Budget April 2009

The latest budget on 22nd April announced various tax rises which will increasingly affect the wealthy but pretty much everyone else aswell. There really has never been a better time to make the most of the tax breaks that are available to you.

The annual ISA allowance is increasing from £7,200 to £10,200 of which half can be saved in a Cash ISA. The limits apply from 6 October for those aged 50 or over and for all investors from 6 April 2010.

With regards to pensions, for those with income between £43,875 and £149,999 per year you will still be entitled to claim 40% tax relief on your pension contributions.

For all dentists earning over £150,000 or more this year (or in either of the last two years) then, from now on, you will only be able to claim higher rate relief on the first £20,000 you contribute. There are however a couple of exceptions to this.

Regular contributions that were in place prior to 22 April this year are ignored, and importantly this includes dentists contributing to the NHS Pension Scheme. So even if your existing regular payments into the main NHSPS, added years, additional voluntary contributions, personal pensions, stakeholder schemes and so on add up to more than £20,000 of 'relevant income' they will be protected.

The other exception applies to those who have income between £150,000 and £169,999 this year, but who have not had income of £150,000 or more in the previous two tax years. The rules would actually allow you to make a pension contribution of up to £20,000 now which has the effect of reducing your income to less than £150,000 and therefore you can still claim the 40% tax relief.

Finally the pension lifetime allowance will be frozen at 2010/2011 levels until 2015/2016 which could affect dentists with significant NHS earnings or personal pensions. The annual limit will be £255,000 and the lifetime allowance £1,800,000.

The national debt now stands at over £740bn and that burden will inevitably fall on the taxpaying population. Higher rate tax payers particularly therefore need to take action now to protect their income, savings, investments and pensions from the recent and no doubt future tax increases.