Tax planning ahead of the Budget on 27 October 2021

Here are the 10 things that we think may be in the Budget:

1. Capital gains tax may go up
2. Lifetime cap Capital Gains Tax Main Residence Relief
3. If you inherit as it you will have to take over the base cost that applied to the deceased person rather than the probate value at date of death
4. Business Asset Disposal Relief, formerly called Entrepreneurs Relief, may only be available on retirement
5. The tax on dividends is low and this may well increase
6. Corporation Tax to go up from 19% to 25%
7. Class I National Insurance they will go up for employees and employers
8. Class 1a National Insurance which is charged on benefits and is only paying for by the employer may be abolished and replaced by class I National Insurance paid by both employee and employer
9. The P 11 D that is prepared annually to tax benefits annually may be abolished. Benefits in kind will be taxed through the payroll when the payroll is run, normally monthly
10. Business relief, formerly Business Property Relief that is 100% for Inheritance Tax without limit may be curtailed in some way.

We have already prepared additional dividends for clients where appropriate and where we have the information from the client to do so.

NHS consultants: ERRORS IN FIGURES PROVIDED BY NHS PENSIONS. HAVE YOU PAID TOO MUCH TAX?

We have a client who received two sets of figures for the same periods from NHS Pensions that differed for their Pension Inputs. Pension Inputs are the amounts that are compared to the Annual Allowance of £40,000. If your Pension Inputs go above £40,000 you can go back over the previous three years and offset any unused relief against them. Pension Inputs that exceed the allowable amounts are taxed. If the amount of tax is over £2,000, the employee can opt to ask for the pension scheme to pay the tax but this results in a reduced pension. 

If these figures are wrong NHS employees or the pension fund may be paying the incorrect amount of tax. Where the employee has asked the pension fund to pay the tax their pension may have been reduced when it should not have been.

Upon enquiry, NHS Pensions came back and said that they had now calculated the Pension Input figures manually and they have discovered that their computer software could not cope with AVCs.

In reply to our request for these calculations, we were sent calculations from their computer, which gave us a 4th, set of figures that disagreed with the previous three sets of figures.

We have made a formal complaint to NHS Pensions concerning this.

If you are an NHS consultant then please get in touch see if it you have been affected. If you know any NHS consultants then you should tell them about this as it may well adversely affect them.

Income tax: changes to the basis periods proposed for 2023/24

The government has proposed to make radical changes to the basis periods for self-employed taxpayers. It is proposing to change the basis from the current year basis to the fiscal year basis. This means that instead of being taxed on the profits for the accounts year ended in the tax year you will in future be taxed on profits made during the tax year.

Those individuals, partnerships, trusts and estates with trading income that do not have 5th  April year-end will be particularly adversely affected especially in the changeover year.

If this affects you then please get in touch so that we can give you more information

Income in retirement from your investments

Canada Life have done research that shows that splitting a client’s portfolio into 3 sections, risk 3, risk 5 and risk 7 where risk 10 is very high risk and then taking income from the risk 3 portfolio is a good way of generating income in retirement. This is for a client who is comfortable with a risk 5 portfolio. This has been back tested over a number of years and has been shown to be  better than taking an income from a risk 5 portfolio and better than taking income from cash where 2 years income in  cash is kept to avoid selling units from a risk 5 portfolio in a market down turn.

Selling residential property

 If you are intending selling residential property please let us know well in advance so that we can help you to prepare the information required for the Capital Gains Tax Computation as you will only have 30 days from completion date to prepare a Capital Gains Tax computation and pay the tax.