1. Personal Allowance to rise to £10,000 from 6 April 2014
This will help those on low income and clients / contacts who live overseas but remain taxable on UK rental income. Of course this will not benefit those earning above £118,880 for 2013/14 who since 6 April 2010 no longer qualify for the personal allowance and whose tax liability actually goes up due to the consequent reduction in the basic rate band.
2. Changes to tax relief for Childcare
Income tax relief via a new childcare account will be introduced from Autumn 2015 for up to 20% of childcare costs or £6000 per child @ 20% = £1,200. The self employed and non taxpayers will now get some help. However this may mean some losers who are presently claiming per parent at the top rate and use cost-effective childcare voucher providers like that offered by our sister business – DIY Childcare Vouchers – http://www.diychildcarevouchers.co.uk/
3. Increase in Inheritance Tax (IHT) limits for “Non Dom” husbands and wives
Currently if one spouse is not from the UK and is thus non-domiciled only the first £55,000 of capital passing from one spouse to another is exempt from IHT. As previously announced this will increase to the same as the IHT nil rate band – currently £325,000. Non-domiciled spouses will also be able to make an election to be treated as UK domiciled for IHT purposes from April 2013.
4. Capital Gains Tax benefits of the Seed Enterprise Investment scheme to be extended to 5 April 2014
For gains reinvested in the two tax years to 5 April 2014 relief will be available for half the reinvested gain instead of all of the gain as presently.
5. New Employment allowance of £2,000 off payroll costs
Small businesses and charities will be entitled from April 2014 to a reduction of £2000 per year from their Employers Class One National Insurance bill – currently 13.8% of gross pay.
Of course there were many other matters covered in the budget. There are some good summaries from the BBC budget site or on the HMRC site here. Please seek advice before taking action as a result of this note.
The Chancellor of the Exchequer George Osborne stands up next Wednesday 5 December to make his Autumn statement.
Here below are some quick simple ideas you may wish to consider acting on – one possibly before next week and the other two before the end of the current tax year on 5 April 2013
1. Contribute to your Pension pot whilst the current limits still last
It is rumoured that either the current annual limit or the rate at which contributions are relieved may well change next week. Currently the “annual allowance” is £50,000 for which relief is given at your top rate of tax. The calculations can quickly get complicated but it is possible to carry forward unused relief from the previous four years.
If you are in the happy position of having any spare cash you may wish to consider prepaying now some pension contributions you intend to make for the next five years. This will ensure the maximum possible contributions are relieved and at up to 50%.
2. For Additional Rate 50% Taxpayers Defer income beyond 5 April 2013
The additional top rate of tax reduces from 50 to 45% for income received on or after 6 April 2013. Maybe consider deferring the receipt of income until after that date? This would clearly save 5% of the income delayed.
Of course to effect this you have to either be in control of your own business or be sufficiently senior in an organisation to have control over the timing of bonuses and dividends.
3. Accelerate Reliefs while tax relief is available at 50%
Again a simple point but for those with the cash available consider taking reliefs in the current tax year to be relieved at rates up to 50% rather than only 45% from 6 April 2013. This might apply for example to pension contributions, charitable donations and losses.Eg
By way of example John a top rate 50% taxpayer pays £4,000 net to his personal pension plan each year. As he has the money available he decides to pay the next five years contributions now. This means that he writes a cheque for £20,000 and receives an extra £1,250 of tax relief than if he had instead made the contributions on an annual basis as he had planned.
There is more detailed prediction and commentary on the Autumn Statement from PWC here.
Please do contact me on Andrew.email@example.com or 079415 80062 if you want more detailed help on how to implement any of these ideas from a london tax adviser, london tax advisor, london tax consultant – covering West End, Ealing, Mayfair, Knightsbridge, Chiswick, Fulham, Chelsea, Notting Hill, Belgravia, Bayswater, Kensington, Ladbroke Grove, Kingston, Marylebone, Barnes, Putney, Richmond, Wandsworth, Kew, Putney..
For those who prefer (mainly Google!) there is a brief video here which covers the above matters but no more detail than already here. Please feel free to share.
Over on our sister site we had a brief introductory video made. We hope you like it.
We are pleased to announce our sister business has recently released the new childcare vouchers solution – DIY childcare vouchers.
This means you can offer your directors and staff vouchers that enable them to effectively obtain a tax deduction for qualifying childcare. This covers nurseries, childminders, after school clubs as well as registered nannies.
For a one off cost of just £147 our DIY Childcare Vouchers toolkit gives you all the tools you need to save money with Childcare Vouchers.
