixed return.

These can be arranged to produce gains over a series of tax years that make use of your capital gains tax exemption.

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