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Capital Gains Tax Hike: A Blow to Investors

Capital Gains Tax Hike: A Blow to Investors

Capital Gains Tax Hike: A Blow to Investors

October 2024’s Autumn Budget delivered a significant blow to investors with the announcement of increased Capital Gains Tax (CGT) rates. Today, we explore the new rates, how they will affect the sale of assets, and how investors can mitigate their effects.

The New Capital Gains Tax Rates

Effective from 30th October 2024, the basic rate of CGT will rise from 10% to 18%, and the higher rate will increase from 20% to 24%.

What This Means for Investors

These changes will make it more expensive for investors to realise gains from selling assets like shares, bonds, and cryptocurrency. This could lead to a number of consequences, including:

  • Reduced investment activity — investors may be less inclined to sell assets, particularly if they expect to make significant gains;
  • A shift towards tax-efficient investments — investors may seek out tax-efficient investments, such as ISAs and pensions;
  • A greater need for tax planning — investors may require more sophisticated tax planning strategies to minimise tax liabilities.

How Can Investors Mitigate the Impact of the CGT Increases?

Investors have several ways to mitigate the worst effects of the CGT rate increases. They can:

  1. Seek professional advice — a good tax advisor like Taxfile can help investors understand the full impact of the changes and develop a tax-efficient strategy;
  2. Review their investment portfolios to identify the potential tax implications of the new CGT rates;
  3. Utilise tax-efficient investments, for example, through the use of tax-efficient wrappers like ISAs and pensions;
  4. Time investments wisely — carefully timing the sale of assets may help to significantly reduce CGT liabilities.

Demystifying the SA302: Your Tax Summary Explained

Demystifying the SA302: Your Tax Summary Explained

Demystifying the SA302: Your Tax Summary Explained

by Faiz at Taxfile

An SA302 is a document issued by HM Revenue & Customs (HMRC) that summarizes your income tax calculation for a specific tax year. It shows how your tax bill was arrived at, including your income from various sources, any deductions and allowances, and the final amount of tax owed or refunded.

An SA302 can be essential documentation in various situations. For instance, you might need it when applying for a mortgage, a visa, or a business loan, as it serves as proof of your income and tax obligations.

How & Where to Get an SA302

If you need a copy of an SA302 there are various ways of obtaining them:

• If you have done your tax return yourself via HMRC’s portal, you can log into your Government Gateway and download copies of them;
• If you have used an accountant that uses external software, then your accountant can provide you with the calculations. It’s worth noting that HMRC has a list of lenders that will accept the tax calculations from the accountant’s software. If your lender’s name is not on this link, then you or your accountant would need to contact HMRC and ask them to send you one. This can take up to 14 days to arrive via post.

Avoiding Errors & Information Mismatches

At Taxfile we receive a lot of SA302s for our clients that have been sent to us by HMRC. This happens when there has been some error or omission on a client’s tax return that was submitted and didn’t match what HMRC had logged on their system. To explain:

HMRC holds the following information about each taxpayer:

• Student loans;
• Private pension contributions;
• PAYE income;
• Jobseeker allowance;
• Child Benefit along with salary information (so, if one of the parents was on a salary of £60,000* or more, then HMRC will recover some or all of the benefit);
* (£50,000+ for the tax years 2023/24 and prior)
• Registration for Class 2 National Insurance.

Because HMRC holds such information, our clients must check their tax returns carefully to ensure all the points mentioned above have been correctly covered and included in the tax return where appropriate. This is a crucial step when we provide the calculation and clients should also carefully read the declaration notes that are provided.

Spring Budget 2024: A Balancing Act for the UK Economy

Spring Budget 2024: A Balancing Act for the UK Economy

Spring Budget 2024: A Balancing Act for the UK Economy

by Ali at Taxfile.

The UK Chancellor, Jeremy Hunt, delivered his Spring Budget on March 6, 2024, amidst a backdrop of subdued economic growth and limited fiscal headroom. The budget aimed to strike a delicate balance between supporting economic activity, controlling public spending, and preparing for future challenges.

If you have missed the announcements, the Key Highlights for the majority of our clients are as follows.

Tax Cuts

The budget continued the government’s commitment to lower taxes, announcing a further 2p cut to National Insurance contributions (NICs) for both employees and the self-employed as of 6th April 2024. This measure, alongside previous cuts, delivers the largest-ever reduction in NICs, aiming to boost disposable income and stimulate economic activity.  Hunt says the National Insurance cut, to begin next month, is worth £450 a year for the average worker earning £35,000 p/a.

VAT Threshold Changes

Recognising the crucial role of small and medium-sized enterprises (SMEs), the Chancellor announced an increase in the VAT registration threshold from £85,000 to £90,000 starting from 1st April 2024. For the de-registration from VAT, the taxable threshold has also increased, by the same amount, to £88,000.

