Is Your Estate Excepted From IHT?

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(for UK domiciliaries only)

From 6 April 2004, there are two types of estates are qualified to be excepted from IHT for UK domiciliaries.

1. Low valued estates
When the total value of estates does not exceed the inheritance tax threshold, then those estates do not suffer IHT.

Which threshold should be applied is determined by the date of deceased’s death. If the death was between 6 August and 5 April in any one tax year, or between 6 April and 5 August with the grant of representation taken after 5 August, you should use the threshold of that tax year in which the death happened. If death was between 6 April and 5 August, but the grant of representation was taken before 5 August, the threshold should be used is the one from the tax year of one year earlier.

2. Exempt estates
No IHT is payable when either Spouse/Civil Partners Exemption or Charity Exemption applies and the gross value of the estates is less then £1 million.

Spouse/Civil Partner Exemption can only be deducted if both spouses or civil partners have always been domiciled in the United Kingdom, if one of the spouse/ partners is domiciled outside of UK at the time of transfer of estates, the exemption is limited to £55000. And charity exemption can only be deducted if the gift is an absolute gift to the organisation concerned.

Both types of estates must be subject to the following conditions in order to be exempted from IHT:

• the deceased died domiciled in the United Kingdom,
• if the estate includes any assets in trust, they are held in a single trust and the gross value does not exceed £150,000 (unless the settled property passes to a spouse or civil partner or to a charity when the limit is waived),
• if the estate includes foreign assets, their gross value does not exceed £100,000,
• if there are any specified transfers(transfer the estate to somebody as a gift, the value does not exceed £100,000 if the transfer is within 7 years of death, and this transferred estate does not get involved into any trust), their chargeable value does not exceed £150,000, and
• the deceased had not made a gift with conditions attached
• the deceased did not have an alternatively secured pension fund, either as the original scheme member or as the dependant or relevant dependant of the original scheme member

Well financial planning with the help of Taxfile will significantly save your IHT, just feel free to visit our offices in
South London to get professional advice from our
tax experts.

Your personal tax allowance

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Everyone who lives in the UK is entitled to a personal allowance. This is the amount of income you can receive each year without having to pay tax on it. Depending on your circumstances, you may also be able to claim certain other allowances.
There are three levels of personal allowance for 2007/2008 tax year:
•Basic rate, which is 5225 (with no income limit)
•age 65 to 74, which is 7550 (with an income limit of 20900)
•age 75 and over 7690 ( with an income limit of 20900).
It is important to bear in mind that if your income is over the income limit, the age related allowance reduces by half of the amount (£1 for every £2) you have over that limit, until the basic rate allowance is reached (you’ll always get the basic allowance, whatever the level of your income).
If you become 65 or 75 during the year to 5 April 2008, you are entitled to the allowance for that age group.

So if, for example, you are 69 and have an income of £22,000( £1100 over the limit) your age-related allowance would reduce by £550 to £7,000.

If HM Revenue & Customs (HMRC) knows your age you should get the personal allowance automatically. But bear in mind they won’t know your age unless you’ve told them or shown your date of birth on a tax return or claim form. If you haven’t done this already and you are 65 or over you need to contact your Tax Office.
If you want to claim a tax refund because you didn’t use your personal allowance (or for any other reason), you need to do so within five years from the 31 January following the end of the tax year concerned. Taxfile in South London can help you claim the overpaid tax . Their tax advisers deal with the Inland Revenue on your behalf , taking the strain off you at a taxing time, making sure that you never pay more than your minimum tax liability, whether this be income tax, capital gains tax (CGT) or inheritance tax(IHT).

Taxfile knows everything about taxi drivers’ tax!

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There are a few things that need to be considered when it comes to taxi drivers’ tax. Among them we can mention the following:

•Mileage Allowances
Taxi drivers can claim as an alternative to vehicle running costs mileage allowances of 40p for the first 10,000 miles and 25p per mile thereafter. You may not claim mileage allowance and vehicle running costs. Should you choose to claim the mileage allowance then keep good records of mileage covered, purpose of journey.

•Taxi Capital Allowances
If you bought a vehicle in 2005-06 and used it as a taxi you can claim a first year tax allowance of 40% of the cost of the taxi, restricted to £3,000 for vehicles costing over £12,000. On vehicles purchased in previous tax years you can claim 25% writing down allowance on the balance not yet claimed. If you have bought and sold a vehicle used as a taxi during the financial year the tax allowance is restricted to any loss made on resale and any profit made over the written down value is taxable as a balancing charge. First year allowance in the current tax year 2006-07 is 50%.

• Taxis bought on Hire Purchase
Claim capital allowances on the original cost of the vehicle, interest and other charges count as business expenses and go in the self assessment tax return.

