Is It Time to Review Your Estate Plan?

Estate Planning

Planning to minimise the inheritance tax (IHT) due on your estate is always important, but the recent introduction of the residence nil-rate band (RNRB) means now could be the ideal time to review your existing plans.

What is the RNRB?

IHT is charged at 40% on estates worth in excess of the nil-rate band, which is currently £325,000. Married couples and registered civil partners can pass any unused nil-rate band on death to one another.

However, 6 April 2017 saw the introduction of an additional nil-rate band – the RNRB – which is intended to take the family home out of IHT for all but the wealthiest. The RNRB is set at £100,000 for deaths in 2017/18, rising to £125,000 in 2018/19, £150,000 in 2019/20, and £175,000 in 2020/21. It is then set to increase in line with the Consumer Prices Index from 2021/22 onwards.

The introduction of the RNRB means that up to £1 million of a married couple’s estate could eventually be taken outside the scope of IHT if the full nil-rate bands (£325,000 + £175,000 x 2) are available to each spouse.

The RNRB is also available when a person downsizes or ceases to own a home on or after 8 July 2015 where assets of an equivalent value, up to the value of the RNRB, are passed on death to direct descendants.

It is important to note that the additional band can only be used in respect of one residential property, which does not have to be the main family home but must at some point have been a residence of the deceased.

There will also be a tapered withdrawal of the additional nil-rate band for estates with a net value of more than £2 million (at a withdrawal rate of £1 for every £2 over this threshold).

Reviewing your estate plan

It is always advisable to review your Will and planning strategies on a regular basis, but it is particularly pertinent following changes in your personal or family circumstances or significant new tax rules. The introduction of the RNRB is one such example.

The additional nil-rate band will only apply when a main residence is passed on death to one or more descendants (including a child, stepchild, adopted child or foster child) of the deceased and their descendants. In order to utilise the RNRB, you may need to review your Will to check that the property is being bequeathed to the correct beneficiaries. The home doesn’t have to be specifically mentioned in the deceased’s Will, as long as it has at some point been a residence of the deceased.

It is also important to review your Will where property has been left in trust, as certain types of trusts may not be eligible for the RNRB. This is a complicated area and we suggest that you consult an expert for further advice.

If downsizing is contemplated, special care is needed to include provisions in a Will which will satisfy the conditions of obtaining the additional band.

For more information on the RNRB or for advice on other tax-efficient estate planning strategies, please contact us.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Making Tax Digital Delayed until 2020

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The Treasury have delivered what is potentially good news for many (yes, you have read that correctly).  Making Tax Digital, or MTD to give it its affectionate moniker, has been both delayed and reduced in terms of requirement.

For businesses that are VAT registered, VAT returns will still have to be submitted via MTD compatible software from 1 April 2019, but in terms of quarterly reporting for tax and national insurance (NI) purposes,  MTD has been delayed until at least April 2020.

The new timetable for income tax and NIC reporting is as follows, although the £85,000 small business threshold is subject to change.

Annual turnover

Old timetable

New timetable

Over £85,000

6 April 2018

At least April 2020

From £10,000 – £85,000

6 April 2019

At least April 2020 but on a voluntary basis

Companies

1 April 2020

At least April 2020

It appears that the Government have quite enough on their plate without launching MTD and undoubtedly many taxpayers will welcome the delay!

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Tax and Your Company Car

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There are many factors which will influence your choice of company car. These can include the distance you travel, terrain covered, the price, your lifestyle and perhaps even your clients. However, is tax ever a consideration?

The start of the tax year saw an increase in the company car rates and indeed the rates are increasing quite significantly year on year. Assuming however that you have some degree of choice over the car make and model, you can influence the tax that you pay.

The two factors which determine the tax charge attached to a company car are the list price of the vehicle and its CO2 emissions.

The table below shows the benefit in kind charge for cars with various, hypothetical,  list prices and CO2 emissions.  The rates applicable to the current tax year (2017/18) have been used.

List price CO2 emissions Fuel type Benefit in kind value
£17,000 102g/km Petrol £3,230
£25,000 99g/km Petrol £4,500
£25,000 117g/km Diesel £6,250
£35,000 0g/km Electric £3,150
£50,000 41g/km Electric/Petrol £4,500
£50,000 155g/km Diesel £16,500

In addition to the company car benefit there is also a fuel benefit if the employer provides fuel for private use; the value of the fuel benefit is affected by the CO2 emissions but not by the list price.

