Autumn Statement by the Chancellor of the Exchequer

George OsborneOn 5 December 2013 George Osborne, Chancellor of the Exchequer, gave his Autumn Statement in Parliament. Key announcements included:

  • A rise for the Personal Allowance, as was long-anticipated, to £10,000 in 2014/15;
  • the higher 40% tax rate threshold also increasing to £41,865;
  • A new, transferable, tax allowance of £1,000 for married couples and those in civil partnerships from April 2015;
  • For employees aged under 21 employers will not have to pay Class 1 National Insurance (‘NI’) Contributions on earnings up to the Upper Earnings Limit;
  • Capital Gains Tax (‘CGT’) for future gains will now also apply to NON-resident individuals from April 2015 (previously this had been applied only to UK resident landlords);
  • For 2014/15 the annual ISA subscription limit will increase to £11,880 (of which £5,940 can be in cash);
  • There were also announcements relating to the continuing clamp-down on tax avoidance, improvements and plans for UK infrastructure, and the proposed inheritance tax (‘IHT’) simplification for trusts.

The full speech transcript can be read here or alternatively view the following video recording: Read more

Assets hidden offshore? Not for long!

Financial information sharing now reaches the Cayman Islands, Isle of Man, Jersey and Guernsey.

On November 5th, Her Majesty’s Revenue & Customs (‘HMRC’) announced that the Cayman Islands had joined the ever-growing list of offshore territories which will now automatically share financial information with them in respect to UK taxpayers who may have accounts there. This follows similar agreements which took place in October for Jersey, Guernsey and the Isle of Man. Clearly the idea is to further aid in HMRC’s clampdown on tax evasion and avoidance.

The Cayman Islands also agreed to become an integral part of the G5 multi-lateral information sharing initiative involving a total of 31 territories including the UK, France, Germany and Spain, based on an earlier agreement with the U.S. and now also including cooperation with South Africa. The transparency of who really owns and controls UK companies is also a key HMRC aim.

This is all an important step towards the creation of a global standard in tax transparency and information sharing, an initiative originally agreed Read more

HMRC now has landlords in their sights

Residential property lettingsHMRC (Her Majesty’s Revenue & Customs) has announced some new initiatives over the course of the last month and one of these is The Let Property campaign which is a campaign designed to recover undeclared tax from those receiving income from residential property lets. The idea is to encourage those landlords with under-declared income or gains (potentially including income tax, Capital Gains Tax and VAT) to contact them in order to make a full disclosure. By doing so they may well avoid the higher penalties which may be applied to them should HMRC discover the undeclared income/gains via other means. Don’t forget that they now have access to information shared across systems, including in relation to properties both at home and abroad, as well as being gained through their digital intelligence system ‘Connect’ which identifies links between individuals, entities and properties. So the message to landlords is loud and clear!

The campaign applies to landlords whether they have just a single property or a large portfolio of properties and encompasses lets to students, business workforces and the holiday market. Read more

New tax break for married couples

In this recently filmed interview David Cameron said:

“Marriage is a great institution and it helps to build good and strong societies so I think it’s right to back marriage properly in the Income Tax system – most other advanced industrial countries do and it and we should do it too.”

So on the eve of the Conservative Party Conference at the end of September, the Prime Minister began to unveil plans for a new allowance which will benefit an estimated 4 million married couples, including 15,000 in civil partnerships. It is aimed at those who are not in the higher tax-paying rate (so those couples with a taxable income of less than £42,285 in the tax year 2015-16) – so will benefit only those on a middle or lower income. Read more

Possible Reforms to Intestacy Rules

Firstly we should mention that we are not solicitors and therefore you should seek professional advice (e.g. a solicitor) before making a will.

What we did want to report on, however, is that the Ministry of Justice is proposing some changes to the intestacy rules governing England and Wales. The changes would affect the scenario in which a person with no children dies leaving no valid will. Currently the surviving spouse or civil partner receives the personal possessions, £450k and half of anything over that amount, with the remaining half going to the parents, or to siblings if there are no living parents, or the siblings’ offspring if the deceased’s siblings are also deceased.  The proposed new rules would instead mean that the surviving spouse or civil partner would inherit the whole estate.

