Everything you ever needed to know about your Tax Code

A tax code is a little set of numbers and a letter assigned to you by HMRC that appears on your PAYE payslip, which can have a profound impact on your earnings. Its important then, to understand why this is so and how to ensure it is correct. This is what this article aims to achieve, so read on, you may even find out that HMRC owes you money!

First of all, where can you find your Tax Code?

HMRC notice of tax codeThere are usually five sources that provide your tax code. The most obvious one is on your payslip. It will resemble something like “1257L”. Obviously, the code will be representative of your personal tax circumstances.

The second place you’ll find it is in the letter of coding that HMRC issues you by post when your tax code changes.

Third, via your HMRC personal tax account, found at the following link if you wish to register:

Forth, on your end of tax year P60. And Fifth, on your P45 if you change your job.

What is a tax code? Really.

There are two parts to the tax code: the numbers and the letter.

The numbers are there to tell your employer how much tax allowance you are entitled to. This is the amount you can earn before tax is applied at the various tax bands published. Simply multiply the number in the code by 10. So, if your tax code is 1257L, this tells your employer that the first £12,570 of your salary is tax exempt. So, if you earn £30,000 per year, your taxable income is £30,000 - £12,570 = £17,430.

There are various reasons why this number may vary in your particular circumstances and this will be covered later. But for most people with simple tax affairs, “1257L” will be a common tax code through the tax year 2022/2023 as this is the threshold set by the government for the personal tax free allowance.

The letter in the code refers to your personal circumstances and how they affect your personal allowances. For instance:

L - Means an employee entitled to the standard tax-free personal allowance.

0T - Where no personal allowance is available. Perhaps the employee hasn’t submitted a P45 and so there’s no information to calculate a tax code.

BR - For income at the basic rate but used for a second job or pension.

NT - No tax is deducted. Used for occupations that are exempt from PAYE, such as musicians.

W1 or M1 - These are emergency tax codes. They are used to calculate your tax only on what you have paid in the current pay period, not the whole year.

K - If you have this letter in your code, it means you are due deductions maybe because of company benefits, state pension or tax you
owe from previous years and these are greater than your personal allowance. So, for example if your tax code is “K525'' and your income is £30,000, you have a taxable income of £30,000 + £5.250 = £35,250.

There is a much larger list of tax coding letter explanations available on the government’s site here. These detail specific codes for Wales and Scotland too.

If the government sets my tax code, why would I need to check it?

Quite simply, mistakes are made. You may make a mistake in reporting aspects of your salary, pension, expenses, benefits, etc. Only by thoroughly working through your personal tax circumstances, ideally with your employer if you are a PAYE employee, can you be sure your tax code is correct.

The situation can get more complex if you have a second job, as the tax code for that will be different to your main job where your personal tax allowances are usually applied. This is why under some circumstances, it’s a good idea for a tax expert such as TaxAgility to check through your income, expenses and coding to make sure you are paying the correct amount, and if you are due any refunds.

I just received a PAYE coding notice in the post, what does that mean?

Typically, you will receive a notice of tax coding in January or February, to allow time for your employer to update your PAYE ready for the new tax year in April. Saying this, if there are no changes to your code and there is only the uplift to consider for the New Year, HMRC will not send you anything. You could receive a notice of coding at any time if your personal circumstances or the tax rules change, or if HMRC feel there are issues with your tax payments.

This is why it’s really important to check the new coding you receive against what you might expect. If you don’t, you may find yourself having to challenge HMRC and either claim back overpayments or find yourself owing tax. Neither situation is particularly fun.

Note: HMRC will not send you a code via post every year if there are no changes or just the uplift to consider.

Why might my tax code change?

As we mentioned earlier, there are numerous reasons why your tax code may change, these may include:

  • Your tax code has been updated, perhaps because of information you or your employer provided, or the tax rules have changed, as they can do each tax year.
  • You’ve started a new job, but your employer hasn’t received P45 information. This means they cannot calculate your tax payments. HMRC will impose an emergency tax code until this is resolved. If subsequently you find that this means overpayment, you’ll have to claim that back, most likely through your coding, which means your coding may change again until you have reached your regular tax payment band.
  • You receive income from a second job or pension. Where your main job uses up your personal tax allowance, the tax code on your second job will be different.
  • When your income changes, earning more or less can affect the tax you are liable for.
  • Benefits within your job impact coding, so this may change when you begin to receive them or stop receiving them. Benefits include such things as company cars, certain types of expenses, phones, etc.
  • You may be eligible to certain types of state benefits, such as the state pension, widow’s pension, widowed parent’s allowance, bereavement allowance, incapacity benefit, employment and support allowance and carer’s allowance. When these start or stop, your coding will most likely change.

What happens if you’ve paid too much tax?

This can happen, especially if you are moving between jobs, have more than one job, or receive or stop receiving any kind of benefits, state or otherwise.

If you think you may have paid too little tax, you need to let HMRC know as soon as possible. The difference will likely be claimed through your tax coding. However, this is only done for sums up to £3000. More than that and you’ll need to pay them directly. In any case, any tax due will need to be paid fully by 31 January following the end of the tax year in which the income was earned - e.g. if you owe HMRC tax for the 2021/2022 tax year, it needs to be paid in full by January 31st 2023.

If you’ve paid too much tax there is an online tax refund service that can be found here. https://www.gov.uk/claim-tax-refund.

The reasons HMRC cite as possible cause of overpayment are:

  • Pay from a job
  • Job expenses such as working from home, fuel, work clothing or tools
  • A pension
  • A Self-Assessment tax return
  • A redundancy payment
  • UK income if you live abroad
  • Interest from savings or payment protection insurance (PPI)
  • Income from a life or pension annuity
  • Foreign income

Essentially, once complete, they will use the information you provide to perform their own calculations and arrive at a figure, hopefully the same as yours. If they agree, they may issue a cheque or make a payment into your bank account.

I have two jobs and two tax codes, now what?

This also applies if you are receiving a pension as well as working. HMRC will determine which of the two jobs is your main job and use this to apply any personal tax allowances. If you don’t agree with this, you’ll need to contact HMRC and request that your allowances are moved to the other job or the pension if that’s more important to you.

If your primary job uses up all of your tax allowances then your second income employer will most likely be instructed to tax your income at the basic rate or higher rates of tax accordingly. This means that all of this second income will be taxed. This is usually done through the tax codes “BR” and “D0”.

How do expenses from my job affect my tax code?

It’s certainly not uncommon, as an employee, to find yourself having to pay out for things you need in your job. Most of the time, your employer will reimburse you for legitimate expenses and it won’t affect your tax coding.

If you do incur expenses that are not reimbursed by your employer and they are essential to your job, HMRC may include these in your allowance calculation. This might include such expenses as:

  • Traveling costs - those needed to do your job, including food and accommodation. However, traveling to and from work - i.e. the normal cost of computing is considered a private expense and not considered.
  • Professional subscriptions, such as those associated with a professional industry body and that allow you to do your job - e.g. as a lawyer, accountant, surveyor, etc.
  • Clothing, such as safety clothing.
  • You cannot claim for things that your employer may have provided an alternative for and for things that you do not use in your private life.

