Welcome to the latest news from FPS

10% starter rate tax banding:

Many of our Members have asked why they are paying more tax in their pay. We hope the following helps to explain this for you:

In the March 2008 budget the UK Government went ahead with its proposal to remove the 10% starting rate tax banding.

• Low earners who would have paid income tax at the lowest, introductory 10% rate now have to pay the 20% rate.
• The basic rate of income tax has been lowered from 22p to 20p. Scrapping the 10p rate was part of a range of measures, which came into force in April- child benefits, state pensions and tax credits have gone up.
• These changes have caused many lower earners to be worse off and therefore caused uproar in the Government.

Effects of the Tax Changes:

Winners:

• Most people with incomes of £18,000+
• Under £18,000 but aged 65+ and therefore eligible for higher personal allowances
• Under £18,000 but with young children and therefore eligible for child tax credits

Losers:

• Under £18,000 and ineligible for working tax credits because under 25
• Retired early and therefore ineligible for higher personal allowances
• Part-timer working insufficient hours to qualify for tax credits*
• Anyone earning £300 or less per week is worse off than last year. See table below:

Below is a table of the previous tax banding and the current tax bands.

Gordon Brown has promised he will compensate those groups who lost out from the tax changes, but has so far not issued a clear statement of policy. The Prime Minister faces a number of issues, the 10% tax change being top of the agenda. For now the Labour rebels continue the protest and debate.

FPS follows the information provided by the Government to ensure we comply with their rules. We will keep you up to date on any changes. For more information on the tax changes visit the BBC news site: http://news.bbc.co.uk/2/hi/business/7329006.stm

Sources: BBC news online, The Times online. PWC.
*Different personal circumstances may affect final amounts

CHILDCARE VOUCHERS REMINDER:

Don’t forget- you can sign up now for the FPS Childcare Voucher Scheme. See below for how much you could save!

We have updated our website and Members’ Lounge with information on the childcare voucher scheme. You can now log in and download information on the NEW service.

New Expenses Form

Our NEW Expenses form now available in the Members’ Lounge. This updated form now includes the working from home allowance.

Are you currently on a Working Holiday Visa (WHV)?

If it is due to expire on or before 31 December 2008 then read on!

FPS Umbrella has a sister company, The Smooth Group, who provide expert visa and immigration advice by fully qualified and professional advisors.

Smooth Group offer a FREE assessment and will be delighted to help you by taking away the time and effort that can be spent applying for visas, not to mention of course the consequences if not done properly.

For those of you on a WHV due to expire before 31.12.08 we will pass your details to Smooth Group, unless you instruct us not to by return email no later than 16th May 2008. The Smooth Group will then contact you with a view to starting a stress-free and easy process. Visit: www.mysmoothgroup.com .

Customer testimonial:
Walter and Maxie Jackson
“ I used The Smooth Group, based in Cape Town and London, who sort out all the bureaucracy. They handle all the paper work and make sure our applications are 100% correct. Organising my visa through an expert is good for peace of mind and it's reassuring to know there's someone on your side who knows what they're doing - giving you the right advice. "

New tax year investment planning

Tony Harris at IFAs ContractorFinancials: “With the new tax year upon us and the government ever keen to close most tax breaks, its important to understand what's new in the world of ISA investments and how Contractors can best exploit the opportunities. You can now invest £7200 pa (up from £7000 2007/8), tax efficiently into an Individual Savings Account.

Cash ISAs, that may have been built up over many years, can now be switched into equities for the first time. With inflationary pressure building and interest rates falling, cash may no longer be king. In the current climate the spending power of money held in a deposit account, even one where returns are tax free, could rapidly erode.

Look to switch longer term savings that aren't required over the next 5 years + to a shares based ISA as historically these areas have massively out performed cash and profits are free from Capital Gains Tax. For equities investors who may traditionally have invested in a single fund each year consider using a portfolio of investments to further spread risk.

The benefits of ‘Pound Cost Averaging’

If you do consider making an investment into 2008/9 Shares ISA, start to drip feed regular contributions to avoid unnecessary risks associated with investment timing (i.e. rather than take a bigger gamble that a single day in March or early April next year is the right day to invest, you spread the risk over 12 separate monthly investments). This need cost you no more than making a single lump sum contribution.

Regular monthly investors can actually make a virtue of market dips. They buy more units in the fund when prices are lower which compensates for the months when units were more costly. In the long run these investors have these extra units to their name when a recovery in prices occurs. This proven investment doctrine is known as pound cost averaging.

If you'd like to discuss the merits of a new ISA investment or wish to look into switching existing cash ISAs into a shares based investment then please contact Tony via Tonyh@contractorfinancials.com

Using the correct address:

Don’t forget our address changed at the end of last year.