Capital Gains Tax (CGT)

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Capital gains tax (CGT) is a tax on capital “gains”. If when you sell or give away an asset it has increased in value, you may be taxable on the profit. This does not apply when you sell personal belongings worth £6000 or less.

You might have to pay capital gains tax if you:

• sell, give away, exchange or dispose of an assets or part of an asset.

• receive money from an asset-for example compensation for a damaged asset.

You do not have to pay capital gains tax on:

• your car

• your main home

•personal belongings sold for less than £6000 like furniture, paintings

• bettings, pools or lottery winnings

• ISAs, VCTs.

There are a few ways of cutting your CGT bill:

•if you are married or in a civil partnership and living together you can transfer assets to your husband, wife or civil partner without having to pay CGT
•you can’t give assets to your children or others or sell them assets cheaply without having to consider CGT
•if you make a loss you may be able to make a claim for that loss and deduct it from other gains, but only if the asset normally attracts CGT – for example you cannot set a loss on selling your car against gains from disposing of other assets
•if someone dies and leaves their belongings to their beneficiaries, there is no CGT to pay at that time – however if an asset is later disposed of by a beneficiary, any CGT they may have to pay will be based on the difference between the market value at the time of death and the value at the time of disposal.

If you are still confused about the way CGT works, Taxfile in South London can help you understand it better giving you the right advice at the right price.

Tax Enquiry Nightmare Gets Worse

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If you are unlucky enough to be the subject of a tax enquiry by the tax man, it could now be an even worse nightmare for you than ever before. HMRC has recently introduced a new bonus scheme for the tax inspectors who conduct the enquiries, which means they have a vested interest in coming down hard on ordinary folk and negotiating far less. The more tax they find you need to pay – in their opinion – the more they will earn.

The average extra tax they are demanding in recent enquiries now averages a worrying £7,778 for each self-assessment enquiry it undertakes – that’s a steep jump of £3,251 extra on last year’s average. The new statistics also show that the amount of extra tax generated just from the band of those earning more than £200k per year has risen to £197 million which is a 150% increase on the preceding year. Clearly those bonuses are having the desired affect on the individual tax inspectors who appear to be squeezing every last penny from each of the enquiries they are undertaking.

It’s times like these when services of tax advisers like TaxFile really come into their own. Because they know the rules (and any allowable expenses) as well as the tax inspectors do, they level the playing field for ordinary hard-working people and can argue the case on your behalf. For a low fixed fee the whole headache can be taken over by an accounting professional who is on your side. Taxfile have offices in South London. Telephone 0208 761 8000 for further information.

Don’t forget 31 July deadline to renew Tax Credit info

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31 July is the date by which HMRC needs to receive your Tax Credit record update. You should have received your Renewal Pack by the end of June latest (if you haven’t, call 0845 300 3900). HMRC needs the renewal to check for any changes to your circumstances. Remember to read the instructions very carefully and send off before the deadline otherwise you may run the risk of Tax Credit payments being interrupted, or worse, being asked to return some of the money paid since 6 April 2007 plus any amounts overpaid for the previous year.

If you were awarded more than one tax credit award during the 2006-7 period, you need the equivalent number of Renewal Packs.

More details on how to renew your tax credit information at the HMRC website.

Brussels wants to impose VAT on food & children’s clothes

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The European Commission is trying to harmonise VAT rates across its member countries. In so doing it wants the UK to fall in line with a rate of at least 5% on food and children’s clothing.

When it joined the EU in 1973 the UK had fought very hard not to have to charge VAT on such items (as well as the printed word, e.g. newspapers) and, as a concession to Brussels it had agreed to impose a ‘zero rated’ level of VAT. That way, VAT was effectively levied but at a valueless rate. Now Brussels wants the zero rate to be scrapped and replaced by a rate of 5% minimum, for certain products including nappies, for example.

The labour Government will fight to retain the zero rate and can use its veto if required. If successful, UK families will save a staggering £28 billion each year.

