Year End Tax Planning0708


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Year End Tax Planning0708

  1. 1. HERTS FINANCIAL FOCUS TAX PLANNING – FINANCIAL YEAR END Get to the point R eading this you should have already filed your “Everyman is entitled if he Our sole objective is to income tax return for 06/07 and be considering can, to order his affairs so how you can improve your financial strategies before provide you with a that the tax attaching the end of the current financial year. under the appropriate Acts targeted, discreet, and is less than it otherwise Significant changes to Profit Extraction would be.” House of Lords private, better business Capital Gains Tax Salary & bonus or dividend, Lord Tomlin – Duke of IR35 regulations & the new service, focussed on you. Capital gains tax (CGT) is cur- Wellington v Inland pension rules are factors that rently charged at your marginal Revenue Commissioners make the task of extracting rate of income tax (up to 40%), Do you want to work with a profits from your company but the rules are changing from hard to get right. 6 April 2008 with a flat rate of collaborator? Investment Schemes (EIS) Technically, the new pen- 18% being introduced. Taper which are eligible for income sion rules mean that instead of relief for business and non- Do you want insight with practical tax relief at 20% on invest- funding pension savings your- CGT for transferring taxable as- business assets will cease to ex- ments of up to £400,000 a year. solutions? self out of post-national insur- sets into venture capital trusts. ist. So for some there will be Dividends and capitals gains ance contributions (NIC’s) in- They are not Inheritance Tax capital gains tax reductions are also tax-free. As a business Where are the gaps in your Wealth come, your company could free. while for others, particularly asset they can be free of contribute free of NIC’s (with a strategy? business owners, there will be VCT Wealth Warning Inheritance Tax after 2 years. typical saving in the region of increases. 13.8%). However, under pre- Any investment in a Venture EIS Wealth Warning Planning point – under- existing rules, HM Revenue & Capital Trust (VCT) should be EIS investments will generally stand how this will impact on Customs (HMRC) is challeng- viewed as a high risk and long- be equities issued by unquoted the expected proceeds of your ing ‘extraordinary’ contribu- term commitment (i.e. at least trading companies, which are business sale & how this will af- tions and arguing for dis-al- over five years, but plan for a non-readily realisable invest- fect your future living. lowance of tax relief for the seven to ten year timeframe). ments (as defined under the company in circumstances Due to the nature of the un- Planning point – Are you FSA Rules) and for which there where company contributions derlying assets, VCTs are highly maximising use of the CGT Call Ivor, 0 1 7 2 7 8 7 0 6 1 3 , & is a restricted market. It may have previously been at a sig- illiquid. As such investors must Annual Exemption (£9,200 therefore be difficult to deal in arrange to complete our short nificantly lower rate. be aware that they may have 07/08) for you and your part- such EIS Investments or to ob- The position on IR35 con- difficulty, or be unable to re- ner, especially in light of the 10 minute Wealth Strategy tain reliable information about tinues to be controversial, but alise their shares at levels close CGT changes above? It is an their value at any given point Questionnaire. in some cases personal service to that that which reflect the annual allowance and cannot in time with any degree of cer- companies are being dissolved value of the underlying assets. be carried forward and is likely tainty. You should be aware Used specifically for entrepreneurs as 'consultants' become em- The tax incentives available to to be worth more to you this that there may be difficulty in ployees once more. investors exist in order to at- it will seek out gaps that you, your year than next year. selling EIS Investments at a rea- tract investment into an asset Planning point – Taking a sonable price and, in some cir- business or family could fall Tax relief on capital class that warrants high risk salary & bonus or dividend still cumstances; it may be difficult expenditure categorisation. through. requires careful consideration. to sell them at any price. The Capital allowances are the tax A dividend is paid free of NICs, Planning point – Consider value of investments can go We have over 20 years experience deduction your business ob- which would typically cost investing in Enterprise down as well as up. Any EIS tains for depreciation and from industry sectors such as 13.8%, or even up to 23.8% in losses on disposal of assets such combined employer and em- Accountancy, Law, Financial Wealth Warnings as cars & machinery used in ployee contributions. The out- Services, Insurance, Industry, the business. The end of the come can be a considerable tax year and the end of your ac- saving (hence IR35) but there Leisure, International and This article is for general information only and is not counting year will govern can also be an increase in the intended to be advice to any specific person. You are Charitable Organisations. when tax relief can be claimed. value of the shares of your recommended to seek competent professional advice before company, if valuation is ever Planning point – A purchase taking or refraining from taking any action on the basis of As a team we can be a formidable necessary (e.g. for inheritance just before the end of the cur- the contents of this article. Please note all references in this tax). 