Sharon GravenerPartner

Graham DoubtfireSenior Tax Manager

Personal Allowances

2011/12 2012/13 2013/14 Personal (age under 65)* £7,475 £8,105 £9,205

Personal (age 65 to 74)** £9,940 £10,500 £10,500

Personal (age 75 and over) £10,090 £10,660 £10,660

*Income limit £100,000 £100,000 £100,000

**Income limit £24,000 £25,400 £25,400

** For 2013/14 Age Allowance frozen until it becomes the same as the basic Personal Allowance

Other Personal Allowances

2011/12 2012/13 Married Couple’s Allowance* £7,295 £7,705

Married Couple’s Allowance** £2,800 £2,960

Blind Person’s Allowance £1,980 £2,100

2013/14 to be confirmed

* Tax relief restricted to 10% and is only available where at least one of the parties is born before 6 April 1935

** Minimum amount

Personal Tax Bands

2011/12 2012/13 2013/14 10%* £2,560 £2,710 TBC

20% £35,000 £34,370 £32,245

40% / 32.5% £35,001-150,000 £34,371-150,000 £32,246-150,000

50% / 42.5% £150,001> £150,001> N/A

45% / 37.5% N/A N/A £150,000>

* Not available if non – savings income exceeds the 10% band limit.

Quirks that this will create

Client with income of £43,875 (Salary £40,875, Bank interest £3,000)

2010/11 2011/12 2012/13

Tax £7,480 £7,560 £7,434

Payable as follows:

Deducted at source

PAYE £6,880 £6,680 £6,554

Bank interest £600 £600 £600

£7,480 £7,280 £7,154

Self Assessment –

Higher rate liability - £280 £280

Total £7,480 £7,560 £7,434

For 2013/14 the 40% rate will start at income of £41,450. 

Withdrawal of Personal Allowance

2011/12 2012/13 2013/14

Personal Allowance £7,475 £8,105 £9,205

Income Limit £100,000 £100,000 £100,000

Total loss of PA at: £114,950 £116,210 £118,740

Bryan from the Canine Partners Charity

Effective Tax Rates – 2012/13

Marginal Rates

70%  

 

60%    

     

50%        

           

40%              

                       

30%                          

                       

20%                          

                         

10%                            

                         

0%                            

                 £0 - £34,370 £34,370-£100,000 £100,000-

£116,210£116,211-150,000

£150,001+

Effective Tax Rates – 2013/14

Marginal Rates

70%  

 

60%    

     

50%        

           

40%              

                       

30%                          

                       

20%                          

                         

10%                            

                         

0%                            

                 £0 - £32,245

(20%)£32,246-£100,000

(40%)£100,001-£118,410

(60%)

£118,411-150,000 (40%)

£150,001+(45%)

Trust Tax Rates

2011/12 2012/13 2013/14

Income Tax Standard Rate Band £1,000 £1,000 £1,000Dividends 42.5% 42.5% 37.5% Other Income 50% 50% 45%

Capital Gains Tax Annual exemption £5,300 £5,300 TBCGains before 23/06/2010 N/A N/A Gains on or after 23/06/2010 28% 28%

National Insurance – Employed

2010/11 2011/12 2012/13

Primary threshold pa £5,715 £7,225 £7,605

Upper earnings limit pa £43,875 £42,475 £42,475

Employee’s main rate 11% 12% 12%

Employee’s additional rate 1% 2% 2%

Employer’s 12.8% 13.8% 13.8%

National Insurance – Self Employed

2010/11 2011/12 2012/13

Class 2 pw £2.40 £2.50 £2.65

Class 4 lower profits limit £5,715 £7,225 £7,605

Class 4 upper profits limit £43,875 £42,475 £42,475

Class 4 8% 9% 9%

Class 4 additional rate 1% 2% 2%

Impact of Tax and NIC Changes

Employee earning £100,000 salary, paid £20,000 bonus

2010/11 2011/122012/13

Income Tax £10,590 £10,990 £11,242

NIC £200 £400 £400

Total tax and NIC employee £10,790 £11,390 £11,642

Employer NIC £2,560 £2,760 £2,760

2013/14 - NIC not announced.

