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. Sole Trader v Limited Company
A difficult question that the self-employed face is whether to trade as a sole trader/partnership or to trade as a limited company. However, the answer isn’t definitive and is dependent on many factors ranging from the type of business you are running to the type of person you are. Whichever one you choose has different implications for tax, legal and financial responsibilities. The aim of this article is to give you an insight to the advantages and disadvantages in terms of tax purposes of being a sole trader/in a partnership or forming your own limited company. Hopefully it will inform you on the structure most beneficial to you. Legality As a sole trader, you are the business. You have full control and ownership of the business and are able to manage it in any way you like. On the contrary, a limited company is its own legal entity. Instead you serve the company as a director of the company and act as a shareholder. In most cases, you are considered as an employee but this status is not automatically granted in terms of Employment Law, the National Minimum Wage or for Tax Credits. Tax – Sole Trader You are subject to income tax on the taxable profits of your business. For the tax year 2013/14, you pay 20% tax on income between £0 - £32,010 and 40% tax on income between £32,010 - £150,000. Income above £150,000 is taxed at 45%. The personal allowance amount for persons aged under 65 is £9,440. You are also required to pay Class 2 & 4 National Insurance contributions (NIC). Class 2 NIC are at a flat rate of £2.70 per week. However, you may not need to pay Class 2 NIC if your earnings are below £5,725 for the whole year. Visit http://www.hmrc.gov.uk/working/intro/class2.htm to see if you may be exempt from paying Class 2 NIC. Class 4 NIC is calculated based on your profits for the year. For 2013/14, you pay 9% on annual profits between £7,755 and £41,450 and then 2% on any amount over that. Any trading losses you incur on your business can be offset against other your income to reduce your tax liabilities. Tax – Limited Company For a limited company, it pays corporation tax on its taxable profits. Company tax rates are lower than the higher rates of income tax. If you are employed under your company and taking a salary, your earnings from that employment are subject to income tax and Class 1 NIC due through PAYE (Pay As You Earn). The amount you pay is dependent on your earnings. Shareholders of the company who are on a higher tax bracket may have to pay higher a higher tax rate on any dividend income they receive. Losses from the company can only be offset against its other income but not against your income as an individual. What does it all mean? Now for most people, the above two paragraphs may have been not only been of little help but confused you further. Here is a scenario that will make things easier to understand and hopefully give you enough information to aid you in that important decision. You have a trading income of £16,000 pre tax and wish to extract all the profits for yourself. As a sole trader, you will be taxed at 20% for any income in excess of your personal allowance. The total tax liability including the Class 2 & 4 NIC amounts approximately to £2,181 (assuming 48 weeks and available personal allowance of £9,440). The tax calculation for a limited company is slightly more complex as you have more flexibility in how you distribute the income. For simplicity sake, you take the minimum annual wage that is not liable for PAYE tax or NIC which is around £7,000. Company profits under £300,000 are taxed at a rate of 20%. Taxable profits is £9,000 and amounts to a corporation tax liability of £1,800. This leaves £7,200 to be distributed as dividend which is taxed at 10% for income below the earnings threshold of £32,010. The total tax paid equates to £2,520. In this scenario, it is marginally better to see that remaining as a sole trader is more beneficial as you pay much less tax. However, calculations may differ depending on the trading income and how much salary you take. The general idea is that as your trading income increases, its becomes more and more beneficial to trade as a limited company than as a sole trader (40% income tax versus 20% corporation tax). Just a Final Note You are better off trading as a sole trader for tax purposes if your annual trading profits are not high. However, many businesses opt to form limited companies for reasons that extend past tax issues. Should the business fail, you will not be personally liable for its debts if you were a limited company. If you plan to sell the business after a few year then limited is again a better choicAlso if you plan to expand the business then getting finance for your business may be easier if you were a limited company. There are many varying circumstances that makes being one more appealing than the other but if you still appear unsure then just contact us and we’ll be sure to offer you tailored expert advice to aid your decision. 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 small business experts. Helping and supporting business throughout the UK, they regularly help new and established businesses with valuable support. 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. BUDGET 2014 HIGHLIGHTS
