Making the most of it B E T 2 1 4 Lesley Sutton & Rhona Graham
LARGE RED BOX FOR TEXT The Revell Ward App We’ve got an App for that…
Making the most of it B E T 2 1 4 Lesley Sutton & Rhona Graham
LARGE RED BOX FOR TEXT Do you remember Mr Hall? Last year we introduced you to Mr Hall, Mr Hall is the majority shareholder in Hall Street Ltd, a family engineering business. At this years planning meeting Mr Hall told me: ? “ I’m not really interested in the Budget this year I don’t think there will be anything in it for me ! The Chancellor will be saving any good news for Setting the Scene next years pre-election Budget. “
Mr Hall & Other Individuals LARGE RED BOX FOR TEXT I individuals & Other Mr Hall
LARGE RED BOX FOR TEXT Mr Hall’s thoughts “ I want to know that I am not paying more than my Thoughts of a business owner fair share of income tax. When I speak to ? others I always seem to be paying more than them ! “ Yes this sounds familiar Lets look at the changes coming into effect and the tax saving opportunities available to Mr Hall
LARGE RED BOX FOR TEXT Key Changes Basic personal allowance will increase to £10,500 by 2015/16 Married couples – transfer of personal allowance Restrictions on pension tax relief but increased access to pension pot Beneficial changes for savers New social investment tax relief Key Changes
LARGE RED BOX FOR TEXT Rates and Allowances – 2014/15 2014/15 2013/14 Change Rates and Allowances – 2014/15 Personal allowance: Age 65 and under £10,000 £9,440 £560 Aged 65-74 £10,500 £10,500 Nil Aged 75 & over £10,660 £10,660 Nil 2014/15 2013/14 Tax bands: Basic rate 20% 0 – £31,865 0 – £32,010 Higher rate 40% £31,866 – £150,000 £32,011 – £150,000 Additional rate 45% Over £150,000 Over £150,000 Higher rate threshold £41,865 £41,450
LARGE RED BOX FOR TEXT Rates and Allowances – 2015/16 2015/16 2014/15 Change Rates and Allowances – 2015/16 Personal allowance: Age 65 and under £10,500 £10,000 £500 Aged 65-74 £10,500 £10,500 Nil Aged 75 & over £10,660 £10,660 Nil 2015/16 2014/15 Tax bands: Basic rate 20% 0 – £31,785 0 – £31,865 Higher rate 40% £31,786 – £150,000 £31,866 – £150,000 Additional rate 45% Over £150,000 Over £150,000 Higher rate threshold £42,285 £41,865
LARGE RED BOX FOR TEXT Married Couples From April 2015, transfer personal allowance to spouse or civil partner Entitled to transfer £1,050 of personal allowance Basic rate taxpayers only Maximum benefit is an income tax reduction of £210 ! How do you claim if not under self assessment – more details to Married couples follow?
Watch out for the cliff edges! LARGE RED BOX FOR TEXT 2014/15 Watch out for the cliff edges! 2013/14 Bands Income Rate of tax Notes (Dividends) Basic rate £10,000 - £41,865 20% (10%) Higher rate 1 £41,866 - £50,000 40% (32.5%) Higher rate 2 £50,001 - £60,000 40% (32.5%) 1 Higher rate 3 £100,001 - £120,000 60% (52.5%) 2 Higher rate 4 £120,001 - £150,000 40% (32.5%) Additional £150,000 + 45% (37.5%) rate Notes: 1. Claw back of child benefit payments kicks in – 1% of child benefit received for every £100 of income between £50,000 and £60,000. 2. Claw back of personal allowance – restricted by £1 for every £2 of income above £100,000 – actual will vary depending on level of income
LARGE RED BOX FOR TEXT Yet more pension changes From April 2014: Annual allowance for tax relief on pension contributions reduces from £50,000 to £40,000 Lifetime allowance also reduces from £1.5m to £1.25m Yet more pension changes Proposed from April 2015 to those aged 55 and over: Removal of requirement to buy an annuity - can take all pension in cash – 25% tax free balance taxed as income Subject to consultation ! Speak to your pensions advisor for further details
LARGE RED BOX FOR TEXT Benefits for savers From July 2014: Massive reforms to ISAs, which now become NISAs Limit increases to £15,000 , junior ISA increased to £4,000 Simplified – stocks, shares and cash merged together, no lower limit on cash invested From January 2015 - Pensioner bond for >65s launched by Benefits for savers NS&I paying leading market fixed rates – further info to follow From 6 April 2015 - £5,000 of savings income taxed at 0% if earnings less than £15,500
LARGE RED BOX FOR TEXT Social Investment tax relief Individuals who make qualifying investments into social enterprises – new shares or loans Social enterprises – social objectives at core, variety of sectors. Limits on size of business and number of employees Social investment tax relief Income tax relief at 30% on up to £1 million per tax year (TBC) with carry back facility Capital gains tax deferral relief available After three year holding period sale of investment capital gains tax free.