2013/14 - Income Tax would increase by £440 to £11,682

Impact of Tax and NIC Changes

Salary 2010/11 2011/12 2012/13

£60,000 £18,289 £18,591 £18,419

£110,000 £40,789 £41,591 £41,419

£180,000 £73,079 £74,980 £75,061*

*2013/13 NIC changes not announced

Income Tax will fall by £1,500

Personal Pension Contributions

2010/11 2011/12 2012/13 Annual allowance £20,000 £50,000 £50,000

Lifetime allowance £1,800,000 £1,800,000 £1,500,000

From 6 April 2011 and no change for 2012/13

• Marginal rate tax relief continues

• Annual contribution allowance restricted to £50,000

• Unused allowance carries forward for 3 years

• Excess contribution charge

BETTER THAN 2010/11! - STILL TIME FOR 2011/12

Pension Contributions Relief

Venture Capital Trusts

2011/12 2012/13

Maximum investment in quoted companies £200,000 £200,000

Income Tax Relief 30% 30%

Dividends on shares are exempt from Income Tax

Enterprise Investment Schemes

2011/12 2012/13

Maximum investment in unquoted companies £500,000 £1,000,000

Income Tax Relief 30% 30%

Enterprise Investment Scheme and Venture Capital Trust Examples

Client with pension income of £200k per annum.

Income Tax liability of approx £52,500 per annum.

 Commitment of approx £175k per annum to EIS and VCT investments. Over a 6 year period this means committing capital of just over £1m. Unless tax legislation changes or investments don’t perform as planned client

will be able to benefit from a nominal tax liability each year.  

   

Enterprise Investment Scheme and Venture Capital Trust Examples

Client with Self Employed income of £20k per annum. Income Tax liability of approx £2,500 per annum.   Commitment of approx £8k per annum to EIS and VCT investments. Over a 6 year period this means committing capital of £48k. Unless tax legislation changes or investments don’t perform as planned client will be able to benefit from a nominal tax liability each year.   

   

Tax and NIC changes – is that the end...?

Child Benefit for high earners • Will continue to be paid in full

• Once one householder has income of £50k+ tax charge of 1% of the Benefit received per £100 of income over £50k

Effect – taxpayers with income of more than £60k will have a tax charge equal to the Child Benefit

 

Alternatively they can elect for the benefit not to be paid

HMRC will contact people earning over £50k in Autumn of 2012

What about people who move from less than £50k to more than £50k?

Child Benefit changes for high earners – real impact example

Client has salary of £50k

2 Children so £1,752 Child Benefit received

Bonus paid of £5k

Income Tax £2,000

NIC £100

Loss of Child Benefit £876

(£1,752 x 50%)

Total Tax, NIC and loss of Benefit £2,976

Effective “Tax” rate 59.52%

Those with more than 2 Children will face an even higher effective tax rate

HMRC estimate this will affect 1.2 million families

Likely to be dealt with via the tax return or PAYE code adjustments.

Capital Gains Tax

2011/12 2012/13

Annual exemption £10,600 £10,600 Basic Rate 18% 18%

Higher Rate 28% 28%

Inheritance Tax Exempt Gifts

Annual Gift £3,000*

Individual allowance £250

Gifts in respect of marriage • Parent £5,000• Party to the marriage £2,500• Any other person £1,000

* You can also use the previous year’s allowance if that has not been used

Regular Gifts out of surplus income – only limited by income

Inheritance Tax

2010/11 2011/12 2012/13

Nil Rate Band £325,000 £325,000 £325,000

Non Domiciled Spousal Exemption £55,000 £55,000 £55,000

Death Rate 40% 40% 40%

Lifetime Rate 20% 20% 20%

Inheritance Tax

Chargeable Estate £1,000,000 £2,000,000

(After 6 April 2012)

IHT due if no donation £400,000 £800,000

IHT due if donation > 10% of Estate £324,000 £648,000

Effective IHT relief for donation 76% 76%

Reduction in beneficiaries’ inheritance £24,000 £48,000

Domicile & Residence

Review of Non – Domiciled individuals living in the UK

From 6 April 2011 and no change for 2012/13

• Relaxation of Visa rules for entrepreneurs and investors coming to the UK

• From 6 April 2013 a statutory residence test will be introduced

• Ordinary residence will be abolished and overseas workday relief available

Remittance Basis Charge

Non Domiciled in UK

• £30,000

• Unremitted income/gains > £2,000

• UK resident 7 of last 9 tax years

• No tax charge when non-domiciles remit for the purpose of

commercial investment in UK business

• Changes from April 2012

Increase £30,000 tax charge to £50,000 for individuals who have been UK

resident for 12 of the last 14 tax years

Pre Year end Income Tax planning

• Review split of income between spouses – is now the right time to form a Limited Company or Partnership – consider Child Benefit changes

• Look at your employment package and how income is taken from your company

• Maximise pension contributions – are you claiming all the relief due?