Claims can be made up to four years of the end of the tax year in which you spent the money. Bear in mind that you will have to keep good records and receipts, as HMRC may challenge the validity of your claim.

If your claim is up to £2,500, you can use form P87. PAYE employees don’t usually have to complete an SA100 Self Assessment Tax Return. However, where you are owed tax through expense claims, you can also choose to submit an SA100 detailing your income and expenses. It’s likely that the amount owed will be paid back through your tax code, either in the current tax year or the next one.

If the amount to be claimed is over £2500, then you will have to use a self-assessment tax return. For those who have not done this before, you’ll first need to register with HMRC.

A full list of allowable expenses can be found on the government site on allowable expense claims here.

Why not let TaxAgility ensure your personal taxation is correct

Most of the time regular employees can most likely work out their tax coding issues through their employer. However, for more complex cases with additional sources of income beyond your day job are concerned or where you may be self-employed. It’s a good idea to let a professional tax advisor assist you.

Mistakes can be costly, as they may represent situations where income from other sources have not been fully taken into account, rendering you liable not just to unpaid taxes, but also penalties too; and these can be substantial.

If in doubt, ask an expert to help. So give us a call today on 020 8108 0090, and find out how we can help.

Tax planning tips for self-employed contractors

Tax Planning Tips for Self-Employed Contractors

Having worked with self-employed contractors across London for many years, we understand that you’ve got a lot on your hands juggling your business operations and financial responsibilities. When it comes to tax planning and reducing your tax obligation legitimately, your busy schedule often means that this is an afterthought and as such can fall by the wayside, leaving you in a difficult position come the end of the financial year.

This is why Tax Agility exists, we’re here to help contractors like yourself maximise your tax returns and increase your contractor business’s profitability. We do this providing tailored advice that suits your business and your industry. In this article, we aim to discuss the top five tax tips for self-employed contractors that you should be aware of with respect to both your day-to-day and long-term operations.

Top 5 tax-planning tips for self-employed contractors

1. Take IR35 seriously

Perhaps the most helpful tip we can give to a self-employed contractor, recognising where you are in relation to HMRC’s IR35 legislation is of the utmost importance at all times. Understanding how to navigate IR35 with respect to your classification and categorisation as a contractor or potentially as a ‘disguised employee’ could mean the difference between a huge increase in tax payable to the government, so taking IR35 seriously is imperative.

On our ‘What does the IR35 legislation mean page, as well as in our ‘What’s IR35? A brief guide to the IR35 legislation’ post, we cover IR35 extensively including what it is, why it was introduced, how it might impact your taxes and how to tell if you’re at risk. The main point is, if HMRC believes you to be operating under IR35, in other words, they consider you as a ‘disguised employee’ rather than a genuine contractor, then you will be required to pay back the underpaid tax or have to pay a penalty and interest. It also means that your current contractor tax planning structure and methodology will need to be re-evaluated.

Getting IR35 right the first time is important because HMRC doesn’t give you the benefit of the doubt, so speak to one of our experienced accountants for contractors if you aren’t sure if you’re inside or outside of IR35.

2. Becoming a Limited Company

Assuming the services that you provide don’t fall inside IR35, incorporating your contractor business as a limited company is an effective way to pay less tax while simultaneously growing your business and boosting its profitability. The main reasons are:

  • With a limited company, you can split your income between salary and dividends. Dividends aren’t subject to National Insurance Contributions and also taxed at a lower rate, resulting in you paying less taxes legitimately.
  • You can claim tax relief on legitimate expenses.

In short, incorporating a limited company is the most popular means of establishing a self-employed contractor business, mainly due to the significant financial benefits it affords the business owner.

Establishing a limited company does have its drawbacks, however, and brings with it a number of responsibilities and administrative necessities that non-company owners wouldn’t normally be required to fulfil. They include accurate record keeping, quarterly submission of accounts and annual returns, as mentioned on our ‘Managing a Limited Company page. The good news is, the teams at Tax Agility can help to alleviate the stress by managing your bookkeeping, payroll, VAT returns, and completing annual returns.

3. Consider the VAT Flat Rate Scheme

The Value Added Tax (VAT) Flat Rate Scheme allows contractors who have an annual turnover of £150,000 or under (excluding VAT) to pay a fixed amount of VAT based on their turnover. This can be beneficial in circumstances where contractors don’t have the time or manpower required to add up every taxable purchase to produce an exact VAT amount, instead paying a fixed rate of VAT to HMRC and keeping the difference between what you charge your customers and what you pay the Government.

As with most of the tips in this list, the VAT Flat Rate Scheme isn’t for everyone, so speaking with your accountant is advised to gauge whether this scheme is suitable for your business structure.

4. Take advantage of the Annual Investment Allowance (AIA)

The AIA, which is currently set at £1,000,000 between 1 January 2019 and 31 December 2020, allows you to deduct the full value of a qualifying item from your contractor profits before tax.

There is a large number of exceptions here, including cars and any item that you previously owned before using it for your contractor work, as well as items given to you or your business (i.e. not specifically purchased).

You can find out more about AIA on this gov.uk page or speak to us if you want to take advantage of this allowance.

5. Submit everything on time

In the same manner that not taking IR35 seriously can make your professional life difficult, not submitting your tax returns on time can also add stress, and even harm your tax planning efforts due to the penalties you’re likely to receive. This is why using a cloud accounting platform and having an experienced accountant working alongside with you are imperative.

With Making Tax Digital now effective for VAT-registered businesses earning above the threshold of £85,000, and soon to be applicable to all businesses regardless of structure, size or industry, transitioning to a cloud accounting platform is an efficient and effective way to streamline your finances and ensure that you provide HMRC and your accountant with all of the necessary data and information required, well in advance of the filing date.

Experienced accountants for contractors

To speak with a professional, specialist contractor accountant to discuss more tax planning tips for self-employed contractors like yourself, contact us today on 020 8108 0090 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.

If you found this helpful, take a look at:

This post is intended to provide information of general interest about current business/ accounting issues. It should not replace professional advice tailored to your specific circumstances.

Tax saving tips

Tax saving tips to maximise your start-up’s potential

Tax saving tipsWhen you’re first starting out in business, it’s essential that you focus as much of your energy as possible on maximising your start-up’s potential. Your time is valuable, and there are better places to spend it than on time-consuming tax issues.

This is why hiring a specialist tax accountant from Tax Agility is so important – we can ensure you’re saving as much money and time as possible, and we also provide you with valuable business information gained from years of experience. Here are some tax-saving tips you can apply to your business.

Know your industry

Knowing your industry inside out is not just good for business, it can also save you money on your taxes. If you keep yourself engaged in what’s going on in your industry, you’ll be the first to know of any new reliefs or allowances approved by HM Revenue and Customs (HMRC). For example, if you’re in the construction industry, knowing how the Construction Industry Scheme (CIS) works is beneficial. If in doubt, check with an accountant specialises in your industry.

