Thousands of reminder letters from HMRC have begun to drop on across door steps in the UK. The tax year ended 5/4/17 ie 2016 -2017 self assessment is now due to be completed and the sooner you do it the sooner you can get a refund of income tax or know how much you need to save and pay.

If you already have a personal UTR - unique tax number then the letter may have already arrived or will be on its way. If you do not then you may need to ensure you or your accountant has applied for one to allow for its submission.

Who needs to do a tax return?

You’ll need to have a personal tax return calculated and submitted if, in the last tax year:

• you were self-employed in a previous tax year, or had income in any capacity other than employed ie income from overseas, property, dividends, sale of investment property or assets etc
• you received more than £2,500 in untaxed income, for example from tips or renting your property etc - if you received less than £2,500 you may still have to complete a tax return
• you received income from your savings / investments which was £10,000 or more before tax
• your income from dividends from shares and investment portfolio's was £10,000 or more before tax
• you made profit(s) from selling things like shares, a second home or other assets and need to pay capital gains tax to HMRC
• you were the director of a limited company registered at Companies House - unless it was for a non-profit organisation (limited by guarantee or registered charity) and you have not been paid or received any benefits, like a company car, medical cover, gym, travel, company phone etc
• your income (or your partner’s) was over £50,000 and one of you claimed child benefit in the tax year 16/17
• you have had some income from abroad that you needed to pay tax on - the money need not be exchanged into Pound Sterling or come into the UK for it still to be taxable
• you lived abroad and had a UK income - which more than likely was declared as non-domiciled income and therefore not tax correctly eg rental property and overseas landlord
• your employed income was over £100,000 - eg higher earner with possibly a P11d also
• you were a trustee of a trust and/or registered pension scheme - and therefore like a company director are required to clarify your tax position each year
• you had a P800 form posted to you from HMRC saying you may not have paid enough tax last year - could be due to your tax code not deducting the correct amount of tax
• you fall into a certain category of worker eg religious minister or Lloyd’s underwriter etc
• if you’ve been told to submit a tax return by HMRC - even if it just an email not a letter

If your not sure contact an experienced quality accountant like Tax Affinity Accountants and they would be happy to advise.

By Anni Khan at Tax Affinity Accountants

Tax Affinity Accountants are experts in Tax and Accountancy. Based in Worcester Park and Kingston upon Thames they are considered in the Industry to be expert accountants and tax advisors for small businesses. Helping and supporting self employed people throughout the UK, they regularly help clients grow their business providing tailored advice.

For more information visit www.taxaffinity.com. To read more interesting articles like this visit www.taxaffinity.com/blog. Please feel free to comment and share this with your friends.

Saving Inheritance tax

Inheritance tax can be a tricky issue to deal with for most people but it is generally considered a “voluntary tax” as good tax planning can greatly reduce your inheritance tax liability or erase it completely. Assets exceeding the current inheritance tax threshold of £325,000 (for tax year 13/14) are taxed at 40%. That’s basically half of your excess assets going straight to the government and not to your loved ones. This is why inheritance tax can be extremely costly for those who have not done sufficient planning. Fortunately, there are many exemptions and allowances to utilise which would significantly reduce the amount of inheritance tax you have to pay. Here are a few things to consider that can help you save some inheritance tax:-

Make a Will

Making a will allows you to know that your estate is divided exactly as you want it to be when you die. In the absence of a will, people that you wish to benefit from your estate such as an unmarried partner may not be entitled to any share in the event of intestacy.

What is a gift?

A gift is something of value given unconditionally to someone without any reservations. The biggest asset that most people are in possession of is their house. However, giving away your house yet trying to live in it may allow HMRC to invalidate the gift as genuine and apply tax on it.

Give away sooner

Majority of gifts you make are classified as “potentially exempt transfers”.  If you survive more than seven years after making the gift, no inheritance tax is due on that gift. The amount of tax can be reduced depending on how long you lived after making the gift due to taper relief. Gifts made less than three years before death have no reduction in tax. If the gift was made three to four years before death then tax is reduced by 20%. This increases by 20% for every extra year the donor lives up to seven years where the whole amount is exempt. Therefore it can help relief some financial burden on your death estate if you make gifts sooner rather than later.

Allowances to take advantage of

You can give away gifts worth up to £3,000 in total per person every tax year and these gifts will be exempt from inheritance tax when you pass away. Any unused part of this annual allowance can be carried forward to the following year, but if you don’t use it in that year, the carried-over exemption expires. You can also give up to £5,000 to your children when they marry as a wedding gift. Grandparents can give up to £2,500 and others up to £1,000.