• Consider Enterprise Investment Scheme and Venture Capital Trust investments – they are not just for the wealthy

• Do you need to file a Tax Return?

• Review your Will – is IHT planning now appropriate?

• Plan ahead for next year and changes occurring on 6 April 2013.

   

Jason FayersPartner

Corporation Tax Rates

From 1 April 2011 2012 2013 2014

Main Rate 26% 24% 23% 22%

Small Companies Rate 20% 20% 20% 20%

Marginal Rate 27.50% 25% 23.75% 22.50%

Compared to 2006 rates: Main Rate = 30%

Marginal Rate = 32.75%

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

Historical Corporation Tax RatesSmall companies' rate

Marginal rate

Main rate

Financial year commencing 1st April

%

Research & Development Tax Relief 

Background • Introduced in 2000 for SMEs• Overall advance in science or technology• Government target: R&D 2.5% GDP by 2014 

Qualifying revenue expenditure • Staff costs• Software, materials and consumable items• Fuel, power and water• Subcontracted expenditure 

Research & Development Tax Relief

From 1 April 2012

• Tax deduction % of qualifying revenue expenditure:

SMEs – 225% (200% before)

Large – 130% (130% before) • 100% ECAs for capital expenditure• Surrender loss for 12.5% tax credit

Relaxation of restrictions to relief

• £10,000 minimum spend limit abolished• PAYE and NIC cap removed

Patently Good

• Profit attributable to patents taxed at 10%

• From April 2013

• Applies to existing and new patents

• Includes purchased patents

• Reduced rate applies to Capital Gain on sale

The first pair of training shoes ever made were invented and developed in 1892

by the Colchester Rubber Company of Colchester, Connecticut.

Pandora’s Box?

• Company must be legal owner

• Election required for rate to apply

• Not as good as some other EU countries

• Can be complicated calculations

• Only to patents granted by UK or EU

Khalid Yafai (left) from Birmingham and Andrew Selby from Wales

trade blows at their Olympic box-off at York Hall in London.

Capital Allowances

2011/12 2012/13

Annual Investment Allowance £100,000 £25,000

WDA 20% 18%

Special Rate 10% 8%

Hybrid rates to consider

Enhanced Capital Allowances

Qualifying expenditure

• Energy-saving plant (Energy Technology List)• Low emission cars – 95g/km from 1 April 2013• Zero emission goods vehicles• Environmentally-beneficial plant (Water Technology List)

Tax Credits

• Scheme extended for further 5 years from 1 April 2013• Surrender losses attributable to qualifying expenditure• 19% tax credit capped at greater of:

Total PAYE and NIC £250,000

Capital Allowances

Company Cars changes

Current – w.e.f 1 April 2012 Proposed – w.e.f. 1 April 2013

Capital Capital

Emissions Level Allowances Emissions LevelAllowances

Low < 110g/km 100% FYA’s Low < 95g/km 100% FYA’s

Medium 111 – 160g/km 18% WDA’s Medium 96 – 130g/km 18% WDA’s

High > 160g/km 8% WDA’s High > 130g/km 8% WDA’s

100% FYA’s on low emission cars to be extended to 31 March 2015

Company Cars

Leasing a Car

Proposed rules – w.e.f. 1 April 2013

• Restriction will apply to high emission cars > 130g/km

• Currently > 160g/km

• 15% disallowance of lease costs will still apply

Is the company car tax efficient

• Low CO2 emissions

• Electric cars and vans / zero emissions 0% benefit in kind

Up to 75g/km 5%

< 99g/km 10%

• 100-104g/km 11%

(Rise of 1% for every 5g/km thereafter)

Is the company car tax efficient

• Reva G-Wiz• 0g/km Co2 Cost £15,000 • 228 miles per gallon

Vauxhall Ampera

27gkm Co2 Cost £29,995

235 miles per gallon

• VW Polo 1.2 TDI 75PS Blue Motion• 89gkm Co2 Cost £10,085• 83 miles per gallon

Citroen C1

109gkm Co2 Cost £8,000

61 miles per gallon

Car and Van Fuel Benefit

Car

2011/12 £18,800 x multiplier %

2012/13 £20,200 x multiplier %

2013/14 onwards Multiplier increased by 2% above inflation

Van

2011/12 Multiplier is £550

2012/13 Multiplier frozen at £550

2013/14 Increased by inflation

Employee Share Ownership

• To be reviewed / simplified

• Enterprise Management Incentive Scheme (EMIS)