Child Benefit

The Spring 2024 UK Budget contained two key points regarding child benefit:

  1. The income threshold at which the High Income Child Benefit Charge (HICBC) applies increased from £50,000 to £60,000 annually.  This means families with one parent earning less than £60,000 will now receive the full amount of child benefit.
  2. There are also plans for future reform; the government announced a consultation to explore assessing the HICBC based on household income instead of individual earnings. This reform is planned to be implemented by April 2026.

The current system has been criticized for being unfair, as two single parents each earning £49,000 would receive full child benefit, while a single parent earning £50,000 would not. Assessing the charge based on household income aims to address this disparity.

Capital Gains Tax

The Spring Budget also includes two changes relating to Capital Gains Tax (CGT) on property:

1. Reduced rate for residential property

The higher rate of capital gains tax (CGT) due on disposal of residential property will reduce to 24% (from 28%), beginning on 6th April 2024. This means that individuals selling a second home or investment property will pay a lower tax rate on their profits.

2. Abolition of the Furnished Holiday Let (FHL) regime

Announced for 6th April 2025, the budget proposes abolishing the FHL tax regime. This regime currently offers beneficial tax treatment for furnished holiday lets. Instead, all UK residents will be subject to the same capital gains tax rules on their rental income, regardless of whether the property is a long-term or short-term let.

Non-Domiciles: Scrapping of the Remittance Basis

The previous system, where ‘non-doms’ only paid UK tax on non-UK income and gains if they brought them into the UK (remitted), is being abolished entirely.

The reform aims to create a simpler and fairer tax system for individuals regardless of their domicile status. It also encourages spending and investment within the UK by offering temporary tax exemption on foreign income brought into the country.  This will be done by:

1. The introduction of a residency-based system

The new regime focuses on residence instead of domicile. Individuals arriving in the UK after April 2025 will be exempt from tax on foreign income and gains for their first four years of UK residence.

2. A transition period

Existing non-doms will have a transition period to adjust to the new system.

 

Final day to submit your Self-Assessment tax return

Today is the Tax Return Deadline!

TODAY is the Self-Assessment tax return deadline!

[As at 31 January 2024]: The 31st January is THE FINAL DEADLINE by which you need to file your Self Assessment tax return with HMRC. If you miss(ed) that deadline (11.59pm on 31st), you risk a £100 HMRC fine right away plus other significant penalties thereafter. Interest will also be charged from 1 February if tax is not paid by midnight on 31 January (rules apply).

Time is running out, so contact Taxfile for help with your tax return as soon as possible please. Book an appointment* with one of our helpful tax advisors and accountancy experts TODAY and we’ll make filling in and submitting your tax return simple!

020 8761 8000 Book Appointment Get Started Here

We’ll make filling in and submitting your tax return easy!

Don’t leave it to the last minute as there is always a bottleneck — come in as soon as you can, please, for professional help with filing of your tax return. We’ll require your records and figures for the financial year 6 April 2022 to 5 April 2023 unless you have a different accounting period. Plus any previous years not yet submitted, if applicable.

* As well as a face-to-face meeting, we can do a ‘virtual’ meeting with you, for example using Zoom video, Microsoft Teams, FaceTime, WhatsApp, Google Hangouts — or whatever suits you best.

It doesn’t matter if you have zero tax to pay – you still need to submit your tax return.

020 8761 8000 Book Appointment Get Started Here

* Please note: in busy times like January, a deposit may be required before appointments commence.

Saturday Appointments in December - Book Now for Tax Returns Etc.

Saturday Appointments in January – Book Now for Tax Returns Etc.

Saturday Appointments Available in January - Book Now for Tax Returns Etc.

Taxfile is open on Saturday mornings in January, by appointment. Saturdays might be useful if you need to see us for your 2022/23 tax return, or any other accountancy work, but can’t do it on a weekday. Saturday slots are limited; there are only 4 Saturdays available in January and opening times will be from 9am until 1pm. So, please book in today if a weekend appointment suits you — before slots are all taken. Late appointments are also available on Mondays, when we open until 6pm, or choose any other weekday if you can come earlier. Please see the footer of our website for latest opening times.

Book in on 0208 761 8000 or book your appointment online (here). We are happy to do virtual (video/phone) or physical appointments at our Tulse Hill office in Thurlow Park Road — whichever suits you best. Read more

Understanding Basis Period Reform for Self-Assessment Tax in the UK

Understanding Basis Period Reform for Self-Assessment Tax in the UK

 

Understanding Basis Period Reform for Self-Assessment Tax in the UK

Are you a sole trader or in a partnership? 

Do you have different accounting dates from the standard 6th of April to the 5th of Apri?

If you answered YES to both questions, some IMPORTANT changes will apply for the tax year 2023-24.

The concept of the basis period determines the time frame used to calculate taxable profits or losses for self-employed individuals, partnerships, and some trusts.  It marks a departure from the traditional “current year” basis, where business profits were taxed based on the accounting period ending within the tax year. Instead, it introduces a “tax year” basis, aligning taxable profits with the UK’s standard tax year, running from 6 April to 5 April. Read more