•Taxi Running Costs
When completing the self assessment tax return taxi drivers should enter fuel costs as cost of sales not motoring expenses. Do not claim fuel expenses when you are on holiday, the revenue will check should they inquire into your self assessment tax return.Taxi running costs also include repairs, servicing and parts including tyres, road tax, taxi insurance and AA/RAC membership. Include radio hire and taxi office costs in general administrative expenses.

• Household expenses
If you run your taxi business from home you can claim a proportion of household expenses as business expenses. Household expenses are likely to be disallowed unless they are either specific to the business or a specific area of your home is devoted entirely to your business.

• Spouse Costs
You can claim expenses for partners who work for your taxi business and payments up to £94 would not attract income tax or national insurance however any payments claimed must be real payments for real work done. The Revenue naturally adopt a strict view on expenses claimed for partner work as it is an area some people might use to reduce the tax liability.

•Other Expenses
The best method of ensuring the taxi drivers tax bill is as low as possible in the future is undoubtedly to meticulously maintain good records of all taxi receipts and expenses and mileage covered which offers the opportunity for taxi drivers to compare vehicle running costs against mileage allowances and choose the most tax efficient option. General if the taxi cab capital allowances are high vehicle running costs will be the best option and if taxi cab capital allowances are low then mileage allowances may well legally increase the costs you can claim and save you money.

Taxfile in South London taxi and cab drivers choose the best accounting option in order to reduce their tax liability.
Taxfile can also provide you with a record-keeper to fill in with all your takings and your expenses for the year. For more information, you can visit us on https://www.taxfile.co.uk/.

Business welcomes tax Tory plans

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The Tories yesterday set out proposals for easing the burden of tax and regulation on British businesses in an attempt to improve the economy’s competitiveness.

However Chancellor George Osborne said that any tax reductions would have to be paid for by tax increases elsewhere, such as new environmental taxes:

” Any reductions in specific taxes will have to be balanced elsewhere, most notably green taxes.”

The former Cabinet minister John Redwood called for a series of tax reductions including abolishing inheritance tax, reducing corporation and capital gains taxes, abolishing stamp duty on share deals and raising the threshold for the higher rate of income tax.

Mr Redwood said that ” reducing the tax burden was the best way to stimulate economic growth and increase overall prosperity.[…] we believe a lower tax economy would be a more successful economy. If you have the courage to cut the rates , the rich pay more.”

The proposals received great support from business organisations.

Richard Lambert, CBI director-general said that the goal of getting corporation tax down to 25% and reducing tax on small businesses, represents a welcome direction of travel after a period when the burden of business taxes has grown substantially. He added, ” A focus on cutting regulation and red tape, one of the biggest irritants for firms trying to succeed and expand, is also positive. Too often, while our European competitors manage to implement EU directives in a few pages, the UK gold plates them with reams of prescriptive and complex regulations and guidance.”

Companies like Taxfile In South London can help you understand better the way corporation tax and capital gains taxes, inheritance tax and income tax works, giving you the right accounting advice at the right price.

Welcome to the Inheritance Tax Blog

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Inheritance Tax (IHT) is a tax on the value of a person’s estate on death and on certain gifts made by an individual during their lifetime.

There is a certain threshold when it comes to inheritance tax. This is defined as the amount above which inheritance tax becomes payable. If the estate, including any assets held in trust and gifts made within seven years of death, is less than the threshold, no inheritance tax will be due on it. Starting from April 2007 the threshold, also known as the nil-rate band is £300 000. For transfers on death, the value of an estate above the mentioned band is taxed at a rate of 40%. For lifetime transfers the tax rate is 20%.

There are a few things to consider when dealing with IHT:

• Gifts between husband and wife are generally exempt for IHT. It may be desirable to use the spouse exemption to transfer assets to ensure that both spouses can make full use of lifetime exemptions, the nil rate band and the potentially exempt transfers (PETs). With a PET the gift will be exempt from IHT if the donor survives for seven years.
• Gifts to individuals not exceeding £250 in total per tax year per recipient are exempt. The exemption cannot be used to cover part of a larger gift.
• £3,000 per annum may be given by an individual without an IHT charge. An annual exemption may be carried forward to the next year but not thereafter.
• Gifts in consideration of marriage are exempt up to £5,000 if made by a parent with lower limits for other donors.
• Gifts to registered charities are exempt provided that the gift becomes the property of the charity or is held for charitable purposes.
• Trusts can provide an effective means of transferring assets out of an estate whilst still allowing the donor to retain some control over the assets. Provided that the donor does not obtain any benefit or enjoyment from the trust, the property is removed from the estate.

A good planning is essential when dealing with Inheritance Tax. Any plan must take into account your personal circumstances and aspirations. Taxfile in South London can help you find the best solution to minimize your tax liability.

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.