Tax Advice

Capital gains tax and property – changes are on the way

Tax changes to private residences for 2020/21.

From 6 April 2020, HMRC is proposing three significant changes which will potentially increase the capital gains tax paid on the disposal of any residential property by an individual.

These changes seek to raise extra revenue from the disposal of residential properties and to collect these taxes more quickly.

For many of the 1.2 million residential property disposals each year, there will be no liability having been occupied throughout the period of ownership as the owner’s main residence.

If, however, you have a property which was once your main residence and you either let it out or have retained it for other reasons, these changes will affect you.

Working away, divorce or separation and other common issues could also see your entitlement to full private residence relief affected, meaning some of the rule changes could impact you.

If any of the above applies to you, these changes are likely to result in you having to pay significantly more capital gains tax if you sell or transfer these properties on or after 6 April 2020. More…

Inheritance Tax – don’t fall into the trap

A record amount of estates paid inheritance tax in 2016/17, according to government figures.

More than 28,100 estates were liable for death duties in 2016/17 – a new high for the number of estates charged.

The latest figure represented a 15% rise on the previous year’s figure of 24,500, and continued the trend of year-on-year increases since records began in 2009/10.

The average tax on an estate in 2016/17 was £179,000, while the proportion of estates liable to inheritance tax increased from 4.2% in 2015/16 to 4.6% in those 12 months.

Total duties raised from inheritance tax also reached a new record of £5.4 billion during 2018/19, which represented a 3% rise on the previous year.

The nil-rate band has remained frozen at £325,000 since 2009/10, with tax deducted at 40% on the part of an estate that exceeds this threshold. More…

Self-employed owe £1.6bn to HMRC in late tax payments for 2017/18

New figures show self-assessment taxpayers owe HMRC more than £1.6 billion in late payments on 2017/18 tax bills.

The deadline for 2017/18 submissions came and went on 31 January 2019, with more than 11.5 million taxpayers beating the midnight cut-off – a new high.

Despite a record number of tax returns submitted early this year, not all taxpayers have paid their liabilities to the Revenue.

The £1.6bn currently estimated to be owed for 2017/18 is expected to surpass the final total of £1.83bn paid late in 2016/17.

That would continue a trend – the amount of tax owed by those who missed the payment deadline has increased every year for the last three years. More…

Making Tax Digital – Most VAT-registered businesses are signed up for Making Tax Digital

Almost three quarters (74%) of VAT-registered firms signed up for Making Tax Digital (MTD) before the second stagger deadline last month.

HMRC’s figures showed that over 230,000 mandated businesses joined the scheme before the 7 September 2019 deadline.

Most (94%) signed-up businesses submitted VAT returns before both the first and second stagger deadlines.

Around 80,000 firms missed the stagger-two deadline, and HMRC will write to those to remind them of their obligations. More…

Treasury to review tapered annual allowance as dispute rumbles on

The Treasury has announced it will review the tapered annual allowance for pensions, following calls to abolish it.

The amount of pension contributions that can be made tax-free in 2019/20 stands at £40,000 in most cases, but this is restricted for higher earners by the tapered annual allowance.

The taper applies to people with a taxable adjusted income of more than £150,000 and a threshold income over £110,000.

For every £2 of income an individual has over £150,000, their annual allowance is reduced by £1, down to £10,000. More…

Update to post of 2nd August – Reverse charge VAT for builders delayed for 12 months

A major change to the way VAT is collected in the building and construction industry has been delayed until 1 October 2020.  

The domestic reverse charge VAT for construction services was due to take effect from 1 October 2019.

It will put the onus on the customer receiving a service to pay the VAT element to HMRC, instead of paying the supplier.

The measure will apply to VAT-registered individuals or firms in the UK, who supply specific services under the construction industry scheme.

The domestic reverse charge aims to combat missing trader fraud in the construction sector.

Campaigners had expressed concerns that up to 150,000 businesses in the sector were not ready for the changes to be implemented next month. More…

Construction industry scheme – VAT and charges

Few sectors have such an impact in the UK as the construction industry. It not only provides the fabric of our nation – the places where we live and work – but also underpins our entire economy.

In 2017, construction contributed £113 billion to the UK economy, while construction output increased by 14% in 18 months to the end of September 2018.

Despite the looming prospect of leaving the EU without a deal on or before Halloween, demand for domestic construction projects remains high.

The Government aspires to build up to 300,000 new homes each year, and major infrastructure projects like the HS2 railway line, Crossrail in London, and Hinkley Point nuclear power station in Somerset continue to tick along.

The construction industry provides high-skilled jobs – many of which are also well paid – for more than 2.4 million people, according to the Office for National Statistics. More…

Most gifters are ‘unclear on inheritance tax rules’

Most people making gifts of money or assets are unaware of inheritance tax rules that might apply to them.

HMRC polled 2,090 people and found that only 25% of those who recently made a gift had a working knowledge of the rules.

Less than half (45%) were aware of the rules or exemptions surrounding inheritance tax when they made their largest gift.

Only 8% of gifters considered inheritance tax rules before making a gift, the research showed.

Inheritance tax will potentially apply on gifts where a donor dies within seven years of making the gift or on a chargeable lifetime transfer into a relevant trust or company.

Within these rules are exemptions, such as gifts to a spouse or civil partner, charity or a political party, while an annual exemption on gifts worth up to £3,000 applies. More…

HMRC error affects payments on account bills for some taxpayers

Some taxpayers may not receive a bill for payments on account this month, and face paying a higher bill in January 2020.

The Association of Taxation Technicians (ATT) is advising individuals affected by an error with HMRC’s systems to set aside money to pay the bill in full.

Most people who complete self-assessment pay their taxes in two instalments every six months, called payments on account.

These advance payments are based on the individual’s tax liability for the previous year, and are paid in January and July, followed by a final balancing payment the following January.

But a system error at HMRC in January 2019 meant some taxpayers’ self-assessment statements did not include their first payment on account. More…

The tapered annual pension allowance

How it affects high net-worth individuals.

The tapered annual pension allowance for high net-worth individuals was in the headlines again recently.

Concerns were raised that its impact on doctors within the NHS pension scheme is prompting high-earning NHS staff to leave their posts or reduce their hours.

In December 2018, it was reported that the number of members leaving the NHS pension scheme was five times higher than from other public pension funds.

Responding to these reports, Chancellor Philip Hammond dismissed requests to scrap the tapered annual allowance. More…

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