Capital Gains Tax (CGT) set to rise - Budget set for 22 June
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Tuesday, 18 May 10 - 01:09 PM (GMT) By andrew cazalet in tax tips |
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The new Conservative Liberal government have announced in their coalition document that CGT is very likely to rise in the first budget of the new government. The current historic low rate is 18%.
http://news.bbc.co.uk/1/hi/uk_politics/8686345.stm
" The new government has already said it will seek to raise capital gains tax on non-business investments to 40%..."
What seems less widely known is that there are strategies that can be put in place now to effectively “bank” the benefit of the lower tax rate under the current more generous regime.
If you have investments with inherent capital gains then please do get in touch if you want any help to implement this planning.
End of Year Tax Planning
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Thursday, 25 March 10 - 10:17 AM (GMT) By andrew cazalet in tax tips |
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We are fast approaching the end of the current tax year (5 April 2010) and now is an ideal time to review your financial affairs to ensure that they are as tax efficient as possible. This is particularly important as the new tax year (2010/11) will see already announced tax and NIC increases and possibly a change in Government, which could bring in yet more changes.
Below, I have set out some planning points to consider and I am happy to provide further details by telephone. Any action you do take needs, as always, to take into account the wider effects of the planning as well as any tax advantage gained.
Tax increases and restricted allowances
As you are probably aware, the top rate of income tax will rise to 50% from 6 April 2010. This only applies to individuals with taxable income in excess of £150,000 and the new high charge only affects income over that level. Therefore for many the relevant highest tax rate will remain at 40%.
The tax-free personal allowance stays at £6,475 for 2010/11 and so, unusually, is not going to be increased for the new tax year. Furthermore, for those with income over £100,000 the personal allowance will taper away and an individual with an income above £112,950 will receive no personal allowance at all. Due to the interaction of the thresholds and tax rates, the marginal rate of tax will be as high as 60% for those affected. Therefore, it is important to consider how you currently receive income and whether there are any better methods that would work for you. You may also want to consider accelerating income into this tax year before the tax rises occur. We can discuss this further if that would be of help to you.
Married couples and civil partners
Married couples and civil partners have a few additional planning opportunities. Where possible, you should ensure that you both utilise your personal allowances and tax bands. With the advent of the 50% tax charge and the restricted personal allowance it is worth reviewing the balance of your joint income to see if any tax savings are possible.
Where you have made capital disposals in the current tax year you should also try to ensure that both of your capital gains tax annual exemptions are used effectively (£10,100 each for 2009/10).
If you intend to make capital disposals in the near future it is worth considering whether to spread these over two tax years to make sure that your capital gains tax annual exemption is fully used up against any gains.
The current rate of capital gains tax is 18% (or even 10% if specific reliefs are available). Even though it did not happen as predicted in the recent Budget there has been talk that the rate of capital gains tax may increase to lessen the gap between it and the top rate of income tax. However, there are currently no firm plans being proposed for this to happen. If you are likely to make a significant capital gain in the near future do let me know so I can provide further details on various options that could help reduce your tax bill.
Gift aid donations should be made by the spouse or civil partner who is the highest rate taxpayer as they are able to obtain higher rate tax relief for the payments. Basic rate taxpayers just receive basic rate relief.
Pension contributions
It is possible to make contributions to a personal pension and contribute up to £3,600 per year (gross), without any evidence of earnings. This could therefore be useful for a non-working spouse, children or for someone with only unearned income.
There are also important pension contribution changes coming in from April 2011, which will restrict higher rate relief for some, but are also already taking some effect. Now is an ideal time to review your overall pension strategy.
Tax-favoured investments
Investments in venture capital trusts (VCTs) or the enterprise investment scheme (EIS) can be useful tax planning tools where they are appropriate for your investment strategy. Where qualifying investments are made, you can obtain generous tax relief. However, these are high-risk investments and, as with any form of investment, financial planning advice should be sought from a qualified individual before making any decisions.
Inheritance tax
The inheritance tax (IHT) annual exemption is £3,000 and can be carried forward for one year. Therefore, if you have not made any gifts in the past two tax years you will have an exempt amount of £6,000.
In addition, there are some other useful IHT exemptions to remember, such as the small gifts exemption of £250 to each individual and gifts out of surplus income, which, if they qualify as such, are free from IHT. Where outright gifts are made and the donor survives seven years, the gift would not be subject to IHT in any event.
Tax Refunds on Holidays Lets within Europe
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Wednesday, 10 June 09 - 02:26 PM (GMT) By andrew cazalet in tax tips |
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Do you own property in Europe....Has it made a loss in any tax year since 2006/07?
Did you know that under new HMRC guidelines you may be able to claim these losses against other income often leading to substantial tax refunds?
