State Pension Top-Up
The deadline for topping up missing national insurance years with class 3 voluntary contributions has been extended to 31 July 2023.
It may be worth checking your NI record to see if you have any missing years. Topping up missing years may boost your state pension when you reach retirement age.
Eligible taxpayers can find out how to:
- check their National Insurance record
- obtain a State Pension forecast
- use the online calculator to decide if making a voluntary National Insurance contribution is worthwhile for them and their pension
- make a payment
Check the www.gov.uk website for more information
Annual Tax on Enveloped Dwellings (Limited Companies)
If the value of one of your investment properties is £500k or greater please get in touch.
You will need to complete an ATED return and pay the tax by 30th April ’23 unless you qualify for relief.
End of Tax Year Checklist
The 5th April 2023 is almost here. Take a look at our checklist for any last minute tax saving options.
Consider contributing a lump sum into your pension to use your full allowance before 5 April 2023. Be aware though, you must consider what your annual allowance is. If you exceed this allowance you could have a pension annual allowance tax.
Use your CGT Allowance
The current CGT Allowance is £12,300. This will be reduced to £6000 for the 23/24 tax year and further still to £3000 for the 24/25 tax year. Consider completing on any sales in progress to make use of this years CGT Allowance.
Use your ISA Allowance
You can put up to £20,000 tax free into your ISA (£4000 into a LISA) per tax year.
Make use of Marriage Tax Allowance
If your spouse has unused personal allowance you may be able to claim a portion of their income tax allowance. Marriage Tax Allowance can also be backdated for up to 5 years if you qualify.
Find out more by visiting: https://www.gov.uk/marriage-allowance
Use your IHT Allowance
You can give away £3k without inheritance tax applying. If you didnt use this last year, you can carry forward a further £3k (£6k in total or £12k for a couple).
Furnished Holiday Lets and VAT
Unlike residential buy to lets, income from Furnished Holiday Lets is subject to VAT at the standard rate of 20% if you exceed the VAT threshold of £85,000 pa.
If you have 1 Furnished Holiday Let, you will probably not exceed this threshold. However, if you have another business that is subject to VAT in the same entity, then you will have to pay the standard rate of VAT on the first pound of income. The £85K vat threshold is based on the total turnover from all businesses…
For Example:
Mr Aston is a self-employed electrician, with a turnover of £50,000 pa, he also has a qualifying holiday let turning over £50,000 pa, as the total turnover is above the VAT threshold, Mr Aston will need to register for VAT as an individual.
If you are planning to purchase 2 or more Furnished Holiday Lets, then it may be advantageous to have them in different entities, for example 1 in individual name, and 1 in a limited company. Each of these entitles will then have its own VAT threshold of £85K.
If you do register for VAT you can reclaim VAT on all expenditure incurred in relation to the Furnished Holiday Let. If your expenses have not been subject to VAT or they are relatively low, you may wish to consider the Flat Rate Vat Scheme, as well as paying a reduced flat rate of VAT, the flat rate scheme includes less paperwork and is simpler to use. There are different rates under the flat rate scheme depending upon turnover and amount of expenditure incurred in the business.
Talk to us to find out more…
Tax Benefits of boosting your children’s pension
If you have spare funds you may wish to consider the option of putting money into a childs pension.
Under current rules, there is also nothing to stop a parent making a contribution into the pension of a child, of working age or younger children.
Adult Child
Many younger workers are now enrolled into a workplace pension for the first time but most are only making small contributions, so additional contributions could prove beneficial.
An additional contribution from parents early in their working life, benefiting from compound interest as it grows, could help your loved ones to build a more meaningful retirement pot and is money that cannot be touched until later in life. Benefits include:
- The recipient will get a boost to their retirement pot, including tax relief at the basic rate.
- Recipients who are higher rate taxpayers can claim higher rate tax relief on their parents contributions, thereby increasing their disposable income.
Younger Child
Parents who are in a comfortable financial position could consider paying into a pension for their little ones.
You can put up to £3,600 a year into a pension for any child. The benefit is that even through they are not yet earning, children still get the basic rate tax relief. So you only put in £2,880 to give them £3,600.
Spring 2023 Budget Comment
In the absence of big changes from this budget, here is a reminder of the highlights from last year’s Autumn Statement, all of which come into effect from April 2023:
Reduction of additional rate tax threshold
The additional rate threshold reduces from £150,000 to £125,140 exposing more individuals to the 45% tax rate.
Increase in Corporation Tax
The main rate of Corporation Tax increases from 19% to 25% for businesses with profits exceeding £250,000. Businesses with profits under £50,000 will continue to pay at 19% and those in between will be subject to a marginal rate of 26.5% on profits falling between those upper and lower limits.
Reduction of the Dividend Allowance
The tax-free allowance for dividend income (the Dividend Allowance) reduces from £2,000 to £1,000 for individuals in receipt of dividend income.
Reduction of the CGT Annual Exempt Amount
The Capital Gains Tax (CGT) Annual Exempt Amount (AEA) reduces from £12,300 for individuals down to £6,000, and from £6,150 for most trustees down to £3,000.
CGT extension to the nil gain/nil loss period to three years for couples that separate or divorce
Increase to the period in which spouses and civil partners who are in the process of separating can make no gain and no loss transfers of assets between themselves to three years; and unlimited time if the assets are the subject of a formal divorce agreement. Previously, separating couples had until the end of the tax year of their separation.
