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

Understanding the Tax Changes for Non Domiciled Individuals

I have always been intrigued by this area of taxation and I often get asked by my clients to explain the latest rules so I thought it would be beneficial to write a blog post on it!

UK tax residents are taxed on their worldwide income and gains on an arising basis, this means whether the funds come into the UK or not they will be taxed. If those individuals are non UK domicile they can choose to benefit from a form of taxation known as the remittance basis, this means they will only be taxed on their UK source income and gains plus anything remitted to the UK.

It was announced back in 2008 that if you are non domiciled but have been resident in the UK for the past 7 out of 9 previous tax years if you choose to be taxed on the remittance basis of taxation you will be subject to a £30,000 tax charge. However from 6th April 2012, this charge will be increased for those individuals who have been in the UK for 12 out of the previous 14 years to £50,000 per year.

The UK government are concerned that this tax charge is discouraging investors from bringing money into the UK and investing in UK companies and thus new rules have been drafted and will be announced in the finance bill 2012, known as 'investment relief'.

It is being proposed that if you are non domicile and you bring funds from offshore to the UK and invests these funds in a qualifying UK trading company then there will be no tax charge on the remittance. I believe this will generate a lot of investment into UK companies and there can be a lot of planning work done for anyone you know who is non domiciled.

The investment can be a subscription for new shares or a loan in an unlisted company. The company must be one which is trading or is letting commercial property. As always the lettings of residential properties will not qualify nor does furnished holiday let. If for whatever reason the company becomes an investment company then the investor has 45 days to withdraw the cash either to invest in a new qualifying company or export the funds back to the UK.

One key point to note is that there is no limit on the amount of the investment possible in any one period or lifetime. There may even be entrepreneur’s relief on the sale of the investment in the UK so this really is worth considering.

If you know anyone that is non domiciled please forward this onto them and tell them to get in touch with us at LJD as I believe with proper planning it could save thousands of pounds of tax and this is the year to take advantage of it.

Thank you for reading my blog and feel free to contact me at mitch@ljd.uk.com


Mitch the Tax Man

Planting the Seed !

Before I begin on my chosen topic this week, as a spurs fan I thought I would just give my two cents worth on the Harry Redknapp vs HMRC case. For me the decision to prosecute Harry was all for publicity, it should never have gone to court and I really hope HMRC are happy paying 8 million pounds for this type of publicity.

Moving on, I attended a cracking course last week where I found out a bit more about the new Seed Enterprise Investment scheme (SEIS). It works along the same basis as EIS scheme where you invest in a qualifying company and you get tax relief on your investment; however this new scheme seems to be offering very generous reliefs

It was introduced in the Autumn Budget statement and comes in from 6th April 2012. The new scheme is designed to encourage investment in small, early stage companies.  The investor gets 50% tax relief, up to a maximum of £100,000 invested and the company is allowed to raise up to £150,000 from offering the relief.

I think this is astonishing, what is more astonishing is the fact that even if you are a basic rate tax payer you can still benefit from 50% relief.

Furthermore there is an exemption from capital gains tax on gains realised from the disposal of assets where the gains are reinvested through the new SEIS. This means that the total tax relief could reach an amazing 78% if taxable gains are reinvested into the SEIS. 50% tax relief and 28% cgt relief.

To claim the SEIS relief the investor must have received a compliance certificate from the issuing company. The company must not have more than 25 employees and not more than £200,000 gross assets and be not more than 2 years old.

Detailed final legislation on this will be included in the finance bill 2012.

In conclusion I believe this is a truly great incentive for investors to invest in UK companies and will generate a lot of interest. I am keen to see how many of my clients invest in new companies next year; however before you invest make sure you do your research about the company you are investing in!

If you have any queries or need any help with your tax please contact me mitch@ljd.uk.com

Thank you for reading my blog

Mitch the Tax Man

I survived the January Tax Returns !

Good morning everyone, Mitch Young from Lerman Jacobs Davis the young dynamic accountants who are committed to saving our clients hassle and money.

Some of you may be aware that the tax deadline for filing a tax return was extended till yesterday evening because of strikes from staff at HMRC. So why was I out for dinner last night looking so relaxed? Because at LJD we completed all our clients tax returns on time and submitted them with HMRC by the original deadline.

Having worked on over 900 tax returns this year I thought I would share a couple of tips to bear in mind for next year’s returns

1.     If you are a higher rate tax payer remember to keep a note every time you make a charitable donation. Too may clients just estimate these or do not have any evidence to back up the postings. What’s more is that the tax relief from making a charitable donation in the current year can be claimed back against the previous tax year so it is a good tax planning exercise.

2.     If you have any PAYE income make sure you have your tax code checked by a professional too often clients that have this income end up with a tax liability because they are on the wrong tax code. A prime example is where an employer puts you on a 747L code giving you an entitlement to a personal allowance where actually your income level well exceeds £100,000 so this should be tapered away.

This week I would love to speak with anyone you know who works in finance with a large organisation and would like to make sure they are not paying too much tax. Please pass them my details. mitch@ljd.uk.com

I am looking forward to my first weekend off in a month so please look back next week where I will be producing some more tax tips for you to enjoy.

Thanks for taking the time to read my blog

Mitch the Tax Man