The conditions are:
• The property must be situated in the European Economic Area
• It must be let furnished not empty
• Available for Letting at least for 140 days a year
• Must be actually let for at least 60 days in the year
• Not normally occupied by any one tenant for more than 31 days at a time.
Further benefits of the relief are as follows:-
• Losses can offset against general income eg salary, self employed profits
• Entrepreneur’s Relief is usually available on the sale of such properties meaning an effective rate of capital gains tax of 10% not 18%
• Roll- over or Hold Over available to defer gain on sale
• Capital Allowances available on equipment used in the property
• Pension contributions can be paid if the property is profit making
• Possibly qualify for Business Property Relief thus exempting the property from IHT on death or gift to others
Deadline
HMRC have said that the cut off date to claim back these losses for 2006/07 is 31 July 2009.
Please get in touch if you need any help.
Would like to help your artiste reduce their tax bill whilst on tour or competing in the UK?
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Tuesday, 17 February 09 - 07:04 PM (GMT) By andrew cazalet in tax tips |
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Under the terms of most UK double tax treaties there is a clause excluding the services of entertainers and sportspeople from the “independent services” provision. This means they are taxable here even if they are not tax resident in the UK and do not have a permanent establishment or place of business here.
The artiste will usually obtain tax credit for the FEU UK deducted through his or her overseas tax return. However under many countries’ domestic tax legislation the tax payer is required to mitigate his or her liability as far as possible otherwise they will only get credit for the tax that was due in the UK not just the possibly higher amount they actually did pay on gross turnover. It is not enough therefore just to pay the tax and expect to get credit for it back in the home country. Relief may be restricted.
I have over ten years experience in this area with major and upcoming artistes and would pleased to help any clients legitimately reduce their UK tax liabilities.
How to obtain tax relief for childcare?
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Tuesday, 14 October 08 - 12:40 PM (GMT) By andrew cazalet in tax tips |
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Childcare Vouchers are popular with those who work with large employers. They provide a tax & National Insurance free way to provide up £2860 per child to each employee. However largely because of the administration and hassle they are less common with smaller owner managed businesses. If you have children, run a business and pay for childcare (not schooling) please read on…
Under these arrangements an employer can establish a Childcare Voucher scheme which allows you to take up to £55.00 per week or £243.00 per month in the form of a Tax & National Insurance free voucher from their employer. This voucher can then be presented to a childcare provider who may apply to the employer for the voucher to be redeemed for cash.
The potential maximum saving for a higher rate taxpayer is £1,195 per year. For an individual who is liable at the basic rate of tax the maximum saving would be £904 per year. There is an additional saving for the employer of up to £373 being the employer’s national insurance that would otherwise be payable if cash were offered instead.
The main conditions of the scheme are as follows:
- The child for whom the voucher is provided must be under 16 and be a child of yours who lives with you and for whom you have parental responsibility.
- The childcare provider has to be registered/ approved with the appropriate authorities. Informal arrangements with relatives are therefore usually excluded unless they can arrange to register. Nannies or au pairs are usually allowed provided they are able to register.
Please be aware that if you are entitled to children's tax credits you are required to notify HM Revenue and Customs that your childcare costs have reduced. This may reduce your entitlement to tax credits.
We have developed a toolkit of documents that enable you to implement the scheme for a fixed sum rather than the % of the voucher usually charged. One flat sum means you only pay once rather than a % each time.
If you have any questions or want to consider implementing a scheme please do get in touch.
Let the Taxman pay for your bike ride to work!
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Wednesday, 12 December 07 - 06:39 PM (GMT) By andrew cazalet in tax tips |
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Under the Cycle To Work scheme an employee is allowed the tax and National Insurance free use of a bicycle for a period agreed between the parties but typically say three to four years.
It would normally be treated as a benefit in kind but in this instance the loan is free of income tax and national insurance. At the end of the term the employee would need to hand back the bike to the employer or more likely purchase it from them.
A purchase price at that point of say 10% or 20% of the original cost would seem possible as the second-hand value of bicycles is of course not very high.
Benefits of Scheme
- The loan is free of income tax and national insurance. This would save each higher rate employee 41% of the market interest charged that would otherwise arise on the loan.
- Often there is a Salary sacrifice arrangement between the employee and employer where the employee agrees to forgo salary over the life of the loan equivalent to the value of the bicycle at purchase.
- Reclaim VAT at 17½% of the cost of the bicycle.
- Capital allowances on the cost of the bicycle. Under present rules (possibly to change soon) this means the company would have been able to claim a tax deduction for 66% of the cost of the bicycle after three years. After six years this figure rises to 90% of the cost. Both this and the VAT saving can be passed onto the employee.
Conditions for the Scheme
Please do get in touch if you want me to help you establish the scheme for your company.
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