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The new Conservative/Liberal Democrat coalition has introduced some sweeping tax changes this week, but conspicuous by its absence was the Tories’ proposed increase in the Inheritance Tax threshold from £325,000 to £1 million.Yet, anyone worrying about Inheritance Tax should be aware that it is one of the easiest taxes to avoid and only a minority of estates need pay it.
I spoke to Ben Smaje, managing director or Kennedy Black Wealth Management this morning and he pulled together a few of the most straightforward and effective ways to avoid paying IHT which I wanted to share with Money Matters readers:
The Treasury has confirmed that the newly appointed Chancellor George Osborne will present his emergency Budget on Tuesday 22 June, less than six weeks away after the new government has taken power.
Although a number of the government’s flagship tax policies were revealed in the Coalition Agreement there are many difficult choices that have yet to be made, for example whether or not VAT will rise. Entrepreneurs will also be eagerly awaiting details of the proposed increases in capital gains tax and the proposed reliefs.
With the World Cup fast approaching and football fever well and truly rising, many work places will be in the mood for a football-themed office party this summer. And the good news for employers is that these staff parties could be tax-free this year.
You may not have paid much attention before to what the Liberal Democrats’ policies on tax consist of but now that they’ve taken a surprise lead in the polls it’s worth knowing exactly what they have proposed and how it might affect you. If a hung parliament is the outcome of the upcoming general election then the Lib Dems’ manifesto will be all the more significant.
After much speculation on the date of this year’s Budget, Gordon Brown has finally confirmed that the Budget will be delivered in two weeks time on 24 March, fuelling speculation that there will be a general election on 6 May.
The forthcoming Election will have an affect on what’s in the Budget of course, and there are many that would argue that the first 2010 Budget will be largely forgotten about, but it shouldn’t be ignored entirely.
Accountants Grant Thornton have come up a list of 10 Budget predictions:
1. More measures to reduce unemployment
It is expected that further measures will be taken to help both 18-24 year olds and the long-term unemployed back into the work force to help rebuild the economy. It remains to be seen whether any jobs created under the current government schemes will be real, sustainable jobs, or if we are simply returning to the days of previous recessions where there were a multiplicity of ‘schemes’ for young people, few of which led to lasting employment.
2. VAT to remain at 17.5%
We expect VAT to be left alone in this Budget. However, there is no doubt that any new Government of whatever political persuasion will consider that our comparatively low standard rate may need to be increased in the near future to reduce the spending deficit.
Frustrated by the new 50 per cent income tax rate slapped on high-earners, accountants are encouraging clients to avoid paying it.
Here are two suggestions for ways to duck it from advisers at Baker Tilly:
Make full use of non-pension reliefs
In the last Weekly Tax Brief, we looked at pensions. Investing in other tax-efficient vehicles such as Enterprise Investment Scheme or Venture Capital Trust shares or Individual Savings Accounts should also be considered.
Each year, up to £200,000 could be invested into a VCT gaining tax relief at 30%. EIS investment of up to £500,000 gives relief at 20% and, additionally, with capital gains tax deferral there is the prospect of 38% relief or 60% relief where the gain arose before 6 April 2008.
Remember that while those investments may bring tax advantages, they also carry inherent investment risks and independent financial advice is always needed.
Consider when to claim losses
Losses on subscriber shares in EIS-qualified companies can be claimed against income tax but qualifying shareholders should not always rush to claim their losses. If a loss has arisen but not been claimed yet, there is no requirement that the loss must be claimed now: the claim may be made in 2010/11, so providing relief at the top rate of tax, including the 50% additional rate where that applies.
Yesterday’s Court of Appeal ruling in the Gaines-Cooper case has sent expats into a panic over the potential hidden tax liabilities that many of them might now have.
The Court ruled that Mr Gaines-Cooper along with two other businessmen were all still liable to tax in the UK, despite living abroad in Mr Gaines-Cooper’s case for over 30 years and not coming back for more than 90 days a year.
The argument was that he hadn’t shown ‘a distinct break’ from the UK and that the ’centre of gravity of his life and interests’ remained here. Worryingly, there is no limit to the amount of tax that can be claimed back and in his case it could be as high as £30m.
St Valentine’s day approaches. And to prepare, tax advisers are reminding clients who are in relationships, but not married, of their rights.
Anita Monteith, technical manager with the ICAEW Tax Faculty, points out that the taxes ”most likely to affect” those in civil partnerships on the 14th of February and beyond are inheritance tax (IHT) and capital gains tax (CGT).
Last week’s news that Air France could start charging obese fliers for the cost of a second seat if they are unable to fit into the standard seats has re-ignited the debate over whether airlines should charge a ‘Fat Tax’ or not.
There was an uproar when the news came out it, with many saying that the move would be unfair, it seems that in reality the majority of Brits would be behind the introduction of such a tax.
Three quarters of 550 people surveyed by travel site www.Skyscanner.net said people should be charged with just 22 per cent disapproving of such a move.
It found the worst offenders were those from the Pacific island of Nauru, which is currently classified as the world’s fattest country by the World Health Organisation, with 94.5 per cent of the population being overweight.
But while we may be feeling quite smug about that fact that the UK ranks quite far down the scale, as the 28th fattest country, there is still a hefty 63.8 per cent of Brits who would test the airline’s scales.