Check if you’re eligible for Seed Enterprise Investment Scheme (SEIS)

SEIS is a scheme that offers tax relief to those individual investors that buy shares in new companies. Though you’ll have to give a small chunk of your start-up away in exchange for their investment(s), it can’t hurt to check if you’re eligible. You can receive up to £150,000 of tax-free investment, but unless your company follows the rules laid out on the government web page your investors will not be able to claim the tax relief.

Choose the right business structure

You can start saving on your tax bill in the first month of your start-up’s life if you choose a business structure that’s appropriate to your start-up. Certain structures can allow you to adjust your earnings to avoid certain taxes – for example, if you set yourself up as the director of a limited company, then you can pay yourself in dividends, which you do not have to pay National Insurance Contributions on.

The Making Tax Digital (MTD) scheme is also fast approaching. From 1 April 2019, VAT-registered businesses with a taxable turnover above the VAT threshold of £85,000 are required to use the MTD service to keep records digitally, plus also use software to submit their VAT returns from 1 April 2019. If you haven’t made the switch and chosen a system that can integrate with online accounting easily, then it’s time to talk to an accountant with experience in cloud accounting to find out more.

Work from home

One way to maximise your start-up’s potential when you’re just starting out is to work from home, as you can save money on expensive office rental fees. At the moment, HMRC allows you to claim £4 a week to cover fixed expenses. In addition, you can also claim tax relief for other expenses like telephone calls and electricity for your work area. However, it must be said that you cannot claim things that are used for both private and business, such as rent or broadband access. To find out more about how much household expenses can be reimbursed, visit this EIM01476 page.

Hire an accountant

It can be tempting to try and save money by doing your taxes yourself. However tax laws are complex, and you need a professional to ensure you’re saving as much as possible, within the permitted law. The sooner you hire an accountant, the sooner they can get to work ensuring you’ll only be paying the tax you’re liable to pay.

Chartered accountants for small businesses

At Tax Agility, we are chartered accountants for small businesses including start-ups. One area we specialise in is business tax for small businesses, where we can show you which tax reliefs you can apply for and any expenses you can claim, potentially saving you thousands of pounds worth of tax.

If you’d like to know more about tax saving tips for your start-ups or small business, contact us today on 020 8108 0090 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.

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Money house £10 bills

Buy-to-let: Essential tax advice for new landlords

Money house £10 billsThe glory days of the buy-to-let market are supposedly over, but according to UK Finance, new investors have taken out over five thousand buy-to-let mortgages in February 2018. If you’re considering doing the same, find out what the main BTL taxes are that you’ll deal with.

Purchasing your property

You can choose to buy a property either as an individual, as a joint owner or via a limited company. The tax implications will be different for each scenario, so you should speak to an accountant specialising in landlords to find out which option is the best for you and decide on a course of action appropriate to your situation.

There is a different Stamp Duty Land Tax (SDLT) system in place if you are buying a property that you do not plan to live in, but will choose to let out instead. There are six band rates, with only properties under £40,000 not attracting any SDLT. Anything over this is taxed between 3 to 15 percent.

Renting your property

You’ll need to register with HMRC and send them annual tax returns when renting out your property, otherwise you may face a fine. Tax rules vary for residential properties, furnished holiday lettings and commercial properties, and your tax bracket will determine how much tax you are required to pay. In every case, you’ll need to have a bookkeeping system in place to track your income and expenses.

You’ll have to pay income tax on rental profits, but there are certain expenses you can deduct from the rental income. There is a vast range of allowable expenditures including general maintenance and repair, letting agent fees, insurance, and direct costs of renting a property, which could include phone calls, stationery and advertising. Visit HMRC’s rental income tax guide for more information.

Mortgage interest tax relief

For those who own property as individuals and have taken out a buy-to-let mortgage, it’s important to know that the government has introduced a cut to mortgage interest tax relief. While before April 2017, mortgage interest payments were deductible from a landlord’s taxable income before they calculated their tax bill, buy-to-let investors will now have to pay tax on their full rental income and then claim back a basic tax deduction.

London’s local accountants saving landlords time, money and headaches

Whether you’re a portfolio landlord or letting your first property, managing your finances as a landlord can get complicated pretty fast. Tax Agility’s has experienced accountants to help keep your finances organised and help with landlord tax returns. We pride ourselves on being specialist accountants for landlords, aiming to help you make sense of the various tax implications that affect you. Our services give you access to a team of experts with specialist resources, providing you with a cost-effective solution to your accounting woes.

Call us today on 020 8108 0090 and find out how we operate local to landlords in London.

We’re chartered accountants serving clients in Putney, Wimbledon, Fulham, Richmond, Hammersmith and from our Central London office in Cavendish Square.

Tax Saving Tip for the Self-Employed, Part II

Last week we received good feedback for our article on reducing the tax bill for contractors and self-employed individuals through tax free allowance and not paying your National Insurance once you have reached the retirement age. This is why we want to continue the theme this week and explore other legal and honest ways to reduce your tax bill.

Home expenses

Many contractors and self-employed entrepreneurs start their business from home. Naturally, you are allowed to include a certain proportion of home expenses (electricity, gas, and a percentage of your mortgage or rental cost) as a genuine business expense. There are no hard and fast rules regarding what you can claim as a reasonable deduction as everyone’s arrangements are different. However, the key is to ensure a reasonable argument can be made for the basis for any calculations. For example, it is rather foolish to claim a deduction for 2 to 3 Starbucks coffees per day while you also claim an allowance for being at and working from home 5 to 6 days per week.

Smaller Allowances Add Up

There are many smaller allowances which go unclaimed but they can add up and benefit your overall tax bill. Two examples are deductions for eye test and the approved schemes for using a bicycle as your mode of transport. Another one is claiming millage when you use your car, motorcycle or bicycle on company business. 45p, 25p and 20p are the maximum rates per mile that companies can pay or business owners can recoup without tax being paid for the use of one's own car, motorcycle or bicycle. One exception to this is that National Insurance arises if you exceed a certain number of annual business miles per annum, but realistically this will not be reached unless you are a full time sales rep on the road.

It is also important to note that the Tax Authorities can be particularly picky regarding the distinction between business and personal millage when using your own vehicle for both. It is therefore advisable to keep a mileage log that records of all business journeys taken, then they can be clearly differentiated from miles driven for personal purposes.

At Tax Agility, we always strive to give the best tax advice that is unique to your circumstances. This is why we always offer our first consultation for free to allow us to learn about your business and your personal financial circumstances, so we can create a tax accounting solution that is as unique as you.

Call us now at 020 8780 2349 or complete the enquiry form and we will call you back.

Tax Saving Tip for the Self-Employed

As chartered tax accountants, tax is a topic which we discuss with our clients on a daily basis. In this day and age, almost all of our clients know they can go to the Internet for tax advice, but often what they get is generic information. Case in point: there are plenty of materials on the Internet advising how a self-employed person can reduce their tax bill and most of them usually begins with, “check your tax code…” – but hardly anyone mentions tax free allowances or even how pensioners can be exempt from National Insurance when they become self-employed. This is why we’ve been motivated to write this post, with the aim of highlighting these often overlooked areas:

Tax Free Allowance

A married couple have a tax allowance each and some arrangements can maximise the total benefit of this. Let’s take a common scenario where one spouse is an entrepreneur and the other is staying at home to bring up the children. The stay at home partner could be allocated tasks from their husband or wife’s workload, and be paid from the entrepreneur's business for doing so. This could provide the stay at home partner with an income that is effectively tax free if the income is less than their annual Tax Free Allowance. Similarly, the Entrepreneur can use the payment as a deduction from their taxable income, possibly reducing their tax bill too. This win-win situation is legal, but often overlooked by entrepreneurs and small business owners.

