Q I have been left about £20,000 worth of shares by my mother. Her estate was below the threshold for Inheritance Tax but I don't know whether or not I am responsible for any Capital Gains Tax?

A There will be no immediate liability for Capital Gains Tax (CGT) on any gains. The value of the shares at her date of death will form the basis of any new ongoing liability from your point of view. The way CGT is calculated has been changed and as from last April, you cannot use any indexation allowance. Instead, a tapering system has been introduced where the amount of tax you pay depends on how long the assets are held. Having said this, you still realise assets tax free up to your annual personal allowance, currently £6,800.

Q I am in my company pension scheme and contribute six per cent of my earnings. I am thinking of investing a sum of money to boost my pension. What is the most I can pay in, and am I right in thinking I can catch up for previous years?

A The Revenue allow you to contribute an overall limit of 15 per cent of salary, which may include overtime or P11D benefits, less the amount paid to the main scheme, irrespective of age. In your case, this will be nine per cent of salary. Unfortunately, you are not allowed to mop up unused tax relief from previous years as this only applies to personal pensions. If you are planning on investing lump sums, you may choose to spread your risk by using different Free Standing AVCs each year, and as they are single contributions, the charges should be pretty competitive. In addition, it is important to remember that your company pension scheme will allow you to pay AVCs direct to them and the benefits and options available should be considered. However, it is important to seek independent advice.

Q I have a TESSA maturing this month and am looking at re-investing the £9,000 in another one. I have been offered a variable rate of seven-and-a-half per cent. How does this compare with others available?

A It is not that far off the pace, but there are certainly better rates available. At the moment the leading providers are offering rates in the region of 8.3 per cent or you could opt for a fixed return of up to eight per cent (source Moneyfacts August 1998). It is well worth shopping round.

Q I cashed in an Investment Bond and have been sent a notice saying I have a "chargeable event". Does this mean I have a tax bill to pay, because I was told at the start that it would be tax free?

A The company running the bond will have already paid tax within the fund, so if you are a basic rate or non tax payer, then there is no further Income Tax to pay, nor is there any Capital Gains Tax. However, if you are a higher rate tax payer, then there will be a liability for the difference.

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