sharon gravener partner graham doubtfire senior tax manager
TRANSCRIPT
![Page 1: Sharon Gravener Partner Graham Doubtfire Senior Tax Manager](https://reader037.vdocuments.mx/reader037/viewer/2022102906/56649c7c5503460f94930d36/html5/thumbnails/1.jpg)
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Sharon GravenerPartner
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Graham DoubtfireSenior Tax Manager
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Personal Allowances
2011/12 2012/13 2013/14 Personal (age under 65)* £7,475 £8,105 £9,205
Personal (age 65 to 74)** £9,940 £10,500 £10,500
Personal (age 75 and over) £10,090 £10,660 £10,660
*Income limit £100,000 £100,000 £100,000
**Income limit £24,000 £25,400 £25,400
** For 2013/14 Age Allowance frozen until it becomes the same as the basic Personal Allowance
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Other Personal Allowances
2011/12 2012/13 Married Couple’s Allowance* £7,295 £7,705
Married Couple’s Allowance** £2,800 £2,960
Blind Person’s Allowance £1,980 £2,100
2013/14 to be confirmed
* Tax relief restricted to 10% and is only available where at least one of the parties is born before 6 April 1935
** Minimum amount
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Personal Tax Bands
2011/12 2012/13 2013/14 10%* £2,560 £2,710 TBC
20% £35,000 £34,370 £32,245
40% / 32.5% £35,001-150,000 £34,371-150,000 £32,246-150,000
50% / 42.5% £150,001> £150,001> N/A
45% / 37.5% N/A N/A £150,000>
* Not available if non – savings income exceeds the 10% band limit.
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Quirks that this will create
Client with income of £43,875 (Salary £40,875, Bank interest £3,000)
2010/11 2011/12 2012/13
Tax £7,480 £7,560 £7,434
Payable as follows:
Deducted at source
PAYE £6,880 £6,680 £6,554
Bank interest £600 £600 £600
£7,480 £7,280 £7,154
Self Assessment –
Higher rate liability - £280 £280
Total £7,480 £7,560 £7,434
For 2013/14 the 40% rate will start at income of £41,450.
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Withdrawal of Personal Allowance
2011/12 2012/13 2013/14
Personal Allowance £7,475 £8,105 £9,205
Income Limit £100,000 £100,000 £100,000
Total loss of PA at: £114,950 £116,210 £118,740
Bryan from the Canine Partners Charity
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Effective Tax Rates – 2012/13
Marginal Rates
70%
60%
50%
40%
30%
20%
10%
0%
£0 - £34,370 £34,370-£100,000 £100,000-
£116,210£116,211-150,000
£150,001+
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Effective Tax Rates – 2013/14
Marginal Rates
70%
60%
50%
40%
30%
20%
10%
0%
£0 - £32,245
(20%)£32,246-£100,000
(40%)£100,001-£118,410
(60%)
£118,411-150,000 (40%)
£150,001+(45%)
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Trust Tax Rates
2011/12 2012/13 2013/14
Income Tax Standard Rate Band £1,000 £1,000 £1,000Dividends 42.5% 42.5% 37.5% Other Income 50% 50% 45%
Capital Gains Tax Annual exemption £5,300 £5,300 TBCGains before 23/06/2010 N/A N/A Gains on or after 23/06/2010 28% 28%
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National Insurance – Employed
2010/11 2011/12 2012/13
Primary threshold pa £5,715 £7,225 £7,605
Upper earnings limit pa £43,875 £42,475 £42,475
Employee’s main rate 11% 12% 12%
Employee’s additional rate 1% 2% 2%
Employer’s 12.8% 13.8% 13.8%
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National Insurance – Self Employed
2010/11 2011/12 2012/13
Class 2 pw £2.40 £2.50 £2.65
Class 4 lower profits limit £5,715 £7,225 £7,605
Class 4 upper profits limit £43,875 £42,475 £42,475
Class 4 8% 9% 9%
Class 4 additional rate 1% 2% 2%
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Impact of Tax and NIC Changes
Employee earning £100,000 salary, paid £20,000 bonus
2010/11 2011/122012/13
Income Tax £10,590 £10,990 £11,242
NIC £200 £400 £400
Total tax and NIC employee £10,790 £11,390 £11,642
Employer NIC £2,560 £2,760 £2,760
2013/14 - NIC not announced.
