What is tax planning?

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Tax planning means taking proactive steps to reduce your tax bill, by making smart financial decisions. This includes everything from savvy saving and investing, to using salary sacrifice schemes to reduce monthly take home pay, thus reducing the amount of tax paid.

Effective tax planning is usually undertaken with the help of a qualified expert, such as a specialist UK tax adviser or financial adviser.

Tax treatment depends on your individual circumstances and may be subject to change in the future.

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Tax on cash gift (from overseas)?

Re: We can confirm that there are no Income Tax implications on the receipt of a cash gift unless the cash gift generates interest or dividends.

 

Clarification on rules when receiving inheritance from abroad?

Re: You will not pay inheritance tax as they are not UK assets. You will need to declare any income that is then generated from these assets and also if you sell the property, Capital Gains Tax may be due

 

When someone living outside the UK dies

If your permanent home (‘domicile’) is abroad, Inheritance Tax is only paid on your UK assets, for example property or bank accounts you have in the UK.

When you will not count as living abroad

HMRC will treat you as being domiciled in the UK if you either:

• lived in the UK for 15 of the last 20 years

• had your permanent home in the UK at any time in the last 3 years of your life

If the Business Have Bank Loan

• Debit – Bank loan paid < 1 years as a Current Liability

• Credit – Liability >1

• Credit – Liability <1

• Interest paid – Expense

• Accrued interest

If Director Loan Arise:

• Debit – Dividend to reduce the DLA / Credit DLA

 

What are Mileage Allowance Payments?

When your employee is using their own vehicle for business purposes, you can pay them Mileage Allowance Payments (MAPs) to cover some of the associated costs.

Each year, you can pay your employee a certain amount of MAPs. As long as the total doesn’t go over the ‘approved amount’, you don’t need to report this to (HMRC) either, making the whole process much easier.

What is included in MAPs?

Only certain types of travel fall under these payments, so it’s important that your team know what can be included.

Trips that are covered by MAPs:

 

• Travelling between offices or other business premises

• Travelling to a temporary location in order to conduct business. This could be meeting a client or attending a business event.

Business journeys that cannot be claimed:

 

• Commuting to and from your usual place of work

• Travelling to a location close to your place of work

• Any travel for a private purpose

It’s also good to be aware that costs such as road tolls and parking charges are generally covered by subsistence expenditure. This is a separate payment from MAPs

Trading and property allowances

These allowances are designed to exempt modest amounts of income for example from sales on eBay and Amazon and rentals from Airbnb.

Each allowance is £1,000 tax-free.

In addition, rent-a-room relief can be claimed if part of your home is let out. Up to £7,500 can be received tax free.

Marriage allowance

Up to £1,260, 10% of the personal allowance, can be transferred to the spouse/civil partner where one party to the marriage/civil partnership is a basic rate taxpayer, and the other has income below the personal allowance. The reduction in the tax liability for the basic rate taxpayer is up to £252 in the current year.

Reliefs available for employees

As an employee there are a few reliefs that can be claimed in respect of your employment. These include:

• professional subscriptions

• working from home allowance

• business miles travelled in your own vehicle.

Actively utilising the Capital Gains Tax annual exemption

You can crystallise capital gains and make use of the annual Capital Gains Tax exemption of £6,000* before 6 April 2024.

One way of crystallising capital gains is to sell and then buyback stocks and shares.

This also provides an opportunity to increase the base cost for future sales. However, the repurchase will need to be delayed for more than 30 days or made by your spouse, civil partner, or ISA to benefit from this.

*Not available to those taxed on the remittance basis with income and capital gains above £2,000

Easy Inheritance tax (IHT) reliefs

You and your family can take advantage of a number of IHT free reliefs.

• An annual gift of £3,000. This provides parents (and grandparents) with an opportunity to make tax-efficient gifts.

• Small gifts of £250 per person as many as you care to make per tax year. This provides the opportunity of gifting £250 to each child or grandchild each and every tax year.

• Regular gifts from disposable income. This is a complex area and people can and do get it wrong, so it is worth seeking advice. When thought through and implemented correctly it is a valuable relief.

Great care needs to be taken to ensure that the gifts are habitual in nature and are out of income which is in excess of regular expenditure.

These gifts could include making the following for children/grandchildren:

• pension contributions

• ISA subscriptions

• university fees

• accommodation costs

• family holidays.

Saving for retirement, making the most of pension contributions

Are you and your family benefiting from making pension contributions? Pension contributions can be made for your minor and adult children and for grandchildren.

The benefits of making contributions are:

• The pension scheme is able to claim back basic rate tax from HMRC.

• If you are paying tax at a higher rate than 20%, then you will receive additional tax relief.

• You are building a pension pot to use in your retirement or pass to future generations.

How much can you contribute?

• For this current tax year, 2023-24 the rates have increased.

• The annual pension contribution capacity in 2023-24 is the lower of your relevant earnings and the annual allowance of £60,000 gross, equating to a £48,000 net payment.

• All UK residents under 75 are able to contribute up to £3,600 gross, £2,880 net per year regardless of income.

• If your adjusted income (generally, your total taxable income plus employer pension contributions) is over £260,000, then the annual allowance is tapered away by £1 for every £2 of income. There is a minimum level of £10,000 gross, £8,000 net for those with adjusted income in excess of £360,000.

• If you are aged over 75 then no tax relief is available on the contributions made.

Do you have scope to make additional contributions that can utilise unused capacity brought forward from the three previous years?

Reviewing your pension position and that of your family is important.

 

Gift Aid payments – ticking a box and making a difference

The key point here is that the charity receives your payment and they are able to claim back basic rate relief on the payment from HMRC. When making Gift Aid payments, ticking the box informs the charity that you are UK resident and have sufficient taxable income to cover the payment.

Gift Aid payments are relevant for sponsoring, donating and some entrance and membership subscriptions.

Who should make Gift Aid payments?

Ideally, the person in the family with the highest marginal tax rate should be making the Gift Aid payment and recording the payment on their UK tax return. Those paying higher rate of tax will generate additional tax relief via a reduction to their tax liability.

See our insight Making Gift Aid donations | Crowe UK for more information.

Making the most of Individual Savings Accounts (ISAs)

ISAs are not just for you but for other members of your family. They can be used by parents or grandparents to transfer funds to future generations and assist children to save for their future.

The income and capital gains generated is tax-free and not taxed when withdrawn.

The government will add a 25% bonus on some ISAs.

The facts:

ISA

• An annual allowance of £20,000 can be invested by UK residents over 18 (16 or over for a Cash ISA).

Junior ISA

•   An annual allowance of £9,000 can be invested per child.

Lifetime ISA (LISA)

• Up to £4,000 of the ISA limit (above) can be contributed.

• This is only available for those aged between 18 and 40 at the time of opening the account.

• Contributions can be made up until the age of 50.

• A bonus of 25% of that year’s contributions is added on each contribution.

• The bonus is only retained if the LISA is used to:

  •  purchase a first home for less than £450,000, or

  • withdrawn after the age of 60.