LARGE RED BOX FOR TEXT Further tax saving ideas discussed with Mr Hall Review remuneration structure – dividends still preferable to salary for an OMB – fall in corporation tax rate increase in NIC Tax saving opportunities Consider making pension contributions or charitable donations to manage ‘cliff edges’ Transfer income producing assets to use up lower rate tax bands E.g. Shares in limited company, rental properties
LARGE RED BOX FOR TEXT Further tax saving ideas discussed with Mr Hall Consider tax advantaged investments such as enterprise investment scheme ‘EIS’, Seed EIS and new social investment tax relief Tax saving opportunities Children over 18 – consider tax efficient funding of university studies via gift of shares If children are under 18 – grandparents only
LARGE RED BOX FOR TEXT Dividends v Bonus 2014/15 Small Co Marginal Co Large Co 45% Dividend 44.4% 45.31% 45.14% Bonus 53.4% 53.4% 53.4% 40% Dividend v Bonus Dividend 40% 40.94% 40.75% Bonus 49% 49% 49% By paying a dividend savings of up to 9% can be achieved Remember: A basic rate taxpayer has no additional tax to pay on the receipt of a dividend
LARGE RED BOX FOR TEXT Tax efficient investments SEIS EIS SIR Income tax 50% on investments of 30% on investments 30% on investments up to £100,000 of up to £1 million of up to £1 million (TBC) Dividends paid Taxable Taxable N/A Tax efficient investments Capital gains tax Shares exempt on sale if Shares exempt on Shares exempt on held for 3 years sale if held for 3 years sale if held for 3 years Capital gains tax Yes Yes Yes deferral Reinvestment of gains made 12/13 & 13/14 are Deferral only Deferral only exempt CGT Connection 30% including 30% including 30% including associates associates associates IHT 100% BPR 10% BPR TBC
Mr Hall & Other Individuals LARGE RED BOX FOR TEXT Hall Street Limited B Taxes usiness Company &
LARGE RED BOX FOR TEXT Mr Hall’s thoughts “ Companies / LLPs / sole traders I don’t understand Thoughts of a business owner the difference – but I want to know that I have the ? most tax efficient structure, and that I am getting all the reliefs that my company is entitled to “ Ah yes a common concern Lets consider the latest on business structures and the reliefs that are still available to mitigate business taxes.
LARGE RED BOX FOR TEXT Key Changes Continued reduction in rates of corporation tax Annual Investment allowance increase to £500,000 Loans to shareholders and directors Review of business structures - partnerships only Improvements to research and development tax credits Key changes
LARGE RED BOX FOR TEXT Rates of Corporation Tax Financial Year Main Rate Small Profits Rate Marginal Rate From 1 April Profits in excess Profits up to Profits £300,000 - Rates of Corporation Tax of £1.5 million £300,000 £1.5 million 2013 23% 20% 23.75% 2014 21% 20% 21.25% 2015 20% 20% 20% NB: No marginal relief calculation and no complex rules to establish number of associated companies
LARGE RED BOX FOR TEXT Annual Investment Allowance Annual Investment Allowance Annual Investment Allowance From 1 January 2013 to 31 March 2014 £250,000 From 1 April 2014 until 31 December 2015 £500,000 From 1 January 2016 £25,000
LARGE RED BOX FOR TEXT Other Capital Allowances Type 2014/15 2013/14 Details Enhanced 100% 100% Energy saving / efficient plant & machinery Capital Allowances – other Business Premises 100% 100% Bringing unused commercial renovation property back into use before 31.3.17 Selected ECA sites 100% 100% Extended to 31 March 2020 in enterprise zones Landlords energy £1,500 per £1,500 per Installing certain energy saving saving dwelling dwelling items before 1.4.15 Standard capital Plant and machinery / fixtures allowances 18% 18% and fittings Integral features Specific items installed in and / or long life 8% 8% building E.g. lifts assets
LARGE RED BOX FOR TEXT Loans to shareholders and directors – watch out! Loans to shareholders and directors Standard rule – loans attract charge to corporation tax at 25% if not repaid within nine months of company year end Rules changed for loans made after 20 March 2013 to prevent bed and breakfasting - ability to clear loan account and redraw the cash a week later If loan cleared by taxable dividend or salary new rules do not apply
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