The DIY Childcare Vouchers toolkit offers
- Tax savings of £933 a year for most taxpayers
- Further saving for employers of up to £401 Employers National Insurance
- Save Hundreds of Pounds compared to traditional providers – Low cost Childcare Voucher solution
- Ideal for SMEs Small / Medium sized businesses
- Implement your own Childcare Voucher scheme in half an hour or less
Please click here to go the website for more information.
Below are several thoughts on tax some but not all related to the tax year end on 5 April 2012.
These comments are by their nature general and any action needs to take into account the wider commercial or family context. This is not investment advice. Please contact me for specific advice relating to your circumstances.
1. Use your Pension limits
Under the new rules from 6 April 2011 the maximum gross contribution per year is £50,000. There is a possibility however to mop up unused relief from the years 2008/09 to 2010/11 provided at least some other contributions were paid in those years.
The pension lifetime allowance reduces on 6 April 2012 from £1.8 million to £1.5 million. It is possible to elect by the end of year to retain the higher limit but this will block further contributions so this needs to reviewed carefully.
2. Accelerate Capital Expenditure in your business before 1 April 2012 for Companies and 6 April 2012 for sole traders / partnerships
The Annual Investment Allowance giving tax relief for 100% of capital expenditure for small businesses reduces from £100,000 to £25,000 in the new year. Consider therefore advancing fixed assets expenditure. It is often overlooked that the relevant date for qualifying expenditure is when the contractual obligation to pay arises rather than when the cash actually moves. Given the change it can often be beneficial to consider changing your business year-end to 31 March 2012.
3. Watch the High Marginal Rates of Tax
The withdrawal of the personal allowance for those with earnings above £100,000 has caught many individuals with lumpy income unaware. The personal allowance of £7,475 for 2011/12 tapers away at a rate of one pound for every extra two pound of income above the limit. If you have any control with your employer when a bonus is paid consider the possible marginal tax rate of up to 60% if your income is in the band between £100,000 to £114,950. Maybe ensure that all charitable contributions by the family are paid by the spouse who is a higher rate taxpayer. Could you consider executing a trust to allocate the income but not the capital to one or other spouse? Pension or gift aid contributions in the marginal rate above are of course very efficient.
4. Use your Inheritance Tax limits
The exemptions available for Inheritance Tax each year are lost if they are not used. The annual exemption is £3,000 and can only be carried forward for one year only. If you have regular income surplus to your annual spending requirements consider documenting and making annual gifts of a regular amount of income.
5. New Generous Tax Relief for investment in new Small Trading Businesses – Seed Enterprise Investment Scheme (SEIS)
The new enhanced EIS scheme starts from 6 April 2012.
- Tax relief of 50% of the amount invested – regardless of the marginal rate of tax at which the individual is taxed.
- Maximum of £100,000 investment per tax year per individual
- Exemption from capital gains tax on sale of the shares.
- Deferral of capital gains tax on any investments rolled over into SEIS shares meaning possible tax relief of up to 78% for 2012/13
- Limit of £150,000 funds a company can raise under the scheme
- Investee company must have been trading less than two years and have net assets less than £200,000
- Maximum shareholding in each company per investor – 30%
- There is clear substantial investment risk for these ventures but as part of a diverse portfolio.
6. Invest efficiently in a Business Property Renovation Allowance (BPRA) partnership with monies you would otherwise have paid in tax
Consider investing in a BPRA limited liability partnership in a hotel or a car park with a pre-arranged tenant.
Invest £100 – financed by cash down of £37 and a limited recourse loan organised by the partnership of £63. The total investment of £100 qualifies for one hundred percent capital allowances.
The deposit is thus covered by the tax refund when your tax return is submitted after 05 April 2012.
Minimum gross investment normally of £100,000.
7. Buy yourself a new smart phone on a company contract – tax exempt under new HMRC guidance
If a limited company provides an employee with a mobile phone on a business contract any private use has been exempt from income tax and national insurance for some time. HMRC have however recently changed their view and accepted that smart phones such as iPhones, Blackberries and android phones also now qualify for the exemption. This is clearly as the primary purpose of such devices is making phone calls rather than as a handheld computer. If tax or national insurance has been paid in the past on this incorrect basis it is possible now to make a back claim for a refund.
Please do get in touch if you want more detail or have any questions how this might apply to you. I am of course happy to help with your tax returns, give tax advice, offer help as a tax consultant/ advisor adviser, give tax advisory services as a tax adviser / accountant covering London and all points west – West End, Ealing, Mayfair, Knightsbridge, Chiswick, Fulham, Chelsea, Notting Hill, Belgravia, Bayswater, Kensington, Ladbroke Grove, Kingston, Marylebone, Barnes, Putney, Richmond, Wandsworth, Kew, Putney.