2013/14 - Income Tax would increase by £440 to £11,682
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Impact of Tax and NIC Changes
Salary 2010/11 2011/12 2012/13
£60,000 £18,289 £18,591 £18,419
£110,000 £40,789 £41,591 £41,419
£180,000 £73,079 £74,980 £75,061*
*2013/13 NIC changes not announced
Income Tax will fall by £1,500
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Personal Pension Contributions
2010/11 2011/12 2012/13 Annual allowance £20,000 £50,000 £50,000
Lifetime allowance £1,800,000 £1,800,000 £1,500,000
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From 6 April 2011 and no change for 2012/13
• Marginal rate tax relief continues
• Annual contribution allowance restricted to £50,000
• Unused allowance carries forward for 3 years
• Excess contribution charge
BETTER THAN 2010/11! - STILL TIME FOR 2011/12
Pension Contributions Relief
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Venture Capital Trusts
2011/12 2012/13
Maximum investment in quoted companies £200,000 £200,000
Income Tax Relief 30% 30%
Dividends on shares are exempt from Income Tax
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Enterprise Investment Schemes
2011/12 2012/13
Maximum investment in unquoted companies £500,000 £1,000,000
Income Tax Relief 30% 30%
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Enterprise Investment Scheme and Venture Capital Trust Examples
Client with pension income of £200k per annum.
Income Tax liability of approx £52,500 per annum.
Commitment of approx £175k per annum to EIS and VCT investments. Over a 6 year period this means committing capital of just over £1m. Unless tax legislation changes or investments don’t perform as planned client
will be able to benefit from a nominal tax liability each year.
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Enterprise Investment Scheme and Venture Capital Trust Examples
Client with Self Employed income of £20k per annum. Income Tax liability of approx £2,500 per annum. Commitment of approx £8k per annum to EIS and VCT investments. Over a 6 year period this means committing capital of £48k. Unless tax legislation changes or investments don’t perform as planned client will be able to benefit from a nominal tax liability each year.
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Tax and NIC changes – is that the end...?
Child Benefit for high earners • Will continue to be paid in full
• Once one householder has income of £50k+ tax charge of 1% of the Benefit received per £100 of income over £50k
Effect – taxpayers with income of more than £60k will have a tax charge equal to the Child Benefit
Alternatively they can elect for the benefit not to be paid
HMRC will contact people earning over £50k in Autumn of 2012
What about people who move from less than £50k to more than £50k?
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Child Benefit changes for high earners – real impact example
Client has salary of £50k
2 Children so £1,752 Child Benefit received
Bonus paid of £5k
Income Tax £2,000
NIC £100
Loss of Child Benefit £876
(£1,752 x 50%)
Total Tax, NIC and loss of Benefit £2,976
Effective “Tax” rate 59.52%
Those with more than 2 Children will face an even higher effective tax rate
HMRC estimate this will affect 1.2 million families
Likely to be dealt with via the tax return or PAYE code adjustments.
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Capital Gains Tax
2011/12 2012/13
Annual exemption £10,600 £10,600 Basic Rate 18% 18%
Higher Rate 28% 28%
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Inheritance Tax Exempt Gifts
Annual Gift £3,000*
Individual allowance £250
Gifts in respect of marriage • Parent £5,000• Party to the marriage £2,500• Any other person £1,000
* You can also use the previous year’s allowance if that has not been used
Regular Gifts out of surplus income – only limited by income
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Inheritance Tax
2010/11 2011/12 2012/13
Nil Rate Band £325,000 £325,000 £325,000
Non Domiciled Spousal Exemption £55,000 £55,000 £55,000
Death Rate 40% 40% 40%
Lifetime Rate 20% 20% 20%
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Inheritance Tax
Chargeable Estate £1,000,000 £2,000,000
(After 6 April 2012)
IHT due if no donation £400,000 £800,000
IHT due if donation > 10% of Estate £324,000 £648,000
Effective IHT relief for donation 76% 76%
Reduction in beneficiaries’ inheritance £24,000 £48,000
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Domicile & Residence
Review of Non – Domiciled individuals living in the UK
From 6 April 2011 and no change for 2012/13
• Relaxation of Visa rules for entrepreneurs and investors coming to the UK
• From 6 April 2013 a statutory residence test will be introduced
• Ordinary residence will be abolished and overseas workday relief available
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Remittance Basis Charge
Non Domiciled in UK
• £30,000
• Unremitted income/gains > £2,000
• UK resident 7 of last 9 tax years
• No tax charge when non-domiciles remit for the purpose of
commercial investment in UK business
• Changes from April 2012
Increase £30,000 tax charge to £50,000 for individuals who have been UK
resident for 12 of the last 14 tax years
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Pre Year end Income Tax planning
• Review split of income between spouses – is now the right time to form a Limited Company or Partnership – consider Child Benefit changes
• Look at your employment package and how income is taken from your company
• Maximise pension contributions – are you claiming all the relief due?