Limit for options up to £250k Growth subject to Capital Gains Tax Entrepreneur relief = 10% tax rate

Sowing the SEED (EIS)

• Commences 6 April 2012

• Small, early stage company seeking investment

• Relief given to investor

• Similar rules to EIS

• Eligibility requirements must be met

Acorns…

Company:

• Qualifying trade must be <2 years old

• Existence requirements

• UK resident

• Unquoted

• Gross assets up to £200k before investment

… to Oaks

• <25 Employees

• Company cannot be members of a partnership

• No EIS or VCT investment prior to SEIS

• Max SEIS < £150k cumulative

Team GB Beijing 2008

It’s a gardeners world

Investor:

• Potential Tax Relief of 78% for 2012/13

• Max invest £100k

• Tax exemption on 2012/13 reinvested gains

• Current Employee No Director Yes

• <30% interest in company

• Future sale exempt from CGT

Beijing 2008

Jack’s golden egg

Jack, a higher rate tax payer, makes a gain in 2012/13 - £100k

Invests the full amount into SEIS

£

CGT saving (100k x 28%) 28k

SEIS IT Relief (100k x 50%) 50k

Net cost to Jack 22k

Jack Green GB Hurdles hopeful

Entrepreneurial Baby Dragon

• Young person’s entrepreneurs loan

• Similar basis to students loan

• Low interest rates

• Payback when earning one set amount

VAT

• Registration threshold £77k

• De-registration threshold £75k

• Rates unchanged

Straightening of VAT treatment

• Listed building alterations

• Repairs to all buildings

• Self-storage

VAT Loophole Closures

• Hairdressers’ chair rental

• Sports nutrition drinks

• Hot food

• Holiday caravan purchase

SDLT

Residential Non Residential

Upto 125k Nil Upto 150k Nil

125k - 250k 1% 150k - 250k 1%

250k - 500k 3% 250k – 500k 3%

500k – 1m 4% Over 500k 4%

1m – 2m 5%

Over 2m 7%

15% Payable over £2m if corporate ownership

GAAR

• General Anti-Avoidance Rule

• Crack-down on tax avoidance schemes

• Enable HMRC quick reaction

• IR35 Simplification

Denis Oswald (above), Chairman of the London 2012 International Olympic

Governing Body and Colin Moynihan, British Olympics Association, enforce the rules.

GAAR – Toothless smile?

• Ambiguous?

• Is any planning outside scope?

• Increase in court cases?

The many smiles of Michael Phelps, USA

8 Gold medals in Beijing 2008

Unlimited Tax Relief?

• Not from April 2013

• Cap to apply, greater of

£50k, or

25% of Income

• What is caught?

First Figure Skating Event 1908 - Madge Syers first Women’s Olympic

Figure Skating Champion before ice skating was moved to the ‘Winter’

Olympics in 1924

Cut out the red tape!

• Integration of Income Tax and NI

• Small businesses - cash basis

• Expenses for cars, motorcycles and home

• Disincorporation relief

CONSULTATIONS

Tax Administration

• Tax transparency

• Real time information

• PAYE penalties reform

• Wider powers for criminal investigation

• Tax agents – dishonest conduct?

Andrew EdgePartner – Head of Financial Planning Department

Agenda

Tax efficient investments

Individual Savings Accounts (ISAs) Venture Capital Trusts (VCTs) Enterprise Investment Schemes (EISs)

Pensions

Inheritance Tax Planning

Action points

ISA Allowances – From 6 April 2012

• Annual allowance increased from £10,680 to £11,280

• Up to £11,280 into an Investment ISA

• Or up to £5,640 into a Cash ISA with the balance up to £11,280 into an Investment ISA

• Cash ISA rates - 3%. Higher rates for longer term accounts

• You can switch Cash ISA to Investment ISA but not other way round!

• Tax incentives re growth & income

• Junior ISAs launched 1 November 2011 – up to £3,600 in each tax year for anyone under age 18. Cash ISAs also available for 16 & 17 year olds in addition!

Enterprise Investment Schemes

What is an EIS?

• Government initiative- encourage investment in smaller companies

• 30% tax relief• Tax free growth after 3 years• Allowable investments - £10,000 to £1m (wef

06.04.2012)• Carry back (1 year) option• Inheritance tax-free after 2 years• Seed Enterprise Investment Scheme (SEIS)

Venture Capital Trusts

What is a VCT?