PERSONAL ALLOWANCE The personal allowance is the amount of income you can receive each year without having to pay tax on it. This amount is to increase to £10,000 for 2014/15 and to £10,500 for 2015/16. The basic rate taxpayer will see a saving of about £112 in 2014-15 and a further £100 in 2015-16 on their annual income tax bill. HIGHER RATE TAX PAYERS The threshold for which individuals pay tax at the higher rate of 40% will increase by 1% for both tax years. ANNUAL INVESTMENT ALLOWANCE For businesses, the annual investment allowance will increase from £250,000 to £500,000 until 31 December 2015. HIGHER ANNUAL SUBSCRIPTION LIMIT FOR INDIVIDUAL SAVINGS ACCOUNTS FROM 1 JULY 2014 The chancellor has announced big changes to the Individual Savings Accounts (ISA). The new policy means that, from July onwards, it will be possible to save up to £15,000 in total. Furthermore, the whole sum could be in cash unlike before where only half of the limit could be saved in cash and the rest in shares. Also, the 10p tax rate for savers will be abolished. CLASS 2 NIC From April 2016, Class 2 National Insurance Contributions (NIC) will be collected through self-assessment. CHILD-CARE HELP Parents paying 80% of childcare costs of up to £10,000 per child, aged up to 12, to a registered provider will get the remaining 20% tax-free from September 2015. NEW TRANSFERABLE TAX ALLOWANCE From April 2015, there will be an introduction to a new transferable tax allowance for married couples and civil partners. PENSION CHANGES All tax restrictions on pensioners' access to their pension pots to be removed, ending the requirement to buy an annuity. The taxable part of pension pot taken as cash on retirement to be charged at normal income tax rate, down from 55%. There is an increase in total pension savings people can take as a lump sum to £30,000 By Wilson Law at Tax Affinity Accountants Tax Affinity Accountants are experts in Tax and Accountancy. Based in Kingston upon Thames they are considered to be small business experts helping and supporting business in the UK. They regularly help new business start up and provide valuable support for new businesses. 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. Properties have always been a relatively safe and sound option for investment. As a landlord, renting out your property can offer an alternative source of income in the form of rent and potentially give a good return on the initial investment through capital appreciation. However, if you’re looking for huge returns over a few days then property investment is unlikely to be your preferred choice. Nonetheless properties have historically been a low risk investment and have provided modest returns over the long term. Here are a few things to consider if you wish to maximise your rental income:
Deducting Allowable Expenses You can reduce the amount of rental income that is taxable by taking advantage deducting allowable expenses. There more common expenses you can deduct are:
The costs should be wholly and exclusively incurred as a result of renting out the property. If a part of the expense meets this condition then that part can be deducted from income. Cost comparisons Saving costs can only have a positive effect as expenses are the only thing eating into your rental income. Try reviewing your costs on an occasional basis (once a quarter) and you may witness bargains that could help you save a lot of money. Service providers tend to offer sizeable discounts to new customers but only have stagnant prices for existing customers. Getting quotes from different companies that offer the same service can sometimes amaze you at how wide the price range can be. Just be sure you don’t jeopardise the quality of services just to save a few pennies. Annual Investment Allowance Expenses of a capital nature are not deductible. You cannot deduct from income the cost of the property you are renting out, expenditure that adds to or improves the property or the cost of renovating a property from a state that cannot be rented out. However, capital spending can be deducted using the Annual Investment Allowance. From 1st January 2013 (until 1st January 2015), you can deduct up to £250,000 a year for many types of capital spending using the Annual Investment Allowance, such as commercial vehicles, business furniture, computers, machinery and tools. It would be beneficial to take advantage of the temporary rise in the Annual Investment Allowance as it is likely to revert back to around the limit of 2012/13 (£25,000) after January 2015. Landlord’s Energy Savings Allowance (LESA) Until April 2015, an allowance of up to £1,500 per let residential property can be claimed for the cost of loft, wall and floor insulation, draft proofing and hot water system insulation. The LESA was introduced to encourage landlords to improve the energy efficiency of let residential properties. These expenditures are usually not deductible from taxable income and are not eligible for capital allowances. Wear and Tear Allowance or Renewals Allowance For fully furnished properties, a wear and tear allowance can be claimed for furnishings such as beds, carpets and appliances. The allowance is 10% of the net rental income (gross rent minus utility bills, service charges and council tax) you receive from these properties. With the renewals allowance, you can claim expenses of any furniture as you replace them. Any money you make from the disposal of the asset must be deducted and the cost of any improvements (e.g. an upgrade from a washing machine to a washer-dryer) Note that you can only claim either the Wear and Tear Allowance or the Renewals Allowance but not both. By Wilson Law at Tax Affinity. Tax Affinity Accountants are considered in the market to be experts in Tax and Accountancy in the UK. Based in Kingston upon Thames they have clients right across the UK as well as Europe, Middle East and North America. 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. Improve the profitability of your small business