• Consider Enterprise Investment Scheme and Venture Capital Trust investments – they are not just for the wealthy
• Do you need to file a Tax Return?
• Review your Will – is IHT planning now appropriate?
• Plan ahead for next year and changes occurring on 6 April 2013.
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Jason FayersPartner
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Corporation Tax Rates
From 1 April 2011 2012 2013 2014
Main Rate 26% 24% 23% 22%
Small Companies Rate 20% 20% 20% 20%
Marginal Rate 27.50% 25% 23.75% 22.50%
Compared to 2006 rates: Main Rate = 30%
Marginal Rate = 32.75%
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0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
Historical Corporation Tax RatesSmall companies' rate
Marginal rate
Main rate
Financial year commencing 1st April
%
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Research & Development Tax Relief
Background • Introduced in 2000 for SMEs• Overall advance in science or technology• Government target: R&D 2.5% GDP by 2014
Qualifying revenue expenditure • Staff costs• Software, materials and consumable items• Fuel, power and water• Subcontracted expenditure
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Research & Development Tax Relief
From 1 April 2012
• Tax deduction % of qualifying revenue expenditure:
SMEs – 225% (200% before)
Large – 130% (130% before) • 100% ECAs for capital expenditure• Surrender loss for 12.5% tax credit
Relaxation of restrictions to relief
• £10,000 minimum spend limit abolished• PAYE and NIC cap removed
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Patently Good
• Profit attributable to patents taxed at 10%
• From April 2013
• Applies to existing and new patents
• Includes purchased patents
• Reduced rate applies to Capital Gain on sale
The first pair of training shoes ever made were invented and developed in 1892
by the Colchester Rubber Company of Colchester, Connecticut.
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Pandora’s Box?
• Company must be legal owner
• Election required for rate to apply
• Not as good as some other EU countries
• Can be complicated calculations
• Only to patents granted by UK or EU
Khalid Yafai (left) from Birmingham and Andrew Selby from Wales
trade blows at their Olympic box-off at York Hall in London.
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Capital Allowances
2011/12 2012/13
Annual Investment Allowance £100,000 £25,000
WDA 20% 18%
Special Rate 10% 8%
Hybrid rates to consider
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Enhanced Capital Allowances
Qualifying expenditure
• Energy-saving plant (Energy Technology List)• Low emission cars – 95g/km from 1 April 2013• Zero emission goods vehicles• Environmentally-beneficial plant (Water Technology List)
Tax Credits
• Scheme extended for further 5 years from 1 April 2013• Surrender losses attributable to qualifying expenditure• 19% tax credit capped at greater of:
Total PAYE and NIC £250,000
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Capital Allowances
Company Cars changes
Current – w.e.f 1 April 2012 Proposed – w.e.f. 1 April 2013
Capital Capital
Emissions Level Allowances Emissions LevelAllowances
Low < 110g/km 100% FYA’s Low < 95g/km 100% FYA’s
Medium 111 – 160g/km 18% WDA’s Medium 96 – 130g/km 18% WDA’s
High > 160g/km 8% WDA’s High > 130g/km 8% WDA’s
100% FYA’s on low emission cars to be extended to 31 March 2015
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Company Cars
Leasing a Car
Proposed rules – w.e.f. 1 April 2013
• Restriction will apply to high emission cars > 130g/km
• Currently > 160g/km
• 15% disallowance of lease costs will still apply
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Is the company car tax efficient
• Low CO2 emissions
• Electric cars and vans / zero emissions 0% benefit in kind
Up to 75g/km 5%
< 99g/km 10%
• 100-104g/km 11%
(Rise of 1% for every 5g/km thereafter)
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Is the company car tax efficient
• Reva G-Wiz• 0g/km Co2 Cost £15,000 • 228 miles per gallon
Vauxhall Ampera
27gkm Co2 Cost £29,995
235 miles per gallon
• VW Polo 1.2 TDI 75PS Blue Motion• 89gkm Co2 Cost £10,085• 83 miles per gallon
Citroen C1
109gkm Co2 Cost £8,000
61 miles per gallon
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Car and Van Fuel Benefit
Car
2011/12 £18,800 x multiplier %
2012/13 £20,200 x multiplier %
2013/14 onwards Multiplier increased by 2% above inflation
Van
2011/12 Multiplier is £550
2012/13 Multiplier frozen at £550
2013/14 Increased by inflation
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Employee Share Ownership
• To be reviewed / simplified
• Enterprise Management Incentive Scheme (EMIS)
Limit for options up to £250k Growth subject to Capital Gains Tax Entrepreneur relief = 10% tax rate