Self-Employed After Pension

We have seen many pensioners going on to set-up a small business which helps to keep them active, mentally and physically. If you fall into this category, i.e. you’re still working beyond the Government’s official pension age, you should cancel any National Insurance payments to HMRC. Continuing to pay into the scheme will not make any difference to the state pension that you are entitled to. However, you do need to make a formal application to HRMC about this. The UK government has been making radical changes to the state pension ages. To find out your current pension age, click here. And, in 2020, the state pension age is to be increased to 66 for both men and women.   

At Tax Agility, we believe in delivering a highly-personalised tax service to our clients. This is why we always offer our first consultation for free to allow us to learn about your business and your personal financial circumstances, so we can create a tax accounting solution that is as unique as you.

Call us now at 020 8780 2349 or complete the enquiry form and we will call you back.

Autumn Statement 2016 edition of Tax Tips & News


Personal allowance and basic rate limit for 2017-18

The personal allowance for 2017-18 will be increased to £11,500 (£11,000 in 2016-17), and the basic rate limit will be increased to £33,500 (£32,000 in 2016-17). The additional rate threshold will remain at £150,000 in 2017-18. It was announced that the allowance will rise to £12,500 by the end of Parliament.

The marriage allowance will rise from £1,100 in 2016-17 to £1,150 in 2017-18.

Blind person's allowance will rise from £2,290 in 2016-17 to £2,320 in 2017-18.

Starting rate for savings

The band of savings income that is subject to the 0% starting rate will remain at its current level of £5,000 for 2017-18.

Dates for 'making good' on benefits-in-kind

As announced at Budget 2016 and following a period of consultation, Finance Bill 2017 will include provisions to ensure an employee who wants to 'make good', on a non-payrolled benefit in kind will have to make the payment to their employer by 6 July in the following tax year. 'Making good' is where the employee makes a payment in return for the benefit-in-kind they receive. This reduces its taxable value. This will have effect from April 2017.

Assets made available without transfer of ownership

Existing legislation is to be clarified to ensure that employees will only be taxed on business assets for the period that the asset is made available for their private use. This will take effect from 6 April 2017.

Termination payments

As announced at Budget 2016, from April 2018 termination payments over £30,000, which are subject to income tax, will also be subject to employer NICs. Following a technical consultation, tax will only be applied to the equivalent of an employee's basic pay if their notice is not worked, making it simpler to apply the new rules. The government will monitor this change and address any further manipulation. The first £30,000 of a termination payment will remain exempt from income tax and National Insurance.

Company car tax bands and rates for 2020-21

To provide stronger incentives for the purchase of ultra-low emissions vehicles (ULEVs), new, lower bands will be introduced for the lowest emitting cars. The appropriate percentage for cars emitting greater than 90g CO2/km will rise by 1 percentage point.

Cars, vans and fuel benefit charges

The company car fuel benefit charge multiplier will be £22,600 for 2017-18 (rising from £22,200 in 2016-17).

The van fuel benefit charge will rise from £598 to £610 for 2017-18.

The van benefit charge will rise from £3,170 to £3,230 for 2017-18.

Life insurance policies

Finance Bill 2017 will contain provisions regarding the disproportionate tax charges that arise in certain circumstances from life insurance policy part-surrenders and part-assignments. This will allow applications to be made to HMRC to have the charge recalculated on a 'just and reasonable' basis. The changes will take effect from 6 April 2017 and are designed to lead to fairer outcomes for policyholders.

NS&I Investment Bond

From Spring 2017, National Savings and Investments (NS&I), the government-backed investment organisation, will offer a new three-year Investment Bond with an indicative rate of 2.2%. The bond will offer the flexibility for investors to save between £100 and £3,000 and will be available to those aged 16 or over.

Personal Portfolio Bonds

As announced at Budget 2016 and following a period of consultation, the government will legislate in Finance Bill 2017 to take a power to amend by regulations the list of assets that life insurance policyholders can invest in without triggering tax anti-avoidance rules. The changes will take effect on Royal Assent of Finance Bill 2017.

ISA, Junior ISA and Child Trust Fund investment limits

The annual subscription limit for Junior ISAs and Child Trust Funds are to rise in line with the Consumer Prices Index (CPI) to £4,128 from 6 April 2017.
As previously announced, the ISA subscription limit will also rise from 6 April 2017, from £15,240 to £20,000.
National Living Wage and National Minimum Wage increases

From April 2017, the National Living Wage (NLW) for those aged 25 and over will increase from £7.20 per hour to £7.50 per hour. The National Minimum Wage (NMW) will also increase from April 2017 as follows:
- for 21 to 24 year olds - from £6.95 per hour to £7.05;

- for 18 to 20 year olds - from £5.55 per hour to £5.60;

- for 16 to 17 year olds - from £4.00 per hour to £4.05;

- for apprentices - from £3.40 per hour to £3.50.
The government announced that £4.3 million is to be spent on helping small businesses to understand the rules, and cracking down on employers who are breaking the law by not paying the minimum wage.

Consultation on reducing money purchase annual allowance

The pension flexibilities introduced in April 2015 gave savers the ability to access their pension savings flexibly, as best suits their needs. Once a person has accessed pension savings flexibly, if they wish to make any further contributions to a defined contribution pension, tax-relieved contributions are restricted to a special money purchase annual allowance (MPAA).
As announced in the Autumn Statement, a consultation has been launched relating to government proposals to reduce the MPAA to £4,000, with effect from April 2017. The consultation will run until 15 February 2017.

Foreign pensions

The tax treatment of foreign pensions is to be more closely aligned with the UK's domestic pension tax regime by bringing foreign pensions and lump sums fully into tax for UK residents, to the same extent as domestic ones. The government will also close specialist pension schemes for those employed abroad ('section 615' schemes) to new saving, extend from five to ten years the taxing rights over recently emigrated non-UK residents' foreign lump sum payments from funds that have had UK tax relief, align the tax treatment of funds transferred between registered pension schemes, and update the eligibility criteria for foreign schemes to qualify as overseas pensions schemes for tax purposes.