Statistics show that around two-thirds of small businesses failed to make a profit last year or increase their profit at all. However, people do not realise how much a small change can impact a business. Making a series of small changes can increase profitability more than making one big change. Here are some suggestions you can take to increase your profit. Revenue and Costs – The Direct and Indirect In basic terms, revenue minus costs equates to profit. So to increase your profit you can either increase your sales or reduce your costs. Many businesses may have little control over the amount of sales they do but all businesses should have control over their costs. Negotiating prices with suppliers can be a key factor to reducing your direct costs. Many businesses tend to stick with one supplier and not negotiate prices but being aware of market prices can increase your bargaining power and potentially save you a lot of money. Costs that could be regularly reviewed in your business include insurance, utilities, mobile/telephone charges and Internet. Ways to decrease your overheads and indirect costs are less obvious compared to direct costs. A good way to lower your indirect costs is to improve your systems. For example, switching from a paper based system to an electronic system to keep important records and manage documents can help reduce your administration costs and minimises the chances for errors. It may be good business practice to review your systems on an annual basis and to seek input from staff from future improvements. Marketing and visibility It can be a very difficult task for small businesses to get their name out and having a small marketing budget doesn’t help either. One thing to keep in mind is not the size of the budget but the effectiveness of your marketing. Understanding your target audience is vital to promoting the awareness of your business. For example, as a local fish and chips shop located near a high school, you can offer a meal deal for students. The sales promotion will help attract one of your key target audiences and possibly increase the reputation of your shop through word of mouth. Also, make sure your advertisements are tailored towards your target audience. Hearing back from 10% of 200 people is better than 1% out of 1000 people. Certifications and accreditations can help put you ahead of your competitors. With the Internet being such a huge platform for communication, it is definitely to your advantage to go online. Try setting up a user friendly company website or use social media sites to increase the awareness of your business. It is a cheap and effective way of promoting your business to prospective customers. Managing your Cash Flow Interests on loans may seem insignificant at one point in time but it quickly accumulates to realisable figures that can put a dent on your profitability. Try keeping a reserve of cash that can be used to cover your current liabilities i.e. short-term loans and interests on long term loans. Having a healthy cash flow can reduce the problems you face if a short-term commitment arises. Key Performance Indicators Analysing key indicators can give light to areas of improvement for a business. Common indicators include actual sales figures against forecasts, costs against budgets, gross profit margin and staff costs. Get advice from your accountant to ensure you’re monitoring the right indicators for your business as staff tends to work towards them whether they are critical to the business or not. The Real Gems of your business In particular to small businesses, every staff member has the opportunity to spread your company’s message. Everyone needs to contribute: whether that is networking on the web, promoting sale offers or greeting customers with a smile, every small thing matters. Get them to be as motivated as you are by encouraging self-development. Reward employees who make an effort to represent the business in and out of work. By Wilson Law at Tax Affinity. Tax Affinity Accountants are considered in the market to be experts in Tax and Accountancy in the UK. Based in Kingston upon Thames they have clients right across the UK as well as Europe, Middle East and North America. 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. Tips to avoid paying too much tax if you’re self employed
According to Which.co.uk, we paid an estimate of £12.6 billion in unnecessary tax in 2012. People who are self-employed or have their own businesses are particularly prone to overpaying tax. But by doing a bit of research and accessing your tax options, you can maximise your income and safeguard your finances for the future. Spreading income tax payments among the family Every individual that is able to work has a personal allowance of £9,440 for the financial year 2013/14. If you are earning over the 20% rate band for income tax, it may be wise to employ a family member to share a part of your workload. Income up to £9,440 would be free of income tax for him or her, and an allowable expense for you. This is especially ideal for any children you have over 16 that can work over the holidays as their wages are also tax deductible. Furthermore, no national insurance is payable if they earn less than £149 per week. Additionally, members earning between £109-148 are entitled to certain state benefits such as building towards the state pension. Using the personal allowance to its maximum Rather than one individual holding the bulk of the income and facing a higher rate of income tax, it is of best interest to arrange the finances in a way that lessens the tax burden. This can be achieved by building up a state pension for your partner and/or make pension payments to build up a retirement pot. These contributions are tax relievable at the marginal rate of the payer. On a further note, £3,600 can be contributed per year irrespective of