Regular Gifting

Regular gifting can dramatically reduce your inheritance tax bill as long as they meet the following criteria: they must be from your income, they must be regular and they must not decrease the standard of living of the donor.

Be generous on birthdays

Gifts under £250 to any recipient per tax year are exempt from inheritance tax. This means that it might be worth giving your boy a big birthday present even if he’s been naughty as it helps reduce the tax bill.

Gifts to charities and political parties are tax-free

It’s good to know that any donations you make to charities or political parties are inheritance tax free at least.

Getting Tax Advice

While it is generally more economical for you to do things by yourself, if you have sizeable assets then seeking professional tax advice is well worth your money. You may end up paying a few hundred pounds to potentially save over hundreds of thousands of pounds. I’m no bargain hunter but that sounds like a good deal to me.

By Wilson Law at Tax Affinity Accountants

Tax Affinity Accountants are experts in Tax and Accountancy. Based in Kingston upon Thames they are considered in the Finance Industry to be the experts in all types of Tax including Inhertance Tax. Helping and supporting business and individual throughout the UK, they regularly help people with their Inhertance tax issues.

For more information visit www.taxaffinity.com. To read more interesting articles like this visit www.taxaffinity.com/blog. Please feel free to comment and share this with your friends.

Where to invest in the current economic climate- Property versus Shares

There is much debate regarding the merits and fallbacks of investing in property versus shares. Traditionally, investments in property have been seen as more stable whilst stocks are far more volatile. Either way, with the retail banks continuing to offer painfully low interest on savings, coupled with high rates of inflation, investors are looking to achieve higher rates of return on their capital. This article gives an outline of the respective issues surrounding both methods of investment.

Property

Figures for August 2013 show a sharp rise in UK property prices, with the average UK property now worth 3.5% more than a year ago. Economists have pointed towards increased consumer confidence, due to the economic recovery, as a key driver behind rising house prices. Equally, the Government’s Funding for Lending (FLS) scheme and the Help to Buy scheme have gradually improved credit availability.

While rates offered by the banks for your savings remain low, property investment can offer a higher return on your capital. Buy-to-let investment is a very sensible option as it offers two potential returns on your investment. Firstly, assuming you find tenants rapidly, you will enjoy a regular stream of income from rent. And secondly, provided you invest in the right property, you have an appreciating asset that can earn you a healthy profit should you look to sell in the future.

Furthermore, unlike with shares, property allows you to leverage up your investment. This can be simplified as follows:

• Suppose you invest £25,000 in shares. If the share price doubles you will make £25,000 profit.

• Alternatively, suppose you invest £25,000 as a deposit with a buy-to-let mortgage on a property worth £100,000. If the property value doubles then you have made £100,000 profit (minus mortgage interest repayments).

This is a hugely simplistic example which discounts some of the costs of property investment but it does highlight the benefits of leverage in property investment.

Issues with Property

Be careful to choose your location wisely as this will be central to the future value of your property and the rents you can command. Inevitably, the surrounding suburbs of London are extremely popular as they can allow for easy commutes whilst being priced more reasonably than equivalent properties in more central locations. Kingston upon Thames, Ealing, Hackney and Merton are all prime examples of this.

Equally, it is worth considering that this unprecedented period of record low interest rates is bound to come to an end as the economic recovery gathers momentum. If interest rates rise then this will make mortgage repayments a far greater burden on potential property investors.

Shares

Investing in equities is another method for achieving greater return on your capital. The FTSE 100 index has seen a notable recovery since the financial crash around 2008 and now shares are becoming a more appealing investment once again.

However, investment in shares requires more industry-specific knowledge in order to outperform the market and thus it may be advisable to invest in an Investment Fund or an Investment Trust:

• Investment Funds- Investors’ money is pooled and invested by a fund manager who has market expertise and may thus be able to outperform market returns. The idea is to generate a well diversified portfolio to protect against the volatility of equity markets.

• Investment Trusts- Similar to Investment Funds but are actually publicly traded companies that invest shareholders money. Investment Trusts are typically lower cost options compared to Investment Funds but are also riskier.

Tax Implications for Investments in Property and Shares

As with all investments, profits made will be liable for Capital Gains Tax (CGT) so this is worth considering before you invest. However, there are certain methods to avoid CGT. For example, you may wish to put your property or shares into a trust. Equally, stocks and shares ISAs can be used to shelter equity profits from CGT. Also, utilise your full tax-free allowance by splitting your assets with a spouse so as to minimise your tax bill.

Verdict

Overall it is probably fair to say that the optimal investment strategy would involve both property and shares. Bricks and mortar provide a more reliable investment option whilst the riskier option of share investment can reap higher rewards. However, with the FTSE 100 at extremely high historic levels one might argue that property can provide more reliable profit margins.