Taxfile, a walk-in “tax advice shop” based in South London, can help with all VAT matters including VAT returns and registering for VAT as well as book keeping, general accounting, tax advice and so on.

Taxman’s mistakes mean 1 million pay wrong bill

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There are more than a million of us in the UK who are paying the wrong amount of tax, thanks to the taxman. £157 million was overpaid to the Revenue last year, according to the National Audit Office (NAO). 540,000 of us – that’s over half a million – were overcharged, but still others were undercharged, the latter totalling £125 million in the same period.

The NAO attributes the staggering level or errors to the fact that many people change jobs so frequently and this makes the calculation more complicated. But it doesn’t end there. Correcting the mistakes will cost both the Revenue and the tax-payer time and money, as well as unnecessary stress. Unexpected tax demands will come as a shock, particularly to vulnerable groups such as pensioners, who are likely to be the most severely affected.

Matthew Elliott of The Tax-Payers’ Alliance commented that “This report demonstrates yet again that the tax system is becoming too complicated and taxpayers who do not have the money to afford top accountants are getting tied up and ripped off by the taxman….It’s the complexity of the system that’s trapping people, so it needs radical reform.”

At TaxFile in Tulse Hill, South London you can drop in to see one of their tax advisers and, for an affordable fixed fee, they will sort your tax out for you and relieve you of the stress and uncertainty. TaxFile bridge the gap between you and the taxman. They level the playing field. They specialise in one thing; tax, and do not charge the higher fees normally associated with swishy accountants.

Taxman wants powers to seize tax straight from bank accounts

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HM Revenue & Customs is seeking the right to seize unpaid tax straight out of bank and building society accounts, without consent. Apparently such powers would be used only against deliberate tax evaders in a bid to avoid seeking a court order. They are part of a consultative document called, “Modernising Powers, Deterrents and Safeguards“. It would work like this: the relevant amount would be frozen in the account. It would be withdrawn by HMRC only if a payment ultimatum had not been met after several written letters were sent, several telephone calls had been made, and at least one visit had been made to the non-payer’s home. We all know that tax bills are not always correct, however, and this is a major worry for some.

A spokesman for HMRC defended the idea saying that it would use the proposed powers only against chronic late payers and continued, “We do not, and will not, seek access to personal bank accounts unless all other exacting avenues of communication have failed.”

Tax advice from such companies as South London based TaxFile can help to level the playing field when a tax dispute arises. As we say above, tax bills from the HMRC are not always correct first time, and a little professional advice from an expert in the field of tax accounting will mean that you only pay the correct amount of tax and nothing more.

Taxman sinks his teeth into your pension

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This was the headline in the Daily Mail article of 4 July 2007, complete with a picture of a vampire! The story outlines how pensioners on low incomes are being taxed up to 40% in what the Mail describes as “an extraordinary cash grab by HM Revenue & Customs”.

Under “trivial commutation” rules, pensioners with pension funds of £16k or under can actually cash them in instead of using them to buy annuities which would, of course, pay ridiculously small monthly amounts. As you might expect, the first 25% of the pension fund taken as cash comes tax-free. It is the other three-quarters which fall foul of HMRC’s cash grab. While most of the pensioners involved are basic-rate tax payers, many have this portion of the fund taxed at the higher 40% rate by the Revenue.

The reason for this ludicrous state of affairs is that, even more absurdly, if HMRC does not have a pensioner’s tax details, they assume the pensioner receives this amount of income every month and apply an emergency 40% rate charge to the top three-quarters of the fund. Pensioners who realise the mistake are then left to try to reclaim the overpayment, however many of them will not know how to even start such a claim as some will not have dealt directly with the tax system before. It is thought that up to 50,000 pensioners will be hit with this overcharge each year.

Walk-in accounting services provided by companies such as TaxFile in Tulse Hill are perfectly placed to offer low cost solutions to this type of tax error. When it comes to tax advice, they are a low cost alternative to a full accountancy firm and even the playing field between ordinary folk and Her Majesty’s Revenue & Customs.