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Sowing the SEED (EIS)
• Commences 6 April 2012
• Small, early stage company seeking investment
• Relief given to investor
• Similar rules to EIS
• Eligibility requirements must be met
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Acorns…
Company:
• Qualifying trade must be <2 years old
• Existence requirements
• UK resident
• Unquoted
• Gross assets up to £200k before investment
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… to Oaks
• <25 Employees
• Company cannot be members of a partnership
• No EIS or VCT investment prior to SEIS
• Max SEIS < £150k cumulative
Team GB Beijing 2008
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It’s a gardeners world
Investor:
• Potential Tax Relief of 78% for 2012/13
• Max invest £100k
• Tax exemption on 2012/13 reinvested gains
• Current Employee No Director Yes
• <30% interest in company
• Future sale exempt from CGT
Beijing 2008
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Jack’s golden egg
Jack, a higher rate tax payer, makes a gain in 2012/13 - £100k
Invests the full amount into SEIS
£
CGT saving (100k x 28%) 28k
SEIS IT Relief (100k x 50%) 50k
Net cost to Jack 22k
Jack Green GB Hurdles hopeful
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Entrepreneurial Baby Dragon
• Young person’s entrepreneurs loan
• Similar basis to students loan
• Low interest rates
• Payback when earning one set amount
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VAT
• Registration threshold £77k
• De-registration threshold £75k
• Rates unchanged
Straightening of VAT treatment
• Listed building alterations
• Repairs to all buildings
• Self-storage
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VAT Loophole Closures
• Hairdressers’ chair rental
• Sports nutrition drinks
• Hot food
• Holiday caravan purchase
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SDLT
Residential Non Residential
Upto 125k Nil Upto 150k Nil
125k - 250k 1% 150k - 250k 1%
250k - 500k 3% 250k – 500k 3%
500k – 1m 4% Over 500k 4%
1m – 2m 5%
Over 2m 7%
15% Payable over £2m if corporate ownership
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GAAR
• General Anti-Avoidance Rule
• Crack-down on tax avoidance schemes
• Enable HMRC quick reaction
• IR35 Simplification
Denis Oswald (above), Chairman of the London 2012 International Olympic
Governing Body and Colin Moynihan, British Olympics Association, enforce the rules.
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GAAR – Toothless smile?
• Ambiguous?
• Is any planning outside scope?
• Increase in court cases?
The many smiles of Michael Phelps, USA
8 Gold medals in Beijing 2008
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Unlimited Tax Relief?
• Not from April 2013
• Cap to apply, greater of
£50k, or
25% of Income
• What is caught?
First Figure Skating Event 1908 - Madge Syers first Women’s Olympic
Figure Skating Champion before ice skating was moved to the ‘Winter’
Olympics in 1924
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Cut out the red tape!
• Integration of Income Tax and NI
• Small businesses - cash basis
• Expenses for cars, motorcycles and home
• Disincorporation relief
CONSULTATIONS
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Tax Administration
• Tax transparency
• Real time information
• PAYE penalties reform
• Wider powers for criminal investigation
• Tax agents – dishonest conduct?
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Andrew EdgePartner – Head of Financial Planning Department
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Agenda
Tax efficient investments
Individual Savings Accounts (ISAs) Venture Capital Trusts (VCTs) Enterprise Investment Schemes (EISs)
Pensions
Inheritance Tax Planning
Action points
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ISA Allowances – From 6 April 2012
• Annual allowance increased from £10,680 to £11,280
• Up to £11,280 into an Investment ISA
• Or up to £5,640 into a Cash ISA with the balance up to £11,280 into an Investment ISA
• Cash ISA rates - 3%. Higher rates for longer term accounts
• You can switch Cash ISA to Investment ISA but not other way round!
• Tax incentives re growth & income
• Junior ISAs launched 1 November 2011 – up to £3,600 in each tax year for anyone under age 18. Cash ISAs also available for 16 & 17 year olds in addition!
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Enterprise Investment Schemes
What is an EIS?
• Government initiative- encourage investment in smaller companies
• 30% tax relief• Tax free growth after 3 years• Allowable investments - £10,000 to £1m (wef
06.04.2012)• Carry back (1 year) option• Inheritance tax-free after 2 years• Seed Enterprise Investment Scheme (SEIS)
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Venture Capital Trusts
What is a VCT?
