Posts tagged ‘Budget Deficit’

If you have a pension, then you are about to see a significant reduction in the amount of money you can put into it without paying tax.

From next April

The Government will slash the annual tax relief limit on pensions from £255,000 to £50,000. There will also be a reduction in the lifetime allowance on money that can be saved in a pension fund from £1.8 million to £1.5 million, which will come into effect from April 2012.

The Government hopes the changes will save it more than £4 billion a year, which it will use to tackle the budget deficit.


Experts have already warned that some people with long service in final salary pension schemes could suddenly face higher bills, particularly as the increase in accrued pension will now be multiplied by a factor of 16 instead of the current factor of 10.

However, the Government says that the changes would affect 100,000 pension savers a year, 80% of whom earned more than £100,000 a year, meaning that very few people earning less than that amount would actually have to pay any pension tax.

Utilising your allowance

Anyone with unused annual allowance from the last three tax years will be able to carry them forward if they are a member of a pension scheme during that period, meaning that if a pension contribution is more than £50,000 then they may not have to pay the annual allowance charge.

At George Hay, we can advise you on all aspects of pensions, including how the above changes might affect you.

For further information on whether you are getting the best from your pension, please contact us.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

On Wednesday 24th March the Chancellor, Alistair Darling gave what could be his last budget. Many are saying how the budget was a waste of time, being so close to an election and the lack of assistance to small businesses or real attempt to recover from the significant budget deficit certainly supports this view.

Businesses however, should consider reviewing their own budgets and make sure they are set appropriately. As someone a lot wiser than me once said ‘failing to plan is planning to fail’.  Just as sinful is spending time creating a business plan and annual budget and not reviewing, updating or revising them on a regular basis.

Budgets are an important tool for anyone in business and at least an annual review should be considered. Many businesses approach their accounting year end at this time of year so it is an ideal time to appraise how your business is doing and what you wish it to achieve in the future.

Here are a few tips to consider when reviewing your budgets for the year:-

  • Are you producing management accounts on a regular basis, if not, what financial information can you easily extract from your accounting system that would help you monitor the business?
  • Business forecasts and cash flow projections should be prepared for a minimum of twelve months giving you something to monitor performance against;
  • You should ensure budgets are realistic in the current climate,
  • Are there any costs that can be trimmed back? Do you know which of your costs are fixed and which are variable, in reality in the short term most costs are fixed, if you need to go through a cost cutting exercise you need to know which costs can be varied and when.
  • Is cash flow behaving as expected? Are you likely to need further banking facilities at some point in the future?  Are your debtors and creditors being managed appropriately?
  • If you are selling a product, it is important to know at what point the business is generating a profit, following the recession with pressure on prices the break even point can be higher than you realise, you need to be aware of this.
  • If you are selling a service, do you know how many of hours of time you are invoicing out a month, you may feel busy but is it resulting in billable income.
  • How are you generating new business, and what is this costing you in terms of time and resources.  Are you being realistic about how much new business can be won?

Focus your attention

Reviewing your businesses budget can be a very valuable exercise.  It will focus your attention on how your business is doing and help you to keep control of costs.  It should also give you a target to achieve for the future.

If you are in business on your own, it may be beneficial to speak through your budgets with someone who understands your business, like your accountant, for example as this may help you to look at the bigger picture, question your processes or brainstorm ideas.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.