• Government initiative- encourage investment in smaller companies

• 30% tax relief available up to max £200k investment

• Tax-free dividends

• Helps to finance vital part of UK economy

• No IHT exemption

VCTINCOME TAX

RELIEF

Tax Advantaged Investment

EIS

MAX INVESTMENT

MINIMUM TERM

DIVIDENDS

GROWTH

CGT DEFERRAL

IHT EXEMPTION (BPR)

30%

£200,000

5 YEARS

TAX EXEMPT

TAX EXEMPT

NO

NO

30%

£1,000,000

3 YEARS

TAXED

TAX EXEMPT

YES

YES

EIS and ISA Combination

£37,600EIS

£11,280Tax

Relief

EIS accessible after three years

tax free

£37,600EIS

£11,280Tax

Relief

EIS accessible after three years

tax free

ISAs fully accessible

– no tax

£11,280 = ISA 1 £11,280 = ISA 2

Result : 60% Increase In Value

Result : 90% Increase In Value

£20,000EIS

£6,000Tax

Relief

EIS accessible after three years tax free

£6,000Pension

£1,500BR Relief

£1,500HR Relief

£20,000EIS

£6,000Tax

Relief

£6,000Pension

£1,500BR Relief

£1,500HR Relief

EIS accessible after three years tax free

Retirement Income Boosting

Restricting Pensions Tax Relief

• Maximum annual allowance restricted to £50,000 from 6 April 2011

• Tax relief available at individual’s highest rate

• Employee taxed on excess payments

• Carry forward of un-used pension payment allowances – reintroduced 6 April 2011

Carry Forward of Unused Payments

 

  2011/12

  £100,000

   2012/13

£50,000        £40,000

  2011/12    

 £30,000 2011/12   +

   £20,000   £50,000

          

  2008/09 2009/10 2010/11    

 £20,000 £20,000 £20,000

   Unused Unused£10,000 £30,000

Watch – Pension Input Periods

Pension Input Period

2011/12 2012/13

6 January 2012 5 January 2013

£100,000 6 January 2012

£90,000post 6 April 2012

5 April 2012

Pension Changes

From 6 April 2012

• No tax changes announced

• Lifetime allowance reduced from £1.8m to £1.5m

• Contacting out of the State Second Pension (S2P)

- ceases with effect from 6 April 2012

National Employment Savings Trust (NEST)

• Phased implementation from 1April 2014 to 1 April 2017 dependent on

number of employees

• Compulsory Pension funding for employers & employees

• Employers have to automatically enrol employees

• Employees have to opt out

• For earnings above £7,475 p.a.

• Budget for this additional cost

NEST – Compulsory Contributions

Employee Pays ** Employer Pays

Before 1 October 2017 1% 1%

From 1 October 2017 3% 2%

From 1 October 2018 5% 3%

** Less tax relief

Inheritance Tax

From 6 April 2012

• No changes to what we already know!

• Make full use of annual allowances available

• Consider inheritance tax efficient investments

• Our Inheritance Tax Solutions handbook – 13 case studies

Summary – Planning Ideas

• Maximise ISAs before 5 April 2012 – Cash to Investment ISA?

• Consider EIS/VCT for tax planning and ISA allowance and/or pension funding

• Maximise pension allowances before 5 April 2012

• Consider carry forward allowances and review current Pension Input Periods to avoid any excess payment tax charges

• Cap on unlimited reliefs from 6 April 2013 – not for EIS/VCT/ pensions!

• 13 IHT solutions – ask for a copy of our IHT case study pack

Compliance slide

The purpose of this presentation is to provide

generic technical training. It should not be taken as recommendations or advice on specific products

(or providers).

It is based on Scrutton Bland Limited’s understanding of current law and Inland Revenue practice, which may be subject to future variation.

Scrutton Bland Limited is authorised and regulated

by the Financial Services Authority

Andrew StricklandPartner

Government Net Debt

£bn % of GDP

2009/10 766 52.5%

2010/11 905 60.5%

2011/12 1,039 67.3%

2012/13 1,159 71.9%

2013/14 1,272 75.0%

2014/15 1,437 76.3%

Economic Growth

Increase in GDP %

2010 2.1%

2011 0.8%

2012 0.8%

2013 2.0%

2014 2.7%

Government Net Debt Weighted Average Funding Cost

2010/11 2.8%

2011/12 2.2%

2015/16 3.5%

The Cash in UK Plc

Non-bank corporates £700 bn

GAAR

St George and his Dragon…?

Corporation Tax

Dividend v Bonuses

Capital Gains TaxEntrepreneur’s Relief

Sharon GravenerPartner

Feedback

We value your views

Thank you for coming