Personal Finance

ISA stands for Individual Savings Account. They are free from Income and Capital Gains Tax. The maximum annual investment is £7,000 of which £3,000 may be in cash. In April 2008 the £7,000 limit will rise to £7,200 and the £3,000 limit to £3,600.

Retirement age for men, when they are entitled to a State Pension is 65. While women were once able to retire at the age of 60, the rules have changed so that those born on or after 6th April 1955 will have to wait until they are 65 before claiming their State Pension.

• Buy direct from the company - if you know what you want, you can ring their call centre or talk to a company sales adviser; however, they will only be able to talk about their own product range.
• Go to your own bank or building society - again, they will only be able to talk to you either about their own products or those of one particular insurance company with whom they are affiliated.
• Seek advice from an Independent Financial Adviser (IFA) - if you're not sure what you want, IFAs are able to look at the whole market and advise on the most suitable product for your needs. For this they will either be paid a commission or charge you a fee and this will be agreed at the initial meeting, which is often free. IFAs are regulated by the Financial Services Authority (FSA).
• Buy through the internet - there are hundreds of personal finance sites and obtaining information is now easier than ever. That said it can be overwhelming.
• Use a discount broker - if you know exactly what you want, you can save money through a discount or 'execution only' transaction by not asking for advice. What happens is that you buy the product and the broker refunds a proportion of the commission into your plan.
• Select a product offered by a non-financial company - you can buy your financial products from many of the big supermarkets and store groups nowadays by phoning or logging on to a specialist website.

Stakeholder Pensions are low-cost private pensions, available from 6 April 2001. They are meant for people who currently don't have a good range of pension options available, so they can save for their retirement.

If you earn more than £30,000 per year and are in a company pension scheme, you cannot take out a Stakeholder Pension as well. However, everyone else can have a Stakeholder Pension, even non-taxpayers, non-earners and children.  

Contribution limits are based on earnings, but even if you don't have any earnings, you can pay up to £2,808 into a Stakeholder Pension and this will be topped up to £3,600 by the Government.

Employers with more than five employees have to provide access to Stakeholder Pensions with effect from 6 October 2001.

Self Invested Personal Plans (SIPPs) allow you direct control over the investments in your pension scheme. They provide maximum flexibility in the timing of contributions into, and benefit payments from, the scheme.

An example of such flexibility is that an SIPP allows you to withdraw up to 25 per cent of the fund tax free between the ages of 55 and 75. You can then use the balance to provide income for the rest of your life.

SIPPs also provide an attraction for Inheritance Tax purposes because if you die before retirement, the whole of the value of the SIPP is excluded from your estate.

There are many assets that can be included in a SIPP but the most common investment is property. In recent years, equity has had a rough ride, but this problem has affected nearly all pensions schemes, not just SIPPs.

One advantage of a SIPP is the opportunity it provides for investing in smaller companies.

Some people who invest in a SIPP opt for the management to be handled by an investment management company. One advantage of this is the clear reporting and administrative package that usually comes with it.

When you reach retirement, you may decide that you want the certainty of a guaranteed level of income for the remainder of your retirement. This type of pension income is known as an 'annuity' and is the traditional way of taking benefits. What will happen is that the pension company will take your pension fund (less your tax-free cash sum if you decide to take it) in return for guaranteeing a specific level of income.

The annuity will cease upon your death unless you have made provision for your spouse or partner to continue receiving all or part of that income for the remainder of his or her lifetime. Of course, some people live longer than others and will therefore receive greater benefit from the terms that they have secured with their pension company, whilst others die sooner than expected.

