Reading this could save you money
10 March 2014
"Any fool can make things bigger and more complex. It takes a lot of courage to move in the opposite direction."
The size and complexity of the UK tax legislation can appear daunting. Back in 2009 it was reported that the UK tax code, at more than 11,500 pages at the time, was the longest in the world. More recently, the Public Accounts Committee concluded that our tax law is “hopelessly complex” – back in 1988, it ran to a mere 1,246 pages!
At Springfords, we want to guide you through this labyrinth of legislation, and make your tax affairs as straightforward as possible by stripping away the complexities. To do this, good tax planning taken at the right time is vital - never more so than in the run up to the end of the tax year.
There may be a number of areas you’d like to discuss - you’ll probably notice some of them in the words and phrases above, but instead of bombarding you with a deluge of information on all these topics, we’d like to focus on some of the more common themes:
- Personal Allowances – will you ‘use them or lose them’?
- Capital gains – have you utilised your annual exemption where practical to do so?
- Annual Investment Allowances – for those in business, should you take advantage of 100% tax relief?
- Charitable donations – can you reduce higher rate tax costs and possibly carry back tax relief?
- Tax efficient investments – have you used your ISA entitlement, and would you consider Enterprise Investment Scheme or other similar tax efficient investments?
- Inheritance Tax – have you used your £3,000 annual exemption this year/last year?
- Married couples – could you transfer income generating assets to minimise tax costs?
- Business structures – if you’re self employed, have you considered becoming a partnership or incorporating?
- Profit extraction – are you minimising your exposure to higher rate tax, or is there a more economical way to extract income from your business?
There may be other annual tax planning areas that you want to look at (just give us a call if you’d like to discuss), but we’d also like to highlight some important tax changes which have effect from 6 April 2014, and which could impact on you or your family:
- Pension Funds – the lifetime allowance will reduce from £1.5m to £1.25m, and action may be required prior to 6 April 2014 to minimise the risk of a tax cost of up to 55% on retirement.
- Annual Allowance – the maximum annual pension contributions on which you can obtain tax relief will reduce from £50,000 to £40,000.
- Non-Residence - 2013-14 is the first year covered by the new Statutory Residence Tests – there may still be time to make changes to ensure a test is met prior to 5 April 2014.
- Partnerships – new legislation concerning the tax treatment of profit allocations in limited liability and mixed partnership structures will come into force.
- Capital allowances – changes will apply to capital allowance claims for fixtures in commercial buildings, which could restrict or even deny claims for relief.
- Principle Private Residence (PPR) Relief – the “final 36 months” capital gains tax relief available for certain second homes will reduce to 18 months for sales after 6 April 2014. If you own more than one home, this may be of relevance to you.
We have the understanding and knowledge to break down the technicalities of the tax legislation, making things clear when it comes to your tax affairs. If you’d like to hear some ‘straight talking’ on pre tax year end planning, just get in touch with your usual Springfords contact.
This is a general guide which is intended to give background information and is not a substitute for taking specific advice based on your particular circumstances.