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Walmley Pages Tax Advice

Christmas and New Year is the time for giving – but what are the tax implications?

As this is the ‘Season of Goodwill’ in this month’s tax tips we are focusing on the tax implications of Giving.

Charity Donations

Firstly let’s consider the donations you make to Charities. Many people are aware that if you make a donation to a charity via the gift aid scheme, then the charity will receive an additional payment of basic rate tax from HMRC. But what many people paying higher rates of tax may not realise is that they can also benefit from tax relief on donations.  By declaring their charitable Gift Aid donations, they can claim relief equal to the difference between the higher rate of tax and the basic rate of tax at 20% on the total value of the donation.  So if you donate £100 to a charity, and you are currently paying tax at 40% you can claim additional tax relief which saves £24 tax!

‘Small’ gifts

What about the gifts to family and friends? Well you can make small gifts up to the value of £250 to as many individuals as you like in any one tax year and they will all be exempt from Inheritance Tax when you die.

Annual exemption

You can give away additional gifts worth up to £3,000 in total in each tax year and these gifts will also be exempt from IHT. There is also provision to carry forward the unused part of the £3,000 exemption from last tax year.

Wedding gifts/civil partnership ceremony gifts

If you give cash or gifts or because of a Wedding or civil partnership, then this will be exempt from IHT if it is below the following limits:

Parents –  each up to £5,000

grandparents and great grandparents – each up to £2,500

anyone else – up to £1,000

Regular gifts or payments that are part of your normal expenditure

If you make regular gifts out of your after-tax income, these can also be exempt from Inheritance Tax. These gifts will only qualify if you have enough income left over to maintain your normal lifestyle.

Any other gifts

Gifts in excess of the above exemptions, but which were made more than seven years before the donor dies are free of IHT. However, if you reserve any benefit from a gift – such as continuing to live in a house you have given away- “gift with reservation” rules may apply tax as though your gift had never happened…

 We offer a free 30 minute consultation, so if you would like any additional information regarding the above or any other tax issues concerning you, then please contact us or visit us in our offices in Walmley Village, Sutton Coldfield.

This article appears in Walmley Pages Magazine, a local magazine delivered to homes and businesses in Sutton Coldfield, Walmley, Minworth and surrounding area’s.

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Should you be completing a Tax Return?

Under the self-assessment system, certain taxpayers are liable to complete a Return; if they are a Director of a company, if they are self-employed, have income over £100,000, if their expenses claim exceeds £2,500, or if there is untaxed income in excess of £2,500 or capital gains.  This year there is also a new category of taxpayer required to complete a return – those who are required to pay the High Income Child Benefit charge. This new tax charge is anticipated to affect approximately 1.2 million families where one or both of the couple earns more than £50,000.

If you fall into one of the above criteria, you do need to ensure that you obtain a tax reference and file a tax return for the year ended 5 April 2013 by 31 January 2014.  Failure to file a return on time does create huge penalty issues; a return three months late could result in penalties in excess of £900 even if the person owes no tax!

If you have received a 2012/13 Tax Return, then you have until 31 October 2013 if you want to complete a paper version; after that date you are obliged to file electronically by 31 January 2014.

Common areas where you might need some advice regarding the entries on your Tax Return:-

·         You are self-employed or a director of a limited company.

·         You want to claim for expenditure incurred personally in respect of your employment. This could include your professional subscriptions or for business mileage undertaken in your own car

·         You receive income from property. This could be from a ‘buy-to-let’ property, a holiday home that you let or even a lodger in your own home.

·         You have a variety of investment income sources, such as a managed investment portfolio, and differing rates of tax have been deducted at source.

·         You are a higher rate taxpayer and you regularly make Gift Aid donations or personal pension contributions so wish to claim additional tax relief.

We offer a free 30 minute consultation, so if you would like any additional information regarding the above or any other tax issues concerning you, then please contact us or visit us in our offices in Walmley Village

This article appears in Walmley Pages, a local magazine delivered free to homes in the B76 postcode.


Tax Tips Starting a Business – What Do You Need To Do?

Welcome to the Hill Lillis & Company  Tax Tips.

One of the most challenging things you may do is to set up a new business, our primary advice is “Do what you love, love what you do”. Your business is going to be your        livelihood – you should have a good time doing it, but make sure you get the ground work sorted from the outset; it helps to prevent a whole load of future problems!

Firstly you need to decide how you are going to trade; the main choices are as a sole trader; as a partnership, through a LLP or through an incorporated structure. Each has different tax and accounting consequences and needs to be registered in a different way. Once you have set up the business you will need to notify HM Revenue & Customs:

 

  • A limited company needs to be register for Corporation tax
  • A sole trader or partnership needs to register as self-employed and this will also         include registration for class 2 self-employed national insurance.
  • CIS registration is necessary if you intend to work within the construction industry
  • If you have employees then you will need to set up a payroll system and operate PAYE, advising HMRC as you make payments to your staff.
  • VAT registration is also necessary if your turnover exceeds the relevant thresholds. For certain B2B trades you might wish to consider registering for VAT even if you do not expect to reach these thresholds, particularly if there is a flat rate VAT scheme that can be used to simplify your VAT computations.

 

As well as notifying HMRC there are many other factors you will have to consider for your new business:

 

A Business plan is very useful; it enables you to set out your goals and plan how you will achieve them, particularly how your cash flow will cope.

Your business will probably need a business bank account and you may need to obtain additional start-up funding.