earnings so consider pensioning for any of your children helping out at the business. Taking advantage of tax free opportunities Use up you and your partner’s cash ISA limit of £5,760. Gift any surplus funds to your partner if he/she is a lower tax payer than you. Be careful of the liquidity position of the business, it may be troubling to recall back the funds. The £100,000 ceiling Try not to exceed earnings of £100,000. For every £2 of income over £100,000, your personal allowance falls by £1. This means that at an income of £118,880 you will have lost all your personal allowance of £9,440. The £9,440 is then taxed at a rate of 20%, and the £18,800 over £100,000 is taxed at a rate of 40%, meaning that your marginal rate of tax on this slice of income is a whopping 60%. You can consider increasing your pension contribution to preserve your personal allowance. Note that the maximum annual allowance is £50,000 but you can use any unused annual allowances dating back three tax years to increase your contribution. Maximising your tax allowances Each person has an annual capital gains tax allowance that can be reached before the gain is taxed. This figure amounts to £10,900 for the financial tax year 2013/2014. With sound financial planning, you can get up to £20,340 tax free each year (£9,440 for personal allowance and £10,900 for Capital Gains Tax). Be well organised and keep good records The deadline for the online tax return is 31st January (31st October for the paper tax return). Failure to commit to the deadline may result in penalties. Keeping your records in an organised manner can make your life a lot easier especially if HMRC decides to investigate. Plan ahead Good forward financial planning can maximise successful tax strategies. That’s why at Tax Affinity Accountants we make sure to sit with all our clients and run through the options for good financial planning. By Wilson Law Tax Affinity Accountants are considered in the market to be experts in Tax and Accountancy in the UK. Based in Kingston upon Thames they have clients right across the UK as well as Europe, Middle East and North America. 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:
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:
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. By Tom Hoadley. To read more interesting articles visit www.taxaffinity.com/blog. Tax Affinity Accountants are expert tax and business accountants based in Kingston upon Thames. They provide a comprehensive range of services to businesses across the UK. To contact them visit www.taxaffinity.com. Tips for Efficient Savings and Investments There are a range of methods for saving and investing your money more effectively. Summarised below are several straightforward ways to obtain tax-free returns and reduce your tax bill. National Savings and Investments National Savings and Investments are backed by the Treasury and thus offer a secure method of saving and investing your money. The tax free savings and investments products currently offered from National Savings and Investments include:
Tax-Free Interest on Savings Interest from your savings in banks and building societies is usually taxed at 20%, but you may be able to register to receive gross (untaxed) interest if your taxable income is within your tax-free allowance. You can also claim back tax paid unnecessarily on savings in the past. ISAs (Individual Savings Accounts) An ISA is a financial product, introduced in the UK in 1999, to allow tax-favoured savings and investment accounts. They can be used to save cash (Cash ISA) or to invest (Stocks and Shares ISA). One can invest a maximum of £11,520 into an ISA in the tax year 2013-14, of which £5,760 may be saved in cash. The remaining sum may be invested in a range of financial products:
No tax is paid on the interest or dividends received from an ISA and profits from investments are exempt from Capital Gains Tax. Junior ISAs Similar to standard ISAs, Junior ISAs offer tax free savings for any child under the age of 18, providing they are not eligible for a Child Trust Fund (CTF) account. The upper limit for a tax free Junior ISA in 2013-14 is £3,720, and once again there is no tax on interest or dividends. However, as with CTFs, the money is locked into the ISA until the child is 18. Child Trust Funds Only eligible for children born between 1st September 2002 and 2nd January 2011, CTF accounts can be paid into by parents, family and friends up to a limit of £3,720 tax free for 2013-14. Once again, the money in the CTF account cannot be accessed until the child is 18 years old. Pension Contributions Taxpayers are encouraged by the government to make contributions to pension schemes by offering tax relief on any such payments. Once you retire, you will ordinarily be able to claim 25% of you pension fund as a tax-free lump sum, and then your pension will be taxed in line with standard income tax rates. Savings in pension schemes are unlimited up to 100% of your earnings each tax year and thus offer an effective method for reducing your tax bill. By Tom Hoadley. To read more interesting and informative articles by this and other writers visit www.taxaffinity.com/blog. Tax Affinity Accountants are experts in Tax and Accountancy for small businesses and help business across the UK and those abroad that have an interest in the UK. Visit www.taxaffinity.com for more details. Please feel free to comment and share this with your friends. Its a question we often get asked - How do you appeal a tax penalty?If you've been unlucky enough that HM Revenue & Customs (HMRC) have imposed a tax penalty on you, a taxpayer then you or your appointed agent (usually accountant) are allowed to lodge an appeal against the penalty.