Cracking down on tax avoiders and those who help them

A new penalty is to be introduced for those helping someone else to use a tax avoidance scheme. Significant penalties may be imposed where HMRC successfully defeat avoidance schemes. The new penalty will ensure that those who help tax avoiders participate in avoidance schemes also face the consequences. In addition, tax avoiders will not be able to claim as a defence against penalties that relying on non-independent tax advice is taking reasonable care.
The taxation of different forms of remuneration

Employers can choose to remunerate their employees in a range of different ways in addition to a cash salary. The tax system currently treats these different forms of remuneration inconsistently and sometimes more generously. The government will therefore consider how the system could be made fairer between workers carrying out the same work under different arrangements and will look specifically at how the taxation of benefits in kind and expenses could be made fairer and more coherent. Proposed changes in this area are as follows:
- Salary sacrifice - following consultation, the tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017, except for arrangements relating to pensions (including advice), childcare, Cycle to Work and ultra-low emission cars. This will mean that employees swapping salary for benefits will pay the same tax as the vast majority of individuals who buy them out of their post-tax income. Arrangements in place before April 2017 will be protected until April 2018, and arrangements for cars, accommodation and school fees will be protected until April 2021;

- Valuation of benefits in kind - the government is currently reviewing how benefits in kind are valued for tax purposes - a consultation on employer-provided living accommodation, and a call for evidence on the valuation of all other benefits in kind, will be published at Budget 2017;

- Employee business expenses - at Budget 2017, the government will publish a call for evidence on the use of the income tax relief for employees' business expenses, including those that are not reimbursed by their employer.
Legal support

From April 2017, all employees called to give evidence in court will no longer need to pay tax on legal support from their employer. This will help support all employees and ensure fairness in the tax system, as currently only those requiring legal support because of allegations against them can use the tax relief.

Non-domiciled individuals

As previously announced, from April 2017, non-domiciled individuals will be deemed UK-domiciled for tax purposes if they have been UK resident for 15 of the past 20 years, or if they were born in the UK with a UK domicile of origin. Non-domiciled individuals who have a non-UK resident trust set up before they become deemed-domiciled in the UK will not be taxed on income and gains arising outside the UK and retained in the trust.

From April 2017, inheritance tax will be charged on UK residential property when it is held indirectly by a non-domiciled individual through an offshore structure, such as a company or a trust. This closes a loophole that has been used by non-domiciled individuals to avoid paying inheritance tax on their UK residential property.
The government will change the rules for the Business Investment Relief (BIR) scheme from April 2017 to make it easier for non-domiciled individuals who are taxed on the remittance basis to bring offshore money into the UK for the purpose of investing in UK businesses. The government will continue to consider further improvements to the rules for the scheme to attract more capital investment in British businesses by non-domiciled individuals.

Inheritance tax reliefs

From Royal Assent of Finance Bill 2017, inheritance tax relief for donations to political parties will be extended to parties with representatives in the devolved legislatures, as well as parties that have acquired representatives through by-elections. This measure is designed to ensure consistent and fair treatment for all national political parties with elected representatives.
Social Investment Tax Relief (SITR)

From 6 April 2017, the amount of investment social enterprises aged up to 7 years old can raise through SITR will increase to £1.5 million. Other changes will be made to ensure that the scheme is well targeted. Certain activities, including asset leasing and on-lending, will be excluded. Investment in nursing homes and residential care homes will be excluded initially, however the government intends to introduce an accreditation system to allow such investment to qualify for SITR in the future. The limit on full-time equivalent employees will be reduced to 250. The government will undertake a review of SITR within two years of its enlargement.

Offshore funds

UK taxpayers invested in offshore reporting funds pay tax on their share of a fund's reportable income, and capital gains tax (CGT) on any gain on disposal of their shares or units. The government will legislate to ensure that performance fees incurred by such funds, and which are calculated by reference to any increase in the fund's value, are not deductible against reportable income from April 2017 and instead reduce any tax payable on disposal of gains. This equalises the tax treatment between onshore and offshore funds.
Reduction in Universal Credit taper

Under the Universal Credit system, as a person's income increases, their benefit payments are gradually reduced. The taper rate calculates the reduction in benefits as a person's salary increases. Currently, for every £1 earned after tax above an income threshold, a person receiving Universal Credit has their benefit award reduced by 65p and keeps 35p. From April 2017, the taper will be lowered to 63p in the pound, so the claimant will keep 37p for every £1 earned over the income threshold.

National Insurance Contributions

As recommended by the Office of Tax Simplification (OTS), the Class 1 secondary (employer) NIC threshold and the primary (employee) threshold will be aligned from April 2017, meaning that both employees and employers will start paying NICs on weekly earnings above £157.

As announced at Budget 2016, Class 2 NICs will be abolished from April 2018, simplifying National Insurance for the self-employed. The Autumn Statement confirmed that, following the abolition of Class 2 NICs, self-employed contributory benefit entitlement will be accessed through Class 3 and Class 4 NICs. All self-employed women will continue to be able to access the standard rate of Maternity Allowance. Self-employed people with profits below the Small Profits Limit will be able to access Contributory Employment and Support Allowance through Class 3 NICs. There will be provision to support self-employed individuals with low profits during the transition.

For 2017-18, Class 2 NICs will be payable at the weekly rate of £2.85 (rising from £2.80) above the small profits threshold of £6,025 per year (rising from £5,965 in 2016-17).
Class 3 voluntary contributions will rise from £14.10 to £14.25 per week for 2017-18.

For 2017-18, the lower profits limit for Class 4 NICs will be £8,164 and the upper profits limit will be £45,000. Contributions remain at 9% between the two thresholds and at 2% above the upper profits limit.


Simplifying PSAs

As announced at Budget 2016 and following a period of consultation, Finance Bill 2017 will include provisions to simplify the process for applying for and agreeing the Pay as You Earn Settlement Agreement (PSA) process. Broadly, a PSA allows an employer to make one annual payment to cover all the tax and National Insurance due on small or irregular taxable expenses or benefits for employees. Further details will be published in due course. The changes will have effect in relation to agreements for the 2018-2019 tax year and subsequent tax years.
Capital allowances: first-year allowance for electric charge-points

From 23 November 2016, businesses will be able to claim a 100% first-year allowance (FYA) in relation to qualifying expenditure incurred on the acquisition of new and unused electric charge-points. The allowance will be available until 31 March 2019 for corporation tax purposes and 5 April 2019 for income tax purposes.

The measure complements the 100% FYA for cars with low carbon dioxide (CO2) emissions, and the 100% FYA for cars poweredby natural gas, biogas and hydrogen.

Employee shareholder status

The income tax reliefs and capital gains tax exemption will no longer be available with effect from 1 December 2016 on any shares acquired in consideration of an employee shareholder agreement entered into on or after that date. Any individual who has received independent advice regarding entering into an employee shareholder agreement before the 23 November 2016 will have the opportunity to do so before 1 December (but not later) and still receive the income and CGT tax advantages that were known to be available at the time the individual received the advice. The effective date is to be the 2 December where independent legal advice is received on 23 November prior to 1.30pm. Corporation tax reliefs for the employer company are not affected by this change.

New tax allowance for property and trading income

As announced at Budget 2016, the government will create two new income tax allowances of £1,000 each, for trading and property income. Individuals with trading income or property income below the level of the allowance will no longer need to declare or pay tax on that income. The trading income allowance will now also apply to certain miscellaneous income from providing assets or services.