You will probably need to arrange business insurance, this could include public     liability, employee liability, trade insurance, professional indemnity, premises or vehicle insurance.

You will need to ensure you are keeping proper business records.

 

We offer a free 30 minute consultation, so if you would like any additional information regarding the above or any other tax issues concerning you, then please contact us or visit us in our offices in Walmley Village, Sutton Coldfield.

This article appears in Walmley Pages Magazine, delivered free to homes in Sutton Coldfield, postcode B76

 


Child Benefit – will you be liable for extra tax?

Welcome to the Hill Lillis & Company Monthly Tax Tips.

You may not be totally aware of a tax change which comes into force from January 2013. The new rules, which are expected to affect approximately 1.2 million families, will apply to those in receipt of child benefit where the income of one or both partners exceeds £50,000 per annum.  In these circumstances, the partner with the highest income will be liable for ‘The Higher Income Child Benefit Charge’.  This is a tax charge which is computed on a gradual scale, whereby when the higher-paid partner’s income is above £60,000 the child benefit received by the family will be fully re-charged.

We foresee that difficulties are going to arise when there are changes in the family circumstances during a tax year (e.g. separation or divorce) or where there is uncertainty over who is the highest earner (perhaps because one partner receives occasional bonuses). It is worth stressing that the person who is expected to pay the charge is not necessarily the same person who receives the child benefit.

HM Revenue & Customs are investing a great deal of money and staff resources in pursuing this new ‘Tax’ and families could be liable to penalties and surcharges if they do not take the appropriate action to ensure their circumstances are notified when applicable.  This does mean having to register for Self-Assessment and file annual Tax Returns.

If your income is very close to the thresholds, you may wish to consider how you can reduce it for these purposes, perhaps by making additional pension contributions or Gift Aid donations.

Alternatively you may decide it is simpler to elect not to receive child benefit; however if one partner is a non-working carer, what will be the impact on their National Insurance record for future state benefits?

We offer a free 30 minute consultation, so if you would like any additional information regarding the above or any other tax issues concerning you, then please contact us 0121 351 6777 or visit us in our offices in Walmley Village, Walmley, Sutton Coldfield.

This article appears in Walmley Pages Magazine, delivered to over 8,000 homes and businesses, in Walmley and surrounding areas of Sutton Coldfield


PAYE Code numbers and PAYE Reconciliations – Tax Tips

Welcome to the Hill Lillis & Company Tax Tips.

Tax and National Insurance deductions are made at source from most taxpayers in the UK through the PAYE scheme.  Each employee (or pensioner) is allocated a tax code which the employer uses to calculate the deductions to be made. If your affairs are straight forward then your code is likely to be 810L which indicates you are entitled to the basic personal allowances of £ 8,105.

However if your tax affairs are more complex, you code may be very different as HMRC seek to collect the tax due on sources of untaxed income or make other adjustments. Some of the most common adjustments are for the benefits you receive from your employment (such as a company car or private medical insurance), whereas pensioners may see a restriction in respect of the State Retirement pension they receive which is never taxed at source.

Often these adjustments are estimated, based on information supplied in previous tax years, and problems can arise where someone has multiple employments or pensions, so it is understandable that on occasions the tax collected is not always correct. Therefore after each tax year HMRC issue many PAYE reconciliations (on form P800) showing how they have computed the under or over deduction of tax.

Our experience shows that there has been a great deal of distress caused by HMRC unexpectedly issuing  PAYE reconciliations covering  several years’  tax arrears, and we note that often there are errors on these calculations. We recommend you check them carefully, and seek advice if you think there is a problem.

We offer a free 30 minute consultation, so if you would like any additional information regarding the above or any other tax issues concerning you, then please contact us 0121 351 6777 or visit us in our offices in Walmley Village, Sutton Coldfield.

This article features in Walmley Pages Magazine, delivered to residents in

Walmey and surrounding areas of Sutton Coldfield.


Personal Allowances – Tax Tips for Sutton Coldfield Residents

Welcome to the Hill Lillis & Company Tax Tips. As a local accountancy and tax practice we will be providing a short, monthly article outlining tax problem areas and our suggestions on what you can do to resolve the issues.

Everyone with income below £100,000 is entitled to a full personal income tax allowance of £8,105 for the current tax year. However if you are over the age of 65 and your income from all sources is less than £25,400  you can claim an increased allowance of £10,500, and if you are over 75 years old the allowance is increased to £10,660. Any income above these levels is taxable, and at present the tax rates are 20% up to £34,370; 40% up to £150,000 and 50% above that level.

Each person within a family is individually entitled to personal allowances, so it is worthwhile regularly reviewing your situation, so that you  make best use of everyone’s allowances.

If family assets are owned jointly, then the default position is that the income should be declared by the owners equally. However in some circumstances you can make an election to confirm that both the underlying capital and income is shared in different proportions.

So, where there is an inequality between the level of income and tax rates being paid by spouses, you may wish to consider how you allocate assets, perhaps by transferring the assets generating the highest levels of income to the partner who pays the lowest levels of tax.

We offer a free 30 minute consultation, so if you would like any additional information regarding the above or any other tax issues concerning you, then please contact us 0121 351 6777 or visit us in our offices in Walmley Village, Sutton Coldfield.

This article appeared in Walmley Pages Magazine, delivered each month to over 4000 homes in

Walmley and surrounding areas of Sutton Coldfield.