But the crucial thing is knowing that the grounds upon which to make the appeal will depend on the nature of the penalty and its circumstances. Example: A penalty for late filing of a tax return can be appealed on the grounds that the tax payer had a fair and reasonable excuse for having to file the tax return late. A sample of some of the reasons that are valid are as per below.
And try to remember, while HMRC seem quick to apply penalties they are also fair to review them and normally always offer an opportunity to review all penalty decisions. But if the penalty still applies following the review, the tax payer shouldn't lose heart and can always make an appeal to the First Tier Tax Tribunal, if they feel that their appeal is truly justified. Making an appeal in a Tribunal. Normally this will involve the preparation of 'trail bundle' which is basically a pack of documents that contain copies of all papers that the defendant is going to be relying on in the case and they have to be disclosed together with, if appropriate and possible, any legal case law that applies. Papers: The bundle may contain different stuff and it usually depends on the nature of the case, e.g. if a taxpayer is appealing a late filing penalty because he was ill and unable to submit the return, then he possibly needs only to bring a doctor's official certificate or hospital and medical records showing this to be the case. While in the course of an appeal a taxpayer or their appointed representative will be required to present their case and then present their evidence to the Tribunal, calling any persons as witnesses if they feel it will help their case. Evidence: Simply like all legal cases the quality of evidence is whats important. Each party in the case will have a keen interest to expose the other party's and their evidence or witnesses as an untrue or unreliable to base the decision on. The judge will decide based on these presentations. In some cases an appeal can be lodged to the Upper Tax Tribunal if it is felt that the First Tier Tribunal decision was incorrect. In most cases however it never gets to this point as the vast majority of appeals are handled by HMRC themselves at the earliest stage. Tax Affinity Accountants are experts in Tax and Accounting for businesses and individuals. Based in Kingston upon Thames they cover the whole of the London area with many satisfied clients. If you have any tax appeal requirements please feel to call or visit our website at www.taxaffinity.com. Follow us on twitter @tax_affinity to find more useful hints and tips. No one in the UK likes paying the taxman. So here's how to pay less tax!
