Each month we will be releasing a range of tax tips on topics that we feel you may find useful and informative. We understand that tax is complex and it’s sometimes difficult to get your head around all the different reliefs that are available to you.
If you’re looking for more guidance on any of the below topics then please contact Your Tax Partners and speak to one of our tax specialist who will be able to assist you and your query.
mail@yourtaxpartners.co.uk
01752 220979
February Tax Tips – Stamp Duty Land Tax (SDLT)
The 3% Additional Property Surcharge
The 3% surcharge applies on the purchase of ‘additional residential property’ such as holiday lets or second homes. The surcharge works by increasing the rate of SDLT by 3%, that’s an extra £3k SDLT for every £100k of property value.
Where there are multiple purchasers, only one purchaser needs to be caught by the 3% surcharge, and the entire purchase is subject to the additional charge.
Early action is key! At Your Tax Partners we can help you plan around this in the best possible way.
Group Relief of SDLT
SDLT is payable on the acquisition of property, this includes the transfer of land and buildings between companies.
Through the use of a government approved relief, Group Relief, were companies are connected it can be possible to reduce this charge nil!
Not everyone is aware of this relief. Before any transfers take place, Your Tax Partners can help determine if SDLT needs to be paid.
Trusts may remove SDLT charges
Trusts are a fantastic tool for long term family wealth protection, this includes the use of trusts to provide family members with land and buildings, either for investment or occupation.
Used correctly, a trust may be able to reduce the SDLT charge on the purchase of a residential property to nil.
Early planning is crucial! At Your Tax Partners we can help you review your options before any purchase is made, to ensure that the acquisition is made in the best way possible for you and your family.
March Tax Tips – Corporate Tax
Utilising Capital Allowances
Capital allowances are a type of tax relief that gives businesses relief on their tangible capital expenditure, by allowing it to be deducted against its annual taxable income. You can deduct some, or all, of the value of the item from profits before tax.
Businesses can begin claiming capital allowances tax relief on assets such as;
- Machinery
- Equipment
- Business vehicles (Cars, lorries and vans)
- Integral features within a building (electrical wiring, heating systems, water systems)
You can expect to gain up to full tax relief on any qualifying assets that you have. The level of relief available will depend on the type of asset purchased, and the date the purchase was made.
It’s good to note that there is no time limit on claiming capital allowances and as long as the asset is still owned and used within the trade you can make a claim.
EIS – Enterprise Investment Scheme
The government offers EIS tax reliefs to help encourage people to invest in early-stage businesses with high growth potential. This has it’s advantages as smaller businesses that develop into successful established companies contribute in creating jobs and helps to stimulate economic growth in the UK.
Investor in EIS can benefit from different tax reliefs if they invest into an EIS qualifying business. These include:
- Income tax relief
- Tax-free growth
- Loss relief
- Capital gains deferral
- Inheritance tax relief
EIS rules to be aware of:
- The business must have less than 250 employees.
- Your gross assets can’t exceed £15 million before investment.
- It mustn’t exceed more than £5 million annually.
- Over a lifetime it can’t exceed £12 million.
- The funds must be used to help deliver growth e.g. Increased revenue, number of employees.
- The trade cannot be more than 7 years old.
Not all companies can be included for the EIS scheme. Some are excluded such as those dealing in land, shares or commodities. To find out if your company can qualify for the EIS scheme contact your tax partners today.
SEIS – The Seed Enterprise Investment Scheme
The SEIS scheme is predominantly used for smaller and newer businesses to help them raise funds and grow.
Just like EIS, SEIS offers investors Income Tax and Capital Gains Tax incentives to invest in qualifying businesses. One notable difference with SEIS is that capital gains cannot deferred, but you can halve the capital gains tax that you owe.
To be a SEIS qualifying company you must be:
- A business less than 3 years old
- Have less than 25 employees
- Your gross assets total less than £350,000
- You can’t receive no more than £250,000 funding through using the SEIS scheme
Not all companies can be included for the SEIS scheme. Some are excluded such as those dealing in land, shares or commodities. To find out if your company can qualify for the SEIS scheme contact Your Tax Partners today.
April Tax Tips – Inheritance Tax Planning (IHT)
You do not need to pay inheritance tax on the first £500,000 you leave to other people
Every individual gets a £325,000 inheritance tax-free allowance and a further £175,000 main residence allowance. So, if the value of the estate (or anything that doesn’t go to a spouse/civil partner) is below £500,000, and your main residence is left to a qualifying direct descendant, there may be no inheritance tax to pay. This is also true if you leave everything over £325,000 to a charity or a community sports club.
If there’s tax for you to pay, your estate will normally be taxed at 40% on anything above the £325,000 and £175,000 allowances when you pass. Contact Your Tax Partners today if you’d like some advice with your Inheritance tax planning on 01752 220979.
Any unused inheritance tax allowance passes to your spouse
Any assets left to your spouse or civil partner will be exempt from IHT tax. Did you know that your spouse’s inheritance tax allowance rises by the percentage of your allowance that you didn’t use.
An Example: Mr and Mrs Miller have assets between them that are worth £600k. Mr Miller passes away first leaving everything to Mrs Miller, which means his £325,000 tax-free allowance is passed on plus his £175,000 main residence allowance. On Mrs Millers passing it is possible that no IHT will arise, as her total estate falls below their combined allowance of up to £1 million.
The executors of your Will after you pass will need to send specific documentation to HMRC within 2 years of your passing. You don’t need to do anything to settle this. Contact Your Tax Partners if you’d like some advice with your Inheritance tax planning.
When might you have to pay inheritance tax (IHT) on a gift
It’s good to note that inheritance tax is due to be paid on gifts that are given away less than 7 years before you pass if the below applies:
- The gift plus your remaining estate amount to more than the tax-free threshold (£325,000)
- The gifts are not considered ‘tax free’ gifts e.g. below the £3,000 annual exemption, or within the £250 small gifts allowance.
Gifts that are given away within 7 years before you pass will still add into your estate’s £325,000 tax-free allowance, however, the rate of Inheritance Tax payable on the gift does decrease after 3 years following a gift. Gifting to a loved one can be efficient Inheritance Tax planning.