Although tax will not be the only issue affecting your choice of company car, perhaps it ‘auto’ be a consideration?

If you’d like any more information please contact Green & Co Accountants.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Don’t Be a Lottery Loser – Protect Your Syndicate Winnings

 

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If you and your employees club together to take a chance on the Lottery by operating a workplace syndicate, but you do not have a formal agreement in place, a large win could cause tax issues in the future.

If ever you are fortunate enough to win the jackpot, the winnings will undoubtedly be collected and distributed by a nominated individual, normally the same person who buys the tickets.  However, if by some stroke of misfortune, that person dies within 7 years of the win, HMRC could argue the distributions were technically gifts, particularly if no written agreement exists.  In that event the gifts would be treated as failed Potentially Exempt Transfers (PETs) and therefore subject to Inheritance Tax.

Admittedly this is not an everyday occurrence, but it can happen, and HMRC are likely to chase all those who shared in the winnings for any resulting liability.

Verbal agreements can of course be valid, but they are much more difficult to prove, so if you are a part of a syndicate, it is wiser to draw up a document, showing all members, the amount of the stake each pays and how any winnings are to be shared.  It should always be updated when new members join to ensure they don’t get caught out by the IHT trap.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Landlords Kept in the Know as Renting Homes Act Moves Forward

Neil Soundy and Daniel Bellis

The South Wales Argus highlight another successful Gwent Landlord Forum.

Landlords from across south east Wales have again received expert advice, support and insight into the ever-changing rental landscape as part of the bi-monthly Gwent Landlord Forum.

The event, held by Cwmbran-based Rubin Lewis O’Brien, Green & Co Accountants and Tax Advisors and Lettings agency SerenLiving, took place at the Parkway Hotel.

Two guest speakers gave informative presentations to a packed room, where landlords were informed of the ins-and-outs of operating as a limited company, AIRBNB and the Renting Homes Wales Act.

Opening the evening was mortgage advisor Neil Soundy, who spoke about the benefits of buying property as a limited or trading company, the basic taxation on limited companies and buy to lets, lower rental coverage requirements and AIRBNB for landlords.

The second speaker was Daniel Bellis, a policy officer for the Residential Landlords Association. Daniel discussed the growing concerns of landlords as the Renting Homes Wales Act has come into effect, including the creation of standardised contracts across the rental sector, fit for human habitation regulations, changes in abandonment procedure and changes to joint contracts.

Ed Gooderham, director of Green & Co Accountants, said: “It’s great to see the forum grow with more and more people attending every session. Both speakers were of great quality, providing our landlords with an informative insight into complex topics. Our continued aim is to provide local landlords with as much information and support as possible, and attendees regularly feedback to us how much they enjoy these events.”

The next Gwent Landlord Forum will take place at the Parkway Hotel in Cwmbran on Wednesday July 12. For more information, please contact Rubin Lewis O’Brien, Green & Co or SerenLiving.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Doctor, Doctor: Are Medical Expenses Tax Deductible?

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The question of whether medical expenses are tax deductible is one which is frequently posed and we can consider this using the example of a self-employed farmer who seeks treatment from a chiropractor. She believes that the treatment will improve her ability to farm and therefore queries whether she can claim a deduction for this in her accounts.

HMRC do recognise that taxpayers need to be in good health in order to carry on their trade, this allows them to earn an income on which they will pay their taxes. However HMRC’s approach to medical expenses typically follows that applied to costs incurred for food and clothes.

In this instance the farmer’s medical expense will not be tax deductible as the treatment will positively impact her personal life and therefore the expenditure cannot be wholly and exclusively incurred for business purposes.

If you require any further information please contact Green & Co Accountants.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Some Employee Perks Are Being Lost and It Could Be Costly

Green & Co

Green & Co feature in the South Wales Argus discussing the tax changes for employee perks.

The new tax year has seen a raft of changes, with more legislative reform scheduled to come into effect over the next few years.

From changes in dividends, stamp duty, and national insurance (with a U-turn thrown in for good measure) the way that people are taxed is an ever-evolving landscape. However, it’s not just directors, landlords and the self-employed who have been targeted with new legislation.