• Government initiative- encourage investment in smaller companies
• 30% tax relief available up to max £200k investment
• Tax-free dividends
• Helps to finance vital part of UK economy
• No IHT exemption
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VCTINCOME TAX
RELIEF
Tax Advantaged Investment
EIS
MAX INVESTMENT
MINIMUM TERM
DIVIDENDS
GROWTH
CGT DEFERRAL
IHT EXEMPTION (BPR)
30%
£200,000
5 YEARS
TAX EXEMPT
TAX EXEMPT
NO
NO
30%
£1,000,000
3 YEARS
TAXED
TAX EXEMPT
YES
YES
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EIS and ISA Combination
£37,600EIS
£11,280Tax
Relief
EIS accessible after three years
tax free
£37,600EIS
£11,280Tax
Relief
EIS accessible after three years
tax free
ISAs fully accessible
– no tax
£11,280 = ISA 1 £11,280 = ISA 2
Result : 60% Increase In Value
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Result : 90% Increase In Value
£20,000EIS
£6,000Tax
Relief
EIS accessible after three years tax free
£6,000Pension
£1,500BR Relief
£1,500HR Relief
£20,000EIS
£6,000Tax
Relief
£6,000Pension
£1,500BR Relief
£1,500HR Relief
EIS accessible after three years tax free
Retirement Income Boosting
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Restricting Pensions Tax Relief
• Maximum annual allowance restricted to £50,000 from 6 April 2011
• Tax relief available at individual’s highest rate
• Employee taxed on excess payments
• Carry forward of un-used pension payment allowances – reintroduced 6 April 2011
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Carry Forward of Unused Payments
2011/12
£100,000
2012/13
£50,000 £40,000
2011/12
£30,000 2011/12 +
£20,000 £50,000
2008/09 2009/10 2010/11
£20,000 £20,000 £20,000
Unused Unused£10,000 £30,000
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Watch – Pension Input Periods
Pension Input Period
2011/12 2012/13
6 January 2012 5 January 2013
£100,000 6 January 2012
£90,000post 6 April 2012
5 April 2012
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Pension Changes
From 6 April 2012
• No tax changes announced
• Lifetime allowance reduced from £1.8m to £1.5m
• Contacting out of the State Second Pension (S2P)
- ceases with effect from 6 April 2012
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National Employment Savings Trust (NEST)
• Phased implementation from 1April 2014 to 1 April 2017 dependent on
number of employees
• Compulsory Pension funding for employers & employees
• Employers have to automatically enrol employees
• Employees have to opt out
• For earnings above £7,475 p.a.
• Budget for this additional cost
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NEST – Compulsory Contributions
Employee Pays ** Employer Pays
Before 1 October 2017 1% 1%
From 1 October 2017 3% 2%
From 1 October 2018 5% 3%
** Less tax relief
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Inheritance Tax
From 6 April 2012
• No changes to what we already know!
• Make full use of annual allowances available
• Consider inheritance tax efficient investments
• Our Inheritance Tax Solutions handbook – 13 case studies
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Summary – Planning Ideas
• Maximise ISAs before 5 April 2012 – Cash to Investment ISA?
• Consider EIS/VCT for tax planning and ISA allowance and/or pension funding
• Maximise pension allowances before 5 April 2012
• Consider carry forward allowances and review current Pension Input Periods to avoid any excess payment tax charges
• Cap on unlimited reliefs from 6 April 2013 – not for EIS/VCT/ pensions!
• 13 IHT solutions – ask for a copy of our IHT case study pack
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Compliance slide
The purpose of this presentation is to provide
generic technical training. It should not be taken as recommendations or advice on specific products
(or providers).
It is based on Scrutton Bland Limited’s understanding of current law and Inland Revenue practice, which may be subject to future variation.
Scrutton Bland Limited is authorised and regulated
by the Financial Services Authority
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Andrew StricklandPartner
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Government Net Debt
£bn % of GDP
2009/10 766 52.5%
2010/11 905 60.5%
2011/12 1,039 67.3%
2012/13 1,159 71.9%
2013/14 1,272 75.0%
2014/15 1,437 76.3%
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Economic Growth
Increase in GDP %
2010 2.1%
2011 0.8%
2012 0.8%
2013 2.0%
2014 2.7%
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Government Net Debt Weighted Average Funding Cost
2010/11 2.8%
2011/12 2.2%
2015/16 3.5%
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The Cash in UK Plc
Non-bank corporates £700 bn
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GAAR
St George and his Dragon…?
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Corporation Tax
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Dividend v Bonuses
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Capital Gains TaxEntrepreneur’s Relief
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Sharon GravenerPartner
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Feedback
We value your views
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Thank you for coming