Monies gained by the pension company from not having to pay a pension for as long as they originally expected to one person will be used to subsidise the extra cost of funding those who live longest. Under current regulations, you are required to purchase an annuity by the age of 75 if you have one of the following types of pension plan:

• Personal Pension
• Stakeholder Pension
• Retirement Annuity
• Free Standing Additional Voluntary Contributions (FSAVC)
• Section 32 Buy-Out Bond

If you are self-employed, while you will be paying into your state pension by means of your National Insurance contributions (assuming you are paying them) you won't have any other pension scheme available unless you are paying into one. You are strongly advised to consult an independent financial adviser to set you up with a scheme most suitable for you.

These are additional contributions made by an employee to his employer's approved pension scheme. They can be regular or they can be irregular.

If you're being pursued by a creditor for an old debt, you may be able to ignore it on the ground that it has time-lapsed. This is six years, except in Scotland where it's five, but this only applies if no legal action has been taken against you on the debt, and you have not acknowledged it during the time. If you do now acknowledge it as a result of the creditor contacting you, you will reactivate the debt, so take advice before doing anything.

You need to fill out a tax return if you:

• are self-employed
• are in partnership
• have income from land and property  
• are a director
• incur taxable capital gains
• are sent one

If you're in any doubt, go to your local tax office and get them to confirm whether you should fill out a tax return.

If you have to complete a Tax Return, included in the package will be a tax calculation guide for you to follow. The main thing to bear in mind is that if you get your Tax Return submitted by 30 September each year, HM Revenue & Customs will work out for you how much tax you have to pay and when you have to pay it.

In principle, you make two payments a year. On 31 January each year you will pay the balance of the previous year's tax still owing plus one half of the previous year's tax liability as a payment on account for the following year. On 31 July each year you will pay the second half of last year's tax liability. On 31 January following, you will find yourself paying any balance of tax that is due plus one half of next year's tax liability based on this year's total tax bill and so on.

If HM Revenue & Customs says that you owe them money for a particular tax year, you may be able to get these arrears waived or appeal if this request is refused. This will be possible if (a) they had all the information they needed to make a decision; (b) by the time they let you know more than 12 months had gone by since the end of that tax year (in exceptional circumstances they may waive if it is less than 12 months); and (c) you reasonably believed your tax affairs were in order. You can also get arrears waived if the tax office paid you too much tax rebate, then tried to reclaim it after the end of the tax year. When you claim, say you are doing it under Extra Statutory Concession A19.

You are legally required to keep your records for six years.

Write to your local Jobcentre (you'll find the address in the phone book), and ask them for your number. You need to provide the following details:

• full name
• maiden name, if appropriate
• date of birth
• date of marriage, if appropriate
• current address

Unfortunately, since 5 April 2000, tax relief on mortgage interest payments has been withdrawn; this applies to both interest paid under MIRAS (mortgage interest relief at source) and otherwise.

Permanent health insurance policies are intended to provide you with an income should illness prevent you from working. If your employer pays the premium on your policy, they will obtain a tax allowance on the payment they make and you will have to pay tax on any benefit that you receive.

If you make the payments, whether as an employee or as a self-employed person, you will not obtain any tax relief, but any benefits paid to you under these circumstances would be tax free.

The simplest answer is that savings accounts with building societies or banks that are in the children's names should pay the children interest gross (i.e. without tax deducted).

It's still quite permissible for children to hold shares in companies, even though the tax credits on the dividends are not refundable.

If the children don't have any investments and if you have surplus after-tax income of your own which you can give to your children, this is usually tax free in the children's hands and, if you are particularly wealthy, is a very useful way of transferring income to them, so that the children can accumulate a sum that can then be invested. However, once the income from the source exceeds £100 per annum it will be taxed in your hands. Where you transfer your own shares to your children, if the children are under 18, the income arising on these shares will be regarded as belonging to you, so this does not save tax.

The Child Trust Fund is a tax-free savings scheme designed for children. The Government contributes £250 when the child is born and a further £250 (£500 for lower-income families) at the age of seven. Parents, family and friends can contribute a further £1,200 annually. The child is entitled to the fund at the age of 18 and there will be no restriction on how he uses the money.