Barrie Kenyon, partner at Green & Co Accountants and Tax Advisors said: “From 6th April, the tax and employer national insurance advantages of a salary sacrifice or salary exchange scheme was removed. This means that any employees who have swapped their salary for benefits, which typically include additional holiday days, will now pay the same tax as if they were buying them out of their post-tax income. The Chancellor, Philip Hammond, announced the changes in the autumn statement believing the previous schemes were unfair. From earlier this month, they have started to come into effect.

“However, these changes do not affect those employees who have reduced their salary for pension contributions, childcare purposes such as vouchers, workplace nurseries or directly contracted childcare, the cycle to work scheme and ultra-low emission company cars with co2 emissions of or less than 75g/km.

“The schemes were seen as attractive to both employees and employers, with reduced tax liabilities benefiting both parties.”

Mr Kenyon stressed that there were some caveats that accompany the changes: “If any arrangements which were in place before April 2017 relate to cars with co2 emissions over 75g/km, accommodation or school fees: these arrangements will be protected until April 2021. Also, other arrangements agreed prior to April 2017 that do not fall into the aforementioned categories will be protected until the end of the current tax year in April 2018.”

It is estimated that millions of workers from across the UK will pay more tax due to these changes, with the Treasury believing that these schemes are costing too much in lost tax receipts and national insurance contributions. It is estimated that the reform will cost employers in the UK around £85M this tax year, whilst increasing another £260M by April 2021 when the full changes will come into effect.

If you are worried about any of these forthcoming changes, please contact us at Green & Co for further help and guidance.

Green & Co Accountants and Tax Advisors specialise in business growth and tax minimisation for businesses across Wales and the South West of England.

For proactive advice, contact Green & Co Accountants and Tax Advisors on 01633 871 122, follow @Green_and_Co on Twitter or email barrie@greenandco.com.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Some employee perks are losing their tax breaks.

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From 6 April 2017 the tax and employer national insurance advantages of a salary sacrifice or salary exchange will be removed, with the exception of:

  • Pensions
  • Childcare (Vouchers, workplace nurseries or directly contracted childcare)
  • Cycle to work
  • Ultra-low emission cars with co2 emissions of or less than 75g/km.

Any employees who have swapped their salary for benefits, for example, additional holiday days, will now pay the same tax as if they were buying them out of their post-tax income.

If any arrangements which were in place before April 2017 relate to cars with co2 emissions over 75g/km, accommodation or school fees, they will be protected until April 2021. All other arrangements (arranged before April 2017) that are not detailed above will be protected until April 2018.

If you are worried about any of these forthcoming changes, please contact us at Green & Co for further help and guidance.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

 

New Allowance for Pension Advice

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A new allowance which will enable people to access pensions advice in a tax efficient way will commence in April 2017.

Under existing rules, if you require advice regarding pensions you will normally have to pay a fee to a Financial Adviser. A new allowance being introduced in April will mean that you will be able to use funds saved in a defined contribution type pension fund to pay for the advice instead. The ability to access the advice in this manner essentially means that the cost of the advice is tax free.

The amount which can be accessed is £500. It can be accessed up to 3 different times provided it is in different tax years.

Be aware that the allowance can only be used to pay for regulated advice and cannot be used by those in final salary schemes unless they also have a defined contribution pension plan at the same time.

If you would like further information or would like to discuss your situation please contact our tax team.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

2017 Budget Review

Following on from the Chancellor’s first and last Spring Budget, we are pleased to provide you with our summary of the key announcements, along with our tax tables for the 2017/18 tax year:

Budget Summary

Tax Data
The main changes include:

  • The tax-free dividend allowance will be reduced from £5,000 to £2,000 from April 2018.
  • Class 4 national insurance contributions for self-employed workers will increase to 10% in April 2018 and rise again, to 11%, from April 2019.
  • Unincorporated businesses and landlords with a turnover below the VAT threshold will have until April 2019 before they are required to implement ‘Making Tax Digital’.

Among the key changes to note for this year are:

  • The Chancellor confirmed that corporation tax will be cut to a rate of 19% from April 2017 and it will be further reduced to 17% in 2020.
  • The personal allowance will rise to £11,500 in April 2017 and to £12,500 by 2020 and the higher rate income threshold will rise to £45,000, although special rules will apply in Scotland.
  • Individual landlords’ tax relief for finance costs will be restricted to basic rate tax – to be phased in over four years from April 2017.

More information on the Budget is available on our website or if you would like to speak to one of our team please contact us.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.