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Tax planning and the preparation of personal tax returns is an important service which we...
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Tax planning and the preparation of personal tax returns is an important service which we provide using our highly experienced and qualified staff.

In addition to those clients for whom we prepare business accounts, we prepare tax returns for individuals whose tax affairs are a little more complex.

As part of the tax planning process we consider the form of ownership of the asset and the tax-efficiency - which might include income tax, capital gains tax, inheritance tax and stamp duty.

Examples include clients with property, holiday lets and/or large share portfolios. We also work with "older clients" who find they are being required to complete a tax return for the first time.

When doing your tax returns - whatever your legal entity - we now have to contend with over 7000 pages of consolidated tax legislation in addition to about 1000 pages each year for the Budget!!

The few pages you see on your return are therefore just the tip of the iceberg and it is in using our expertise that you can ensure the few brief entries on your return really do comply with those thousands of pages of tax legislation and comply in the most tax efficient way for you.

 

Changes to taxation on dividends

I’ve attempted to set out below how these new rates which are effective from 6 April 2016 will work in a generic sense:


Dividends received by a basic rate taxpayer - if all one’s income above the  Personal Allowance is dividends, one would pay no tax on the first £5,000 of dividend income and then one would pay 7.5% tax on dividends up to the higher rate tax threshold of £43,000. This would give rise to a tax liability of £2,400 in 2016/17 on total dividends of £37,000.
On the same level of dividend income in 2015/16 one would have paid higher rate tax of £2,098, so one would be £302 worse off as far as I can see.


Dividends received by a higher rate taxpayer
- for every £1,000 of dividend over the higher rate threshold there will be a tax liability of £325 in 2016/17, whereas the liability would have been £250 in 2015/16.

I think it’s probably just going to increase the hard work for us poor beleaguered tax advisors without really achieving very much for anyone including HM Treasury!- However we will look at each case as it arises once we get the detailed rules.

August 2015

 

Higher tax allowance

From 6 April 2014 the income tax personal allowance will rise to £10,000 (currently £9,440 for the tax year 2013/14. The saving for basic rate taxpayers will be (£560 x 20%) £112.
The higher rate threshold will increase from £41,450 to £41,865, so that higher rate taxpayers will keep the full benefit of the increased personal allowance and enjoy a reduction of £83 in their higher rate liability.
From April 2015, the standard personal allowance will be increased each year in line with CPI inflation. The higher personal allowances for people born before 6 April 1948 or 6 April 1938 will remain frozen at £10,500 and £10,660 respectively, until they are overtaken by the index-linked standard allowance.

March 2014


New tax relief for married couples

The Government has promised to introduce ‘a transferable tax allowance for married couples’ from the 2015/16 tax year. It will not be an additional allowance, but a facility for one spouse (or civil partner) to transfer up to £1,000 of his or her personal allowance to the other, provided neither spouse is a higher rate taxpayer. There will be no point in making a transfer unless the transferor has insufficient income to use all of his or her personal allowance, and the recipient spouse is a basic rate taxpayer.

 

Child Benefit

The new High Income Child Benefit Charge came into force on 7 January 2013. There is a claw back of benefit once the higher earner earns over £50,000 based on a family unit (clawed back in full by £60,000).  This could apply to you even though the kids are not your own, but your partner’s.

Example

Current rates of benefit

         -     first child £20.30 per week

         -     additional children £13.40 per week

         -     Child Benefit entitlement £1,752 pa

  • Income of higher earner £54,000
  • 40% charge on £1,752 = £700
  • Collected via Self Assessment tax return

It is very important to look at the position if you are considering paying a bonus that will fall in the £50,000 - £60,000 band. For example, if the person has 2 children, the marginal rate of tax on the amount clawed back is 60%, but if the person has 5 children the effective tax rate can be as high as 80%!

June 2013
 

University or Not?

Most students who intend to start University in any given year will have had to make up their minds by the end of April, and how to pay for this higher education is a huge concern.

Patricia Arnold gives annual presentations to 6th formers at Queen Elizabeth High School to try to focus their minds on the facts.

They are facing costs totalling some £50,000 if they do a three year degree in England – but this is not the whole story!

The point Patricia emphasises is that the students need to ensure they get day to day budgeting right to manage during their course, as they are going to need some £4,000 more than the non-means tested assistance available.  Worry about the loan later – it is really just a graduate “tax”.

Once graduates earn more than £21,000 they will be paying a 29% marginal rate of tax. However the marginal rate of tax paid by many of their parents at the start of their careers would have been 35%!

If they learn to budget through their University years, they will be able to budget for this graduate tax once they start working.

Parents: Plan your income to maximise help for your children!

April 2012
 

Student Loans


The first student loans are now coming to their natural end in terms of repayment and anyone who is in the position of repaying the loan needs to look hard at the numbers they are paying and how this is being repaid.  The paperwork provided by HMRC and the Student Loan Company often doesn’t agree and in particular, people who have been paying student loans under self assessment can find that they have overpaid their loan.


If this applies to you, you need to take advice and in order for this advice to be helpful you will need copies of your P60’s or self assessment returns for the years in which the loan has been repaid and copies of the student loan statements.  There can be thousands of pounds involved so it is worthwhile checking this.