Expanding the museums and galleries tax relief

The new museums and galleries tax relief is to be expanded to include permanent exhibitions. The new relief, which starts in April 2017, was originally only intended to be available for temporary and touring exhibitions. The rates of relief will be set at 20% for non-touring exhibitions and 25% for touring exhibitions. The relief will be capped at £500,000 of qualifying expenditure per exhibition. The relief will expire in April 2022 if not renewed. In 2020, the government will review the tax relief and set out plans beyond 2022.

Tax deductibility of corporate interest expense

Following recent consultation, the government will introduce rules that limit the tax deductions that large groups can claim for their UK interest expenses from April 2017. These rules will limit deductions where a group has net interest expenses of more than £2 million, net interest expenses exceed 30% of UK taxable earnings and the group's net interest to earnings ratio in the UK exceeds that of the worldwide group. The provisions proposed to protect investment in public benefit infrastructure are also to be widened. Banking and insurance groups will be subject to the rules in the same way as groups in other industry sectors.

Reform of loss relief

Following consultation, the government will legislate for reforms announced at Budget 2016 that will restrict the amount of profit that can be offset by carried-forward losses to 50% from April 2017, while allowing greater flexibility over the types of profit that can be relieved by losses incurred after that date. The restriction will be subject to a £5 million allowance for each standalone company or group.
In implementing the reforms the government will take steps to address unintended consequences and simplify the administration of the new rules. The amount of profit that banks can offset with losses incurred prior to April 2015 will continue to be restricted to 25% in recognition of the exceptional nature and scale of losses in the sector.

Bringing non-resident companies' UK income into the corporation tax regime

The government is considering bringing all non-resident companies receiving taxable income from the UK into the corporation tax regime. At Budget 2017, the government will consult on the case and options for implementing this change. The government wants to deliver equal tax treatment to ensure that all companies are subject to the rules which apply generally for the purposes of corporation tax, including the limitation of corporate interest expense deductibility and loss relief rules.

Substantial Shareholding Exemption (SSE) reform

Following consultation, the government will make changes to simplify the rules, remove the investing requirement within the SSE and provide a more comprehensive exemption for companies owned by qualifying institutional investors. The changes will take effect from April 2017.

Authorised investment funds: dividend distributions to corporate investors

The rules on the taxation of dividend distributions to corporate investors are to be modernised in a way which allows exempt investors, such as pension funds, to obtain credit for tax paid by authorised investment funds. Proposals and draft legislation will be published in early 2017.

Northern Ireland corporation tax

The government will amend the Northern Ireland corporation tax regime in Finance Bill 2017 to give all small and medium sized enterprises (SMEs) trading in Northern Ireland the potential to benefit. Other amendments will minimise the risk of abuse and ensure the regime is prepared for commencement if the Northern Ireland Executive demonstrates its finances are on a sustainable footing.

Corporation tax deduction for contributions to grassroots sport

As announced at Autumn Statement 2015 and following consultation, in Finance Bill 2017 the government will expand the circumstances in which companies can get corporation tax deductions for contributions to grassroots sports from 1 April 2017.

Patent Box rules

The government will legislate in Finance Bill 2017 to add specific provisions to the Patent Box rules, covering the case where Research and Development (R&D) is undertaken collaboratively by two or more companies under a 'cost sharing arrangement'. The provisions ensure that such companies are neither penalised nor able to gain an advantage under these rules by organising their R&D in this way. This will have effect for accounting periods commencing on or after 1 April 2017.

Authorised contractual schemes: reducing tax complexity for investors in co-ownership authorised contractual schemes

As announced at Budget 2016 and following a period of consultation, Finance Bill 2017 will include legislation (to be supported by secondary legislation) to clarify the rules on capital allowances, chargeable gains and investments by co-ownership authorised contractual schemes (CoACS) in offshore funds, as well as information requirements on the operators of CoACS.

Off-payroll working rules

Following consultation, the government will reform the off-payroll working rules in the public sector from April 2017 by moving responsibility for operating them, and paying the correct tax, to the body paying the worker's company. This reform aims to tackle high levels of non-compliance with the current rules and means that those working in a similar way to employees in the public sector will pay the same taxes as employees. In response to feedback during the consultation, the 5% tax-free allowance will be removed for those working in the public sector, reflecting the fact that workers no longer bear the administrative burden of deciding whether the rules apply.

Bank levy reform

As announced at Summer Budget 2015, the bank levy charge will be restricted to UK balance sheet liabilities from 1 January 2021. Following consultation, the government confirms that there will be an exemption for certain UK liabilities relating to the funding of non-UK companies and an exemption for UK liabilities relating to the funding of non-UK branches. Details will be set out in the government's response to the consultation, with the intention of legislating in Finance Bill 2017-18. The government will continue to consider the balance between revenue and competitiveness with regard to bank taxation, taking into account the implications of the UK leaving the EU.

Hybrids and other mismatches

The government will legislate in Finance Bill 2017 to make minor changes to ensure that the hybrid and other mismatches legislation works as intended. The changes will have effect from 1 January 2017.

Annual Tax on Enveloped Dwellings

The annual charges for the Annual Tax on Enveloped Dwellings (ATED) will rise in line with inflation for the 2017-2018 chargeable period.
Clarification of tax treatment for partnerships

Following consultation, the government will legislate to clarify and improve certain aspects of partnership taxation to ensure profit allocations to partners are fairly calculated for tax purposes. Draft legislation will be published shortly for technical consultation.

Tax-advantaged venture capital schemes

The rules for the tax-advantaged venture capital schemes (Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trusts (VCTs)) are being amended to:
- clarify the EIS and SEIS rules for share conversion rights, for shares issued on or after 5 December 2016;

- provide additional flexibility for follow-on investments made by VCTs in companies with certain group structures to align with EIS provisions, for investments made on or after 6 April 2017; and

- introduce a power to enable VCT regulations to be made in relation to certain shares for share exchanges to provide greater certainty to VCTs.
In addition, a consultation will be carried out into options to streamline and prioritise the advance assurance service.

The government will not be introducing flexibility for replacement capital within the tax-advantaged venture capital schemes at this time, and will review this over the longer term.

Gift Aid digital

As announced at Budget 2016, intermediaries are to be given a greater role in administering Gift Aid, with the aim of simplifying the Gift Aid process for donors making digital donations.


Tackling aggressive abuse of the VAT Flat Rate Scheme

A new 16.5% VAT flat rate for businesses with limited costs will take effect from 1 April 2017.

The VAT Flat Rate Scheme (FRS) is a simplified accounting scheme for small businesses. Currently businesses determine which flat rate percentage to use by reference to their trade sector. From 1 April 2017, FRS businesses must also determine whether they meet the definition of a limited cost trader, which will be included in new legislation.

Businesses using the scheme, or thinking of joining the scheme, will need to decide whether they are a limited cost trader. For some businesses - for example, those who purchase no goods, or who make significant purchases of goods - this will be obvious. Other businesses will need to complete a simple test, using information they already hold, to work out whether they should use the new 16.5% rate.

Businesses using the FRS will be expected to ensure that, for each accounting period, they use the appropriate flat rate percentage.

