BUSINESS
IF YOU FAIL TO ( TAX ) PLAN , YOU ARE PLANNING TO …
BY KEVIN THORNBY AT WILKINS KENNEDY
JANUARY HAS COME AROUND ONCE AGAIN AND WHILST YOU ARE BUSY PLANNING NEW YEAR ’ S RESOLUTIONS , YOU MIGHT WANT TO THINK ABOUT THE END OF THE TAX YEAR , WHICH IS FAST APPROACHING . THERE ARE MANY BASIC PLANNING POINTS TO CONSIDER AND MANY TAX CHANGES ON THE WAY COME 6TH APRIL , SO HERE ARE A FEW THINGS TO KEEP AN EYE OUT FOR .
MARRIAGE TAX ALLOWANCE Individuals can reduce their tax liabilities by yielding assets to a spouse or civil partner that has lower income . The Marriage Allowance lets you transfer £ 1,100 of your personal allowance to your husband , wife or civil partner and it can reduce tax bills by up to £ 220 in the tax year . If you were eligible for Marriage Allowance in the 2015 / 16 tax year , you can backdate your claim to 6th April 2015 and reduce your tax bill even further .
REVIEW DIVIDENDS From April 2016 the Government introduced a new rate of tax on dividends and the notional 10 % tax credit has now been abolished . A new £ 5,000 nil rate band has been applied so the exact rate of tax anyone pays on the rest of their dividend income will depend on the amount they receive and their other income in 2016 / 17 .
BUY TO LET PROPERTIES If you have a mortgage on a buy-to-let property , you can currently offset the interest against rental income when calculating profits , paying tax on the profit according to your income tax band . From April 2017 , new rules restricting tax relief on mortgage interest will be phased in over four years . Liabilities could increase considerably for higher rate payers , so now is your chance to consider some of your options . Look carefully at your projections for income and profit , and work out what is an acceptable return and consider scaling back on non-essential refurbishments . It may be that selling an element of the portfolio or restructuring the debt may be required , but before making decisions like these , I ’ d recommend contacting us in order to explore every option available to you .
DRIVING IN CHANGE You might consider changing your company car to a lower emissions vehicle to save tax . Benefit in Kind tax is calculated on the vehicle value and the emissions it produces and the amounts really can add up . By switching to an electric car , or similar , you could see your Benefit in Kind liabilities drop considerably compared to a fuel-powered vehicle . Assuming a list price of £ 55,000 of an electric vehicle , the 7 % benefit in kind would be just £ 3,850 . For a petrol car with average emissions of 124g / km that would be £ 11,550 . Compare this to a Mercedes , another popular choice of company car for many . Average list price is £ 36,000 – so around £ 19,000 cheaper than the electric car – however you are looking at a Benefit in Kind of 23 % for a diesel car with 115-119 g / km emissions . That ’ s a massive £ 8,280 , compared to electric ’ s £ 3,850 .
CARRY BACK CAPITAL GAINS If you sell an asset that has been used in your business and you realise a capital gain , that gain can be rolled over if you buy another qualifying business asset within three years . If a qualifying investment was made in 2015 / 16 you can match this with a gain on disposal of another qualifying business asset within 12 months to roll over the gain that would otherwise be taxed in 2016 / 17 .
REMEMBER TO KEEP ON GIVING ! Christmas has come and gone , but the gift of giving doesn ’ t need to wait until next year . You could consider making a donation to charity before 31st January 2017 to provide an early benefit to the charity . You can elect for the donation to be treated as made in 2015 / 16 to accelerate tax relief .
INHERITANCE TAX Speaking of charitable gifts , if you plan to leave a gift to charity in your Will , your family could save paying Inheritance Tax ( IHT ). IHT is payable on the chargeable value of your estate above £ 325,000 . A reduced rate of 36 % rather than the usual 40 % IHT applies when 10 % or more of the net estate is left to charity , but several types of assets qualify for 100 % relief from IHT once held for two years . To qualify for 100 % tax relief you could consider one of the following :
• Move your cash into a discounted gift trust
• Transfer your share portfolio from the stock exchange to qualifying unquoted shares
• Transfer your buy-to-let property to a qualifying business or agricultural asset
YEAR END TAX PLANNING There are many sensible steps that you can take ahead of the tax year to make use of valuable tax reliefs . Look out for our pre yearend tax planning guide which is due to be published towards the end of February , or get in touch with your local Wilkins Kennedy representative at one of our offices in Ashford , Canterbury , Maidstone , Orpington and Sandwich .
www . wilkinskennedy . com
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