Research by professionals claim we’ll collectively gift the taxman £12.6 billion, or £421 per taxpayer, this year. Tax Action reports highlight ten examples of tax wastage, either benefits we’re not claiming or tax breaks we’re not using. Some of the biggest area of wastage in the report highlight income-related tax credits, which include Child Tax Credits, Working Tax Credits and Pension Credits. The public's failing to take advantage of the tax relief available on pension contributions is the second biggest waste, with not using tax relief on charity donations third. Here are the top ten list of biggest tax wastes: List of Tax wastage and their amount of wastage: Income-related Tax Credits: £7.26 billion Tax relief on pension contributions: £2.45 billion Tax relief on charity donations: £997 million Savings on Inheritance Tax: £448 million Making use of ISAs: £403 million Child Benefit: £401 million Avoiding penalties for late filing of tax return: £307 million Savings on Capital Gains Tax: £133 million Making use of Employee Share Schemes: £118 million Income tax and Personal Allowances: £83 million Total: £12.6 billion Source: unbiased.co.uk So it should become clear where you’re paying tax unnecessarily, So to help we at Tac Affinity Accountants are going to show you six ways you can stop wasting your money and pay less tax. 1. ISA Have an ISA One problem with saving money in a standard savings account is that you have to pay tax on any interest you earn on those savings. And with interest rates so low on many savings accounts right now, this really is the last thing we all need. Related how-to guide Cut your tax bill by thousands Tax may be an inevitable fact of life, but there’s no reason to pay more than you have to! So to avoid this, make sure you invest in an ISA. This is a tax-free way of saving and you can invest up to £10,680 in an ISA each tax year. You can invest the full amount in a stocks and shares ISA, or you can split your investment between a cash ISA (up to £5,430) and a stocks and shares ISA. You can also stash tax-free cash for your children by opening a Junior ISA (up to £3,600 during the current tax year) or by saving into an existing Child Trust Fund (the savings limit on these have now been raised to £3,600 a year in line with the Junior ISA limit). We took a look at the top Junior ISAs on the market at the moment inthe article Your child could earn 6% from an ISA. Or you could consider starting a pension for them. Find out more about all these tax-efficient savings options for children in Top tax havens for babies, children and teens. 2. Pension. By using a pension to save for retirement, you’ll also avoid paying tax. That’s because your pension contributions qualify for tax relief. So if you’re a basic rate taxpayer, you’ll qualify for tax relief at a rate of 20%. Meanwhile, higher rate taxpayers qualify for tax relief at a rate of 40% and additional rate taxpayers will get 50%. So pensions are a great way to build up a tax-free nest egg for your retirement. That said, once you start to claim your pension income, you will have to pay income tax. You should note that the amount you can contribute to your pension is now limited to £50,000 a year. 3. Partner If you’re a taxpayer, but your partner isn’t, a great way to save tax is to transfer any income producing assets to his/her name and receive the lower tax rate by using his/her personal allowance. Your personal allowance is the amount of money you can earn before having to pay tax. The list below shows the personal allowance for the current tax year and next: Personal allowances Personal allowance 2011/2012: £7,475 2012/2013: £8,105 Allowance for those aged 65-74 2011/2012: £9,940 2012/2013: £10,500 Allowance for those aged 75+ 2011/2012: £10,090 2012/2013: £10,660 4. Tax Code Your employer uses a tax code to calculate how much tax should be deducted from your pay. But how many of us actually bother to check our tax code to see if it’s correct? Your tax code is made up of a few numbers and a letter. If you multiply the numbers as a whole by ten, that’s how much money you can earn before you start paying tax. The most common number is 747, as for most people it’s only once you earn more than £7,475 that you start paying tax. Meanwhile, the letter refers to your tax status and how that affects the preceding number. The most common letter is L, meaning you qualify for the basic personal allowance. If you check your tax code and you think there’s been a mistake, you need to contact your tax office. In some cases you can claim up to £1,300 of your tax back. 5. Give it away In each tax year, you can gift up to £250 to as many people as you like, completely free of inheritance tax. Just bear in mind you can’t give a larger sum of money and claim exemption for the first £250. You can also give away £3,000 in total each tax year and if you don’t use your full allowance, you can carry it over into the next tax year. However, you can’t combine this £3,000 allowance with a £250 gift to the same person. Wedding or civil partnership ceremony gifts are also exempt from inheritance tax – although there are limits to this:
Gifts to UK charities are also tax-free. So its worth finding out how to cut your tax bill without the effort of complex tax planning. 6. Capital Gains Tax allowance Each of us has a yearly capital gains tax (CGT) allowance (£10,600 in 2011/2012), so only gains above this band will be liable to CGT. In other words, each of us can make profits of £10,600 each tax year from selling assets or investments before we have to pay tax. Any profits made above this level will be subject to tax at 18%, or 28% if you’re a higher-rate taxpayer. So each year, before the tax year end, consider selling assets to use up your allowance and make a tax-free profit. It’s a good idea to spread this over a couple of years to make the most of your allowance. For example, if you sold some shares today and then more on 6 April 2012, you’d be able to take advantage of two years’ CGT allowances totalling £21,200. Don’t forget that children also have a CGT allowance of £10,600, so if they hold an investment they can make tax-free profits up to this level each tax year. Tax Affinity Accountants are experts in tax and accounting. For more interesting articles and help visit www.taxaffinity.com. Please feel free to comment and share this with your friends. |
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