Budget Summary 2012

I felt quite patriotic as we watched the Chancellor deliver a Budget Speech designed to encourage investment back into the UK. In today's post I will just provide you with the main points to take away from the speech however HMRC release detail notes, guidance and additions that were not mentioned in the speech itself. These get released tomorrow so Friday I will update the blog again to inform you of aspects such as pensions, SEIS and further tax reliefs mentioned in the proposed first draft of the legislation.

Main points to take away from the Budget Speech are as follows:

• From April 2013 Personal Allowance will be increased to £9,205
• The 50% tax rate is to be reduced to 45%
• Age Related Personal Allowance is to be phased away
• Child Benefit will be gradually tapered away for those that earn £50,000 at 1% deduction for every £100 over the limit, resulting in when someone earns £60,000they will not be entitled to child benefit
• Main rate of Corporation Tax to be reduced to 24%
• Stamp Duty Land Tax increased to 7% on properties valued at £2 million or over.
• Stamp Duty Land Tax charge of 15% on properties bought under a 'corporate envelope' i.e. a company
• Single Tier Pension of £140 to be brought in, consultation on this over the summer
• A general anti avoidance law to be brought in, consultation on this over the summer
• £50,000 capped amount of income tax relief available at 25% of overall income total. More details to follow on the guidance of this

The personal allowance increase is good but in reality you only will be getting around £20 pounds a month.  The phasing out of age allowance means middle tier pensioners will be hit harder as this will not keep up with inflation and the stamp duty land tax charges may see foreign suitors stop investing in UK attractive properties

As mentioned above before giving a detailed tax review I need to wait till HMRC release their budget guidance tomorrow.

Thank you for reading my blog and please feel free to pass it on !

Mitch the Tax Man

mitch@ljd.uk.com

My Predictions for the 2012 Budget

Very exciting times in the tax world as the budget approaches for yet another year. The Chancellor will unleash the budget one week from today (Wednesday 21st March) but what does he have in store for us? Today's blog post I will focus on 5 key topics I predict the Chancellor to bring up:

1. Pension

One can still obtain higher tax relief on pensions and the current 3 year carry back rule mean an individual can benefit from £50,000 contributions over a 3 year period and get relief on this. I predict Osborne to reduce the limits on pension contributions and potentially restrict the relief to 20%.

2. SEIS

As mentioned last month in my blog the new SEIS tax relief will be announced. The first draft of the legislation restricts the amount an investor can invest to £100,000 or £150,000 over 2 years but I have a sneaky feeling the government may relax these rules even further. The investor will be able to get an astonishing 50% tax relief/tax deduction on their investment. If you know of any start-up companies start investing!

3. Stamp Duty Land Tax Avoidance

I have been approached to get involved with these schemes over the past year but I have always turned down the opportunity because I believed it was only a matter of time before the government will crack down on them and that is exactly what I predict to be announced in the budget. HMRC will start issuing investigations into all these schemes.

4. Real Time Information

This is going to come in and Businesses need to be aware of it. "Real Time Information (RTI) is a priority Government programme aimed at improving the operation of Pay As You Earn (PAYE). It will make the system better for individuals and easier for employers and HM Revenue & Customs (HMRC) to operate. It also supports the introduction of Universal Credits." HMRC. They want every form submitted online on a monthly basis to do with your employees and PAYE operation. More will be announced in the budget

5. Child Benefit Allowance

I believe the original plan to stop child benefit allowance for households that have to total income of just over £40,000 is too tight and has already caused some unrest. I predict there will be a restriction on child benefit allowance but they might increase the total household income to nearer £60,000.

I am excited for this budget and as stated I am interested to hear more of the 50% tax reliefs and other tax incentives the government might have for us.

I will be analysing the budget next week on my blog

Thank you for reading

Mitch the Tax Man

My Second Article in the Daily Express

It is amazing what can come from some twitter banter. As my regular regular readers know I am trying to build up my own client base at the moment. I use Twitter as a marketing tool and when I asked Annie Shaw (@cashquestions) to retweet my blog she responded with some sarcastic remark. We had some exchanges on twitter that eventually led to emails and now she has helped get my second article in the Daily Express. I will forever be grateful to Annie and it just goes to show keep trying and you will succeed.

I thought this week I would share the subject of the article in case you missed Wednesday’s edition of the Express.

Q I am selling part of my garden so a bungalow can be built. The land is worth about £150,000. What tax would apply to the sale?

A Mitch Young from LJD Chartered Accountants in Elstree, Hertfordshire, says: “You may not have to pay tax on the sale but this will depend on the size of the land.

“The capital gains tax exemption for a main residence includes grounds not exceeding half a hectare (about 1.25 acres) or a larger area which is appropriate to the size and character of the house.

“If you sell some of the land, perhaps for development, the sale may be covered by the exemption if the land was used as part of the garden and grounds and is sold either before the sale of the house or at the same time.

“If your garden and grounds exceed half a hectare you are unlikely to be entitled to relief for all of it. The area for which you are entitled to relief is called the permitted area, which is that part required for the reasonable enjoyment of your dwelling as a home. The size and character of your dwelling house is taken into account.

“If the portion of the land does not qualify for the exemption then you are likely to be subject to capital gains tax on the gain, at either 18 per cent or 28 per cent, depending on your total income for the tax year.”

I am hoping for more opportunities with the Express and I am working on pitching for a regular tax tips column. Watch this space.

In the meantime I would love to speak with any football agents out there. Do you have any contacts you could introduce me to?

If you have any questions or require tax assistance please get in touch mitch@ljd.uk.com

Thank you for reading, have a great weekend

Mitch the Tax Man

Do you need to complete a tax return?

I have had a decent week meeting potential new clients all around London. I have been dealing with quite a number of city bankers recently and a question that I often get asked is "do I need to complete a tax return if my I am taxed at source"? I thought it would be a good idea to simplify the answer in this week’s blog post.

If HMRC has written to you with a request to complete/file a tax return then quite clearly you need to complete one aside from that obvious one here is a list of the most common situations where HMRC require you to register for self assessment:

1. Self Employed
2. Company Directors
3. Income is above a certain level from savings, investments and property
·         £10,000 or more income from savings and investments
·         £2,500 or more income from untaxed savings and investments
·         £10,000 or more income from property (before deducting allowable expenses)
·         £2,500 or more income from property (after deducting allowable expenses)
·         annual trust or settlement income on which tax is still due (even if you’re only treated as receiving this income)
·         income from the estate of a deceased person on which tax is still due
4. Income from Overseas
5. Claiming certain reliefs such as EIS/VCT
5. Capital Gains arising
6. Trustees
7. Aged over 65 and have a reduced age allowance
8. YOU EARN ABOVE £100,000

This list is not exhaustive but provides you with the most common scenarios.

The one I want you to focus on is number 8. The majority of people I come across that earn above 100k and are taxed at source do not complete a tax return because they believe they do not have to register. Well you do!! Register ASAP to avoid further penalties and surcharges.

Last week I helped my new client register and file his tax return before the end of the month managing to avoid him an additional 5% surcharge.

If you know of anyone earning above 100k or people in the banking industry that may benefit from a chat with me please pass them on my details as I would love to help them.

Don't wait for HMRC to find you bring your tax affairs up to date today

Thank you for reading my blog and have a great weekend



Mitch the Tax Man