2. Introduction & Welcome
• Agenda & housekeeping
• What’s new? Alan Boby
• 2012 for investors Chris Beckett
Head of Quilter Equity Research
• Tax saving opportunities Alan Boby
4. Personal tax rates and allowances
Individuals
• Income tax rate bands:
20% up to £42,475
40% from £42,476 to £150,000
50% above £150,000 – down to 45% in April 2013
• Personal allowance £8,105 - restricted if income >£100k
• Pension payments tax relief capped at £50,000
but can claim unused relief for 3 prior years
• Capital gains tax (CGT) main rate now 28% but
18% for ‘basic rate taxpayers’
• Trust income taxed at 50% – down to 45% in April 2013
5. Income tax bands
2012/13
60%
60%
Tax Percentage
50%
40% 40%
40%
20%
20%
0%
0%
Income in £s
6. Business tax rates and relief
• Capital allowances on plant & machinery – 100% on
first £100,000 down to £25,000 from April 2012
• CGT 10% rate for entrepreneurs on gains of £10m
• NIC rates:
o13.8% for employers
o12%/2% for employees
o 9%/2% for self-employed
• New ‘cash basis’ for businesses with sales <£77k
• Corporation tax main rate down to 24%
7. Income v capital gains
Comparing tax rates
Income tax CGT - basic rate payers
CGT - higher rate payers CGT - entrepreneurs
60
50
Tax Percentage %
40
30
20
10
0
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13
8. Tax relief for business investment
• Enterprise Investment Scheme (EIS) relief:
- investments up to £500,000 pa
- income tax relief at 30%
- deferral of other capital gains
- no capital gains tax on EIS shares
• EIS limit to go up to £1 million pa from 6 April 2012
• New Seed EIS from 6 April 2012:
- investments up to £100,000 pa
- income tax credit at 50%
- tax exemption for other capital gains (up to 28%)
- no capital gains tax on Seed EIS shares
9. Other taxes and reliefs
• Inheritance tax – 20% (lifetime) + 40% rate (death)
o gifts to individuals tax-free after 7 years
o no tax up to £325,000 & business & agricultural reliefs
• Stamp duty land tax (SDLT)
o nil to £125k (residential) & to £150k (other)
o 1% up to £250,000
o 3% > £250,000
o 4% > £500,000
o 5% > £1 million for residential
o 7% > £2 million for residential
12. Tax saving opportunities
• Keeping out of higher income tax bands
• Taking profits out of the business
• Cutting business taxes
• Sharing income or gains
• Using tax shelters & other ways to stay out of tax
• Converting income into gains
13. Keeping out of higher income tax bands
• Keep total annual taxable income below limits:
£42,475
£100,000
£150,000
• Pension tax relief – up to £200,000!
• EIS investments – 30% income tax relief
• Seed EIS – 50% income tax credit
• Gift aid relief on charitable donations
14. Taking profits out of the business
NB: Top income tax rate drops to 45% in 2013!
• Change business accounting date
• Timing of dividends & interest payments
• Timing of bonus payments
15. Cutting business taxes
• Capital allowances – 100% on £25k from April
• Saving employer’s national insurance at 13.8%:
- Review car benefits - 45p/mile for using own car
- Use salary sacrifice for pensions/benefits
• Incorporate to take advantage of lower
corporation tax rates
16. Sharing income or gains
• Put assets into joint names with unequal shares
• Bring spouse/family members into business?*
(NB personal allowances up to £8,105)
• Issue or transfer shares to spouse/family members
to share dividends *
• Incorporate the business into a limited company
* Beware settlement anti-avoidance rules (eg parental
settlements) & draft anti-income shifting law
17. Using tax shelters etc
• Individuals savings accounts (ISAs)
• Pension schemes
• EIS or new Seed EIS
• Leave UK – non-UK tax residence
• Tax planning structures
• Or .....
18. Convert income into capital gains
• Selling the asset or business
- is the tax rate 28%,18% or 10%?
• Transfer to family, trust or pension fund
• Company buy-back of shares
- eg on retirement
• Can entrepreneurs’ relief cut tax rate to 10%?
- check the rules!
19. Summary
1. Refer to our website - www.ellacotts.co.uk
2. Check what tax rates apply to you
3. Consider the tax-saving ideas
4. Take specialist professional advice
21. Ellacotts LLP
• These slides are intended for use in connection with
the presentation given on 22 March 2012. No action
should be taken on the basis of information contained
in these slides or in the presentation without obtaining
professional advice specific to the circumstances.
• No responsibility for the loss arising to any person
acting or refraining from acting as a result of the
material in these slides or presentation can be
accepted by the speakers or by Ellacotts LLP
Copyright 2012
Ellacotts LLP