5 April is your last date partnership. Try us initially for 10 rent accounting year will usu- publication to marriage and spouses should be read as for paying a 2007/08 dividend, ally mean the allowance is including registered same-sex civil partnerships and civil minutes. Then make your mind up. and higher rate tax on that div- available a year earlier than partners. Levels, basis of and relief from taxation are idend will not be due until 31 would have been the case, had subject to change as UK legislation, regulations and January 2009. Kellock Wealth Management a trading style the purchase been made just tax regime are amended from time to time. Past of Trinity House Financial Planning Limited. after the year end. Similarly, Planning point – Consider performance of an investment is no guide to its performance the disposal of an asset, partic- investing in Venture Capital in the future. Investments, or income from them, can go Authorised and Regulated by The Financial ularly a car costing more than Trusts (VCT) which are allow- down as well as up. Risk can be brought about by the Services Authority 439073. Registered in England £12,000, may trigger an earlier able for income tax relief on performance of world markets, interest rates, taxes on income No4740530. Registered address Highland Suite, claim for relief or even an ad- the amount invested at 30% on and capital, and foreign exchange rates. You may not Great Hollanden Business Centre Mill Lane ditional charge to tax. Care up to £300,000 of investments necessarily get back any of the amount you invested. The Underriver Sevenoaks Kent TN15 0SQ. needs to be taken as the date a year. Dividends and capital information contained within this article is only directed at expenditure is incurred is criti- gains are also tax-free but there persons in the United Kingdom. cal to the timing of tax relief. is no longer any deferral of 01727 870613 • WWW.KWM.CC • IVOR@KWM.CC 13
  2. 2. FINANCIAL FOCUS Qualifying Company can fail. overpay tax. what you are really spending 2008 to make your 2007/08 ISA now and what you’d like to investment, or lose it. This Planning point – If you are Inheritance Tax – spend later. Life expectancy has means that as a couple you can married or in a civil partner- 51% increase in receipts increased by 15 years since the make an investment of £14,000 ship and your partner pays no 5 years mid 1970’s. Will you have this year, and a further £14,400 tax, or pays tax at a lower rate enough money in your retire- after 6 April 2008 when the (Comparison of tax receipts than you, consider switching ment and will it last? limit increases to £7,200 each. 2001/02 and 2006/7 (estimate) income producing assets into source HMRC) your partners name to make Planning point – Pension Gifts To Charity & use of their £5,225 nil rate per- contributions based on 07/08 Community Amateur Only 6% of estates are liable to sonal tax allowance and the earnings need to be paid by 5 Sports Club (CASC) inheritance tax (IHT) although £34,600 basic 20% tax band for April 2008. Tax relief will be at families that have a liability to When making such a gift you interest payments. a maximum of 40%, and the inheritance tax is a much are likely to have been asked to Planning point - If you are maximum contribution is an greater figure. make your gift under the Gift employed or are a pensioner, amount equal to your earnings Aid rules. The charity can re- Planning point – The 2007 check your tax code, HMRC es- or the annual limit currently claim currently 22% of your Pre Budget Report introduced timates that 5.7 million tax- £225,000 for 07/08 whichever gift. If you are a higher rate tax changes that provide IHT free payers may not be paying the is less. payer they can receive a fur- estates for the majority, with right amount of tax. Tax codes Planning point – Consider ther 18% if you complete the joint estates (husband/wife or for a particular year will be paying up to £3,600 into a pen- relevant section on your tax re- civil partners) currently valued based on the previous year’s in- sion for a spouse or partner, turn. at £600,000 or less. However if come which could be substan- child, grandchild etc. This is your estate as an individual is tially different from the actual Planning point – It’s now particularly advantageous if the valued at more than £300,000 income received in the coming too late for this years return beneficiary is a non-taxpayer or £600,000 as a couple con- tax year. but ensure you record all your because the contribution is el- sideration needs to be made as This means that the wrong donations ready to benefit your igible for tax relief and there- to how your legacy will be amount of tax is being paid up chosen organisations next year. fore a contribution of £3,600 passed on efficiently & effec- to 22 months before it will be costs the donor only £2,808. tively. IHT is still charged at reclaimed. A continued charge 40% on death less certain re- for a benefit you no longer ISA’s – don't forget the liefs. IHT is still a voluntary tax. have is a regular occurrence. deadline Retirement Planning point – Non-tax- Capital gains and most income payers with interest from a de- in Individual Savings Accounts Have you forecast your future posit account should make sure (ISA’s) are tax-free, and they are spending habits and compared that they have completed form ideal for saving lump sums and them to your expected pen- R85 supplied by the bank or regular amounts. sion? Is there a match or miss building society to allow inter- match? Planning point – With a est to be paid gross, without limit of £7,000 on annual sav- Planning point – Be honest deduction of income tax. This ings, you have until 5 April with yourself and consider is the most common way to 14