A limited cost trader will be defined as one whose VAT inclusive expenditure on goods is either:
- less than 2% of their VAT inclusive turnover in a prescribed accounting period;

- greater than 2% of their VAT inclusive turnover but less than £1000 per annum if the prescribed accounting period is one year (if it is not one year, the figure is the relevant proportion of £1000).
Goods, for the purposes of this measure, must be used exclusively for the purpose of the business but exclude the following items:
- capital expenditure;

- food or drink for consumption by the flat rate business or its employees;

- vehicles, vehicle parts and fuel (except where the business is one that carries out transport services - for example a taxi business - and uses its own or a leased vehicle to carry out those services).
These exclusions are part of the test to prevent traders buying either low value everyday items or one off purchases in order to inflate their costs beyond 2%.

Updating the VAT Avoidance Disclosure Regime

As announced at Budget 2016 and following consultation, legislation will be introduced in Finance Bill 2017 to strengthen the regime for disclosure of avoidance of indirect tax. Provision will be made to make scheme promoters primarily responsible for disclosing schemes to HMRC and the scope of the regime will be extended to include all indirect taxes. This will have effect from 1 September 2017.

Penalty for participating in VAT fraud

As announced at Budget 2016, Finance Bill 2017 will introduce a new and more effective penalty for participating in VAT fraud. It will be applied to businesses and company officers when they knew or should have known that their transactions were connected with VAT fraud. The penalty will improve the application of penalties to those facilitating orchestrated VAT fraud. The new penalty will be a fixed rate penalty of 30% for participants in VAT fraud. This will be implemented following Royal Assent of the Finance Bill 2017.

Power to examine and take account of goods at any place

The government will introduce legislation in Finance Bill 2017 to extend the current customs and excise powers of inspection. This will amend the Customs and Excise Management Act 1979 and enable officers to examine goods away from approved premises such as airports and ports, to search goods liable for forfeiture and open or unpack any container. This will take effect from Royal Assent of the Finance Bill 2017.

Retail Export Scheme

The government is to consult on VAT grouping and provide funding with a view to digitising fully the Retail Export Scheme to reduce the administrative burden to travellers.

Tackling exploitation of the VAT relief on adapted cars for wheelchair users

The government is to clarify the application of the VAT zero-rating for adapted motor vehicles to stop the abuse of this legislation, while continuing to provide help for disabled wheelchair users.

Indirect taxes

Landfill tax

As announced at Budget 2016, the definition of a taxable disposal for landfill tax purposes is to be amended in order to bring greater clarity and certainty. This will come into effect after Royal Assent of Finance Bill 2017, on a day to be appointed by Treasury Order.

Insurance Premium Tax increase

Insurance Premium Tax (IPT) will increase from 10% to 12% from 1 June 2017. IPT is a tax on insurers and it is up to them whether and how to pass on costs to customers.

Air Passenger Duty (APD): regional review

A summary of responses is to be published shortly relating to a recent consultation on how the government can support regional airports in England from the potential effects of APD devolution. Given the strong interaction with EU law, the government does not intend to take specific measures now, but intends to review this area again after the UK has exited from the EU.

Freeplays in Remote Gaming Duty

Following the consultation announced at Budget 2016, the government will legislate in Finance Bill 2017 to bring the tax treatment of freeplays for remote gaming more in line with the treatment for free bets under General Betting Duty. The changes will take effect for accounting periods beginning on or after 1 August 2017.

Tobacco Illicit Trade Protocol: licensing of tobacco machinery and the supply chain

Following consultation the government will legislate in Finance Bill 2017 to introduce a licensing scheme for tobacco machinery to allow officials to quickly determine whether machines are being held legally. Applications for licences will be accepted from January 2018 and the scheme will come into force on 1 April 2018.

Implementation of the Fulfilment House Due Diligence Scheme

As announced at Budget 2016 and following a consultation on the scope and design of the scheme, the government will legislate in Finance Bill 2017 to introduce a new Fulfilment House Due Diligence Scheme in 2018. This will ensure that fulfilment houses play their part in tackling VAT abuse by some overseas businesses selling goods via online marketplaces. The scheme will open for registration in April 2018.

Soft Drinks Industry Levy

Draft legislation for the Soft Drinks Industry Levy will be published on 5 December 2016.

Tax administration

Tax evasion and compliance

Emerging insolvency risk

HMRC intend to develop their ability to identify emerging insolvency risk, using external analytical expertise. HMRC will use this information to tailor their debt collection activity, improve customer service and provide support to struggling businesses.

Offshore tax evasion

A new legal requirement is to be introduced to correct a past failure to pay UK tax on offshore interests within a defined period of time, with new sanctions for those who fail to do so.

Requirement to register offshore structures

The government intends to consult on a new legal requirement for intermediaries arranging complex structures for clients holding money offshore to notify HMRC of the structures and the related client lists.

Hidden economy and money service businesses

The government will legislate to extend HMRC's data-gathering powers to money service businesses in order to identify those operating in the hidden economy.

Tackling the hidden economy

Following consultation, the government will consider the case for making access to licences or services for businesses conditional on them being registered for tax. It will also develop proposals to strengthen sanctions for those who repeatedly and deliberately participate in the hidden economy. Further details will be announced in Budget 2017.

Tax administration

Making Tax Digital

In January 2017, the government will publish its response to the Making Tax Digital consultations and provisions to implement the previously announced changes.

Tax Enquiries: Closure Rules

The government will legislate to provide HMRC and customers earlier certainty on individual matters in large, high risk and complex tax enquiries.

Tax Avoidance

Disguised remuneration schemes

Budget 2016 announced changes to tackle use of disguised remuneration schemes by employers and employees. The government will now extend the scope of these changes to tackle the use of disguised remuneration avoidance schemes by the self-employed. Further, the government will take steps to make it less attractive for employers to use disguised remuneration avoidance schemes, by denying tax relief for an employer's contributions to disguised remuneration schemes unless tax and National Insurance are paid within a specified period.

HMRC counter avoidance

The government is investing further in HMRC to increase its activity on countering avoidance and taking cases forward for litigation, which is expected to bring forward over £450 million in scored revenue by 2021-22.

Ten Inheritance Tax (IHT) Mistakes: And How to Avoid Them

If you’ve been reading our recent article series on inheritance tax (IHT) you’ll know the importance of planning for IHT in advance, and what forms your personal representative will need to fill in after your death.

Here we’re going to put to you a number of mistakes that it’s easy to make with regard to IHT, along with our own thoughts on how you can avoid them. Some of these mistakes are things you should look out for in the future, while others you may already be falling victim to. Once you’ve read through this list twice, take a look take a look at this other great list from The Times.

Not Planning in Advance

49825142 - tax time design, vector illustration graphicIt seems obvious, but this is where it all begins. If you don’t plan for the fallout of IHT in advance you could be throwing away thousands (maybe even tens of thousands) of pounds that could have otherwise benefited your beneficiaries. It’s never too early to start planning.

Improper Planning of Pension Funds

Your pension fund(s) can be passed on to your dependants (spouse, children, step-children, and grandchildren) IHT free. If it’s paid to your estate after your death, or to non-dependents, it will be liable to IHT.