In the meantime, think yourself lucky that you can repay your student loan.  Today’s students will not be able to do this so quickly and it is estimated they will be stuck with the costs until they are 52!!
February 2012

 

Equity Release Schemes  

Most of us hope our pensions and life savings will enough to support us in retirement but one in three people plan to raise funds using their home. Equity release schemes unlock value in your house but can be complex and you should seek advice. There are three main types of equity release schemes:-


1. Lifetime Mortgages
Lifetime mortgages let you borrow a lump sum against the value of your property whilst allowing you to stay in your home.  Unlike a typical mortgage, you don’t make regular payments, instead the interest charged is compounded and added to your loan.  The loan and interest is repaid when the house is sold as a result of death, or if you leave for medical reasons, typically when entering a care home.  Some of the schemes will also allow you to pay off the interest each month.


2. Drawdown or “Flexible” Lifetime Mortgage
This is the dominant form of equity release scheme and the leading growth area, making up 61% of the market.  It is identical to a lifetime mortgage scheme, except that rather than just having access to an initial lump sum, the lender also offers a drawdown reserve.  Arranged at the outset, this lets you withdraw smaller amounts at short notice.  You pay interest only on what you borrow, not the full reserve.


3. Home Reversions
Home reversion schemes, which are typically offered only to those over the age of 65, let you sell a percentage of your home to the provider for a lump sum.  The difference between this and a lifetime mortgage is that you are effectively selling a portion of your house rather than borrowing money.  This means that you have certainty over the percentage of your property you will be left owning when you die.  With a lifetime mortgage, the interest can keep rolling up until you owe the entire value of your property, whereas with a reversion plan, you know that if you sell 50% of your property, your estate will always be left with the remaining 50%.
The disadvantage with home reversion plans however, is that you will sell the portion of your home for less than it is worth – 40% of its value for selling a 50% share in the property is not an uncommon figure.  Additionally, it is worth bearing in mind that if the value of your property rises, the equity release provider will take all the upside on their share of the property.
If you would like to find out more, please don’t hesitate to contact us.


February 2012

 

A Good Cause


Charity donations are now a much more useful planning tool than they used to be, particularly for taxpayers in the marginal 45% to 60% tax brackets.
Finance Act 2010 introduced a new definition of a charity, which is a body of persons or trust that:-

  • is established for charitable purposes only,
  • is within the authority of a relevant UK Court or corresponding jurisdiction in the EU,
  • is registered with a charity regulator in the relevant jurisdiction – the Charity Commission for England and Wales, and
  • all managers of the charity are “fit and proper persons”.

 

The change in the definition may well enable you to get some tax benefits from your generosity.
To be a “qualifying donation” for Gift Aid purposes, the payment must: 

  • be a sum of money,
  • not be subject to any condition as to repayment,
  • not be subject to the payroll deduction scheme,
  • be deductible in calculating your income for tax purposes,
  • not be conditional on, or part of an arrangement for the acquisition of property by the charity form you or a connected person.

Whether you are a potential donor or a charity if you would like to find out more, please don’t hesitate to contact us.
April 2012

 

Pre-Nups Really Work
 

You “love him/her to bits” but you don’t want your wider family to suffer if either of you has got it horribly wrong and it all ends in divorce!


There is a landmark case which concluded that property acquired before marriage and inherited wealth acquired during the marriage were not up for grabs however, fairness should be applied and generally there is equality of matrimonial assets.  You cannot leave your husband/wife and kids in penury.


While still not absolutely binding, the Courts are paying more attention to pre-nuptial agreements providing they have been entered into freely and both parties have fully disclosed their financial assets.  This is an opportunity to take your intended into your confidence; you have to disclose your wealth to your spouse before the pre-nup is signed. Be generous! Seek advice and a financial health check before you get married!

18 November 2011

 

Domestic Micro Generation is Tax Free!!


Micro-generation refers to the electricity generation equipment of the smallest capacity, intended for installation in domestic premises. Support for micro-generation includes the Renewables Obligation and Feed-In tariffs. If you install micro-generation equipment in your home but generate electricity in excess of your domestic needs, the income earned from selling the excess to the Grid is not taxable. Tariff rates may be down but this may still make sense, as it could be the difference between selling your house and not!!

November 2011

 

"Rent a Room Relief"

Don’t forget that “rent a room relief” is still available enabling you to earn £4,250 per year free of tax from someone renting part of your home.

In the present climate, we are all looking for ways to stretch our budget and if you have a spare room you may want to consider renting it out. The current Rent a Room scheme enables you to earn £4,250 per year free of tax from someone renting part of your home.

The Rent a Room scheme allows homeowners to receive a small amount of tax free income if they let a furnished room in their only or main home. The £4,250 is allowable on 'gross' income (receipts before expenses). However if income is in excess of this, there are also ways to set tax against income.

If you are facing some financial difficulties or want a bit of extra income to stretch the household budget, a lodger may be a possible solution. For many people this can be a good way to earn money from their home, but it’s always advisable to seek professional advice to help weigh up the pros and cons and how it might affect your overall tax liability, So, if a lodger is the solution to your financial crisis, please come and see me.


October 2010