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.
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.
This is 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. Let us help you get this right.
High Income Child Benefit Charge is a trap for even those earning at a modest level. 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.
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%!
Let us help you plan for this valuable benefit.
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.
They are facing costs totalling some £50,000 if they do a three year degree in England – but this is not the whole story!
Our advice is to get the day to day budgeting right during their course, Worry about the loan later – it is really just a graduate “tax”.
Graduates won't start repaying the loan until they are in work and earning a reasonable amount.
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!
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!!
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.
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, it can save tears later.
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!
Don’t forget that “rent a room relief” is still available enabling you to earn £7,500 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 £7,500 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 us.