Not Writing Life Insurance Policies in Trust

If a life insurance policy is written into trust, on your death the proceeds from the policy can be paid directly to your beneficiaries instead of to your estate, thus its value won’t add to the value of your estate.

Avoiding Generational Planning

Talking about money, inheritance, and Wills with your family is never easy. But avoiding these conversations may be an even bigger mistake when it comes to IHT, as generational planning with regard to wealth creation and preservation can save your estate thousands of pounds.

Having an Outdated Will

Your Will is outdated if, among other things, any of the beneficiaries have died, any notable assets no longer belong to you, or it refers to your ‘spouse’ but you have since divorced. Make an effort to update your Will regularly.

Trying to Avoid IHT by Living Abroad

Living abroad doesn’t necessarily mean your estate is exempt from IHT upon your death, especially if you wish to be buried in the UK. If you’re currently living abroad ask a UK-based accountant about your specific situation.

Having Low Estate Liquidity

Having low estate liquidity means you don’t have enough (or much) cash available at your death to cover IHT, without assets needing to be sold to cover this bill. Consider taking out life insurance to help overcome any deficit.

Gifts Made With Reservation

If you’ve given a gift with reservation in the past this may come back to bite your estate after your death. One of the best examples of this is gifting your home to your children, then continuing to live in it rent free.

Losing the Family Home

This may not be as much of an issue in upcoming tax years’ as an increase to the current IHT allowance of £175,000 between now and 2020, commonly known as a family home allowance, will work to ensure that all family homes £1m and below (two spousal allowances of £500,000 each) can be passed down IHT free.

Not Speaking with a Professional

Last but not least, when it comes to IHT one of the biggest mistakes you can make is not speaking with a professional sooner! Here at Tax Agility our professional accountants are experienced in everything related to IHT; they’re here to save you money.

Experienced Inheritance Tax Accountants

To speak with a professional accountant to discuss more ways you can maximise the value of your estate with inheritance tax planning, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.

Inheritance Tax (IHT) Guide to Completing Forms

33873157 - inheritance. people divide the house in half. vector illustrationWhen you’re acting as a personal representative for the estate of a deceased person (often a spouse, parent, or older relative) you can save yourself a lot of time by using this short guide that explains what forms you’ll need to complete, depending on your unique situation.

In this capacity you’ll be known as the executor if you’re working with a valid Will, or an administrator if the deceased person had no Will, or their Will is deemed invalid.

Grant of Representation

The Grant of Representation is a certificate with the names of the personal representative(s) of the case, along with a document that you, as a personal representative, are using as evidence of your entitlement to act as the executor/administrator of the deceased person’s estate.

Which Inheritance Tax (IHT) Forms?

The number of forms you’ll have to fill in as the estate’s executor/administrator will depend entirely on whether or not there is IHT to pay and, if no IHT is due, how easily you can prove this.

Forms IHT205 and IHT217

If there is no IHT to pay you only need to fill in form IHT205. There’s no IHT due if the value of the estate is below the £325,000 (2016-17) threshold, or if its full value if left to a charity or a community amateur sports club.

If the individual who died had a spouse or civil partner who didn’t use any or part of their IHT threshold, you can transfer up to 100% of it, thus making it possible for an estate worth up to £650,000 (2016-17) to be IHT exempt. In this situation you’ll need to complete form IHT217 alongside IHT205, and send it in with any supporting evidence.

Form IHT400

If there is IHT to pay you need to fill in form IHT400, along with a number of supplementary pages (forms IHT401-430) depending on the details of the deceased person’s estate. These supplementary forms can all be found on this page (scroll down until you reach the ‘supplementary pages’ heading).

In certain cases estates with no IHT to pay will be required to fill in form IHT400, along with a number of supplementary pages, if certain conditions can’t be met within form IHT205. If you believe the estate you’re a personal representative of owes no IHT, we strongly recommend you read form IHT205 all the way through before you begin filling it in.

Regardless of what forms you’re sending in, they must be received by HM Revenue and Customs (HMRC) “within a year of the end of the month the person died,” or you risk receiving a penalty.

Experienced Inheritance Tax Accountants

To speak with a professional accountant to discuss which inheritance tax forms you need to complete if you’re a personal representative of an estate, or for anything else, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.

3 Ways to Make Tax Efficient Charitable Donations












We all want to receive greater tax efficiency out of our charitable giving; both for the charity, and for us. There are three main ways in which you can make tax efficient charitable donations with either you or them being able to claim tax relief on your donation, these being when you:

  • declare (using an appropriate form) that you would like Gift Aid to be added to your donation,
  • donate through a Payroll Giving scheme set up by your employer, and
  • donate land or certain shares to a charity that agrees to accept your donation.

Gift Aid

Gift Aid is the simplest, and most common, way in which individuals and businesses alike can make tax efficient donations to charity. If you’re a British taxpayer, the Gift Aid scheme allows the charity you’re donating to to reclaim basic rate tax on your donation from HM Revenue and Customs (HMRC), thus increasing the overall value of your donation.

Your donation will only qualify for gift aid if you:

  • pay at least as much income tax in a given tax year as the charity (or charities) will reclaim (if you don’t pay income tax, you cannot take advantage of the Gift Aid scheme),
  • don’t receive excessive benefits, in any form, for your donation,
  • make a Gift Aid declaration (using an appropriate form) that you would like Gift Aid to be added to your donation.

It should be noted that Gift Aid donations can be backdated up to four years. As we wrote in this article from last year, “It’s been suggested that the current declaration form doesn’t make the link between the tax the individual making the donation has already paid and the Gift Aid that can be claimed by the charity they’re donating to; something the upcoming improvements are sure to address.”

Payroll Giving

Donating to charity through a Payroll Giving scheme is a great way to give to charity every time you’re paid by your employer.

In order to make a gift to charity through a Payroll Giving scheme your employer must have already set up the scheme with their business, and you must authorise your employer to gift a certain amount from your pay every month (or however often you’re paid) to a Payroll Giving agency that’s been approved by HMRC. It’s this agency that will then send your gift on to your chosen charity (or charities).

The main benefit of donating to charity through your employer’s Payroll Giving scheme is that your donation is deducted from your pay before the tax you owe is worked out: therefore you receive immediate income tax relief at your current (basic, higher, or additional) tax rate.

For more information on payroll, click here.

Donating Land, Shares

If you decide you’d like to donate land or certain shares to charity, the first thing you need to do is contact the charity (or charities) in question to make sure they are able to accept your donation.

Next you’ll have to ensure that the land or shares you’re looking to donate qualify for tax relief. This is where you’ll want to speak with your accountant in relation to your specific circumstances, but in general the following donations qualify:

  • freehold interests in land,
  • leasehold interests in land (so long as the lease period is for a term of years absolute),
  • shares and securities listed or dealt on the British stock exchange, or recognised overseas stock exchanges,
  • holdings in recognised foreign collective investment schemes.

Keep in mind, if you donate any land to a charity it’s essential that they present you with a certificate proving that they have acquired the land from you in order for you to receive tax relief.

Experienced Tax Accountants

To speak with a professional accountant to discuss how you can make tax efficient charitable donations, or for anything else, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.