But that is only if the deceased has no children. If they have children then other rules currently apply and changes are being suggested in relation to those too. Read more

Stocks & Shares ISAs …

The Pros and Cons of ‘Pound Cost Averaging’

ISAs represent a tax-efficient vehicle for savings because any interest gained on them does not attract tax. At Taxfile, particularly in respect of Stocks & Shares ISAs, we’re often asked whether a lump sum investment is better or worse than a regular ‘drip-feed’ of smaller payments. If the two total the same amount over the course of a year, which is the best method of paying into an ISA?

Well, it all comes down to market conditions, timing and ‘Pound Cost Averaging’. A regular drip-feeding of smaller investments can take the worry out of investment decision-making because it reduces exposure when markets are falling and also it results in a smoother, less volatile, ride. If a larger lump sum were invested and the market fell, it could clearly be a disaster. Compared to that, regular, smaller payments would mean that only a small amount was invested while the market was at its lowest – and even then it would have purchased comparatively more shares because they were then much cheaper (an opportunity which would have been missed with the earlier one-off lump sum approach). Similarly, with a regular drip-feed of smaller payments, fewer shares are purchased when they are at their most expensive. Read more

HMRC now see payments you receive via credit card!

On September 1st 2013 new legislation kicked in which allows HMRC automatic access to data showing payments made to businesses via credit card, going back as long as 4 years. HMRC will receive this information direct from the companies who process credit card payments on behalf of businesses (‘merchant acquirers’).

No personal data identifying the card owners, nor the credit card numbers, will be supplied as part of the data — it will primarily show the quantity of transactions and values credited to any particular business via credit card. On its own this may reap £50 million per annum in otherwise ‘lost’ tax revenue and the exercise will be helped by HMRC’s ‘Connect’ system which compares data coming in from various sources and cross-refers for consistency. The scheme’s implementation has been aided by a £1 billion budget given to HMRC aimed at tackling tax evasion and fraud.

The new legislation is part of the Finance Act 2013 and is part of a major crackdown on tax evasion which overall costs the taxpayer £9 billion a year Read more

Bank Base Rate to stay at 0.5% until 2016 (…probably)

Bank Base Rate changesMark Carney, the Bank Of England’s new Governor, has announced his ‘forward guidance’ that the Bank does not intend to raise Bank Rate from 0.5% until the unemployment rate falls to 7%, which it forecasts will happen in mid 2016 — three years away. The Governor hopes that the announcement of this 3 year plan will instil confidence in the economy and help to encourage companies and consumers to borrow money without having to worry about any sudden, unforeseen rises in interest rates. It may well help, but of course it does hinge on that all-important unemployment rate falling to the desired level.

The Governor also stated 3 additional scenarios in which earlier action would become necessary: Read more

What 31 August means for Child Tax Credit (“CTC”) and Child Benefit

On 31 August, Child Benefit and Child Tax Credit (“CTC”) will cease for children, aged 16 at that date, who have left approved* education or training. However if they continue in approved training/education then these benefits may continue but only if the parent or claimant has told HMRC’s Child Benefit Office and/or Tax Credit Office (note that parents/claimants must notify *both* departments if they are claiming both of the benefits).

* “Approved education” means that the child remains in full-time, ‘non-advanced’ education at school/college (e.g. ‘A’ Levels).
“Approved training” means that the child is participating in, has enrolled in, or been accepted for one of the following types of course prior to reaching 19 years old: Read more

Received an SA302 form from HMRC?

If you’re ever wondering why you were sent form SA302 through the post, it will usually be for one of 3 reasons:

  1. if you sent in a paper tax return asking HMRC to calculate the tax for you;
  2. if you made an amendment to your paper tax return; or
  3. if you sent HMRC a paper tax return and they don’t agree with your calculations for tax.

You will also have received a covering letter explaining the period under scrutiny, the income tax due (or owed) for that tax year with a note of when it’s payable, an explanation of any changes made by HMRC to your figures and lastly information relating to any payments on account which may be required for the next tax year. Read more