PENSION PLANNING
For most taxpayers the maximum pension contribution is £40,000 each tax year, although this depends on their earnings. This limit covers both contributions by the individual and by their employer.
Under the current rules, the government adds to your pension contributions at the 20% basic rate. For instance, if you save £4,000 in a personal pension the government tops this up to £5,000. If you are a higher rate taxpayer there is a further £1,000 tax relief when your tax liability is calculated, reducing the net cost to £3,000. This can be even more effective if your income is between £100,000 and £125,140 where the effective tax rate is 60%. Remember that pension fund investments can go down as well as up.
For practical advice on the best approach to planning for retirement and mitigating inheritance tax, contact your usual Beavis Morgan Partner or email info@beavismorgan.com.
We will review your individual situation including your property assets and provide the right advice to help you make informed decisions. If necessary, we can also introduce you to our Beavis Morgan group business Integrity 365, where an Independent Financial Adviser will assess your situation and advise on the pension protections best suited to you.
TIME TO REVIEW YOUR WILL?
Top of the New Year to do list for many individuals is to make or update their Will. Many think this is something to leave until later in life but it is important to get things in place once property is acquired or when children come along.
In the absence of a will there are statutory rules which dictate how your assets are distributed on death. Those statutory intestacy rules may not be tax efficient and you might to want to make specific provision in your Will for your unmarried partner or for the guardianship of your children.
For information on drawing up a Will, speak to a member of our Estate Planning team who are available to assist with:
- Company & Personal Wills
- Estate Planning
- Business Property Relief
- Inheritance Tax
- Bloodline Planning
- Lasting Powers of Attorney
- Care
- Business Succession
PASSING ON THE FAMILY HOME
When considering the wording of your Will you should note that the inheritance tax (IHT) nil rate band continues to be frozen at £325,000 until 2028. There is an additional nil rate band of up to £175,000 for passing on the family home to direct descendants on death. We can work with your solicitor to make sure your Will is tax efficient.
Where the nil bands are unused on the death of the first spouse the balance is available on the death of the surviving spouse, potentially allowing a married couple (or civil partners) to pass on assets of up to £1 million without paying IHT.
The residence nil band is even available when you downsize to a cheaper property. For example if a married couple currently live In a large house worth £500,000 and downsize to a flat worth £300,000 they could give away some of the proceeds during their lifetime and yet still benefit from inheritance tax relief based on the higher valued property. They could even sell the house and move into a rental property or a care home and still benefit from this additional relief. In these circumstances, certain conditions must be met, so please speak to us if you think it may affect you.
No matter who you decide to leave your estate to, the tax implications of transferring wealth cannot be ignored. Professional advice should therefore be sought to protect your wealth, secure the financial future of your beneficiaries and plan for IHT, a legitimately avoidable tax. We do however recommend that planning starts as early as possible.
£12,300 CGT ANNUAL ALLOWANCE – USE IT OR LOSE IT
The Capital Gains Tax (CGT) annual exempt amount reduces from £12,300 to just £6,000 for gains made in 2023/24. Remember that the 2022/23 allowance is lost if not used by 5 April 2023 and you might want to consider bringing forward disposals of chargeable assets where possible.
Where a married couple who are higher rate taxpayers own a buy to let property, bringing forward the disposal from 2023/24 could potentially save £3,528 CGT (£24,600 – £12,000 @ 28%). It would be important to exchange contracts before 6 April 2023 as that is the critical date for CGT.
Whether you are looking to save on capital gains tax, income tax, inheritance tax, or all three, there are various legitimate tax planning opportunities available to you. Our Beavis Morgan tax experts are available to assist.
130% SUPER-DEDUCTION ENDS 31 MARCH 2023
The 130% super-deduction for the investment in plant and machinery was introduced in the March 2021 Budget.
The enhanced tax deduction is available to limited companies that acquire new plant and machinery between 1 April 2021 and 31 March 2023. Companies should consider bringing forward plans to acquire new plant to benefit from this generous tax allowance. Note that the expenditure must be incurred before the 31 March 2023 deadline.
£1 MILLION ANNUAL INVESTMENT ALLOWANCE NOW PERMANENT
The 130% super-deduction referred to above only applies to limited companies, however the Annual Investment Allowance (AIA) is available to unincorporated businesses as well as limited companies.
In the recent Autumn Statement the Chancellor announced that the AIA for expenditure on plant and machinery would become a permanent £1 million allowance.
The annual limit was originally scheduled to revert to just £200,000 from 1 January 2021 and has been extended twice to 31 March 2023. Businesses will welcome the certainty that this provides.
NEW VAT PENALTIES FOR LATE RETURNS
A new points-based system for late VAT returns starts for return periods commencing on or after 1 January 2023. A financial penalty will apply when a number of points have been accumulated, which will depend on how frequently the returns should be submitted. For a trader preparing quarterly returns a penalty will be charged when four points have been accumulated.
ADVISORY FUEL RATE FOR COMPANY CARS
The table below sets out the HMRC advisory reimbursement rates for employees’ private mileage using their company car from 1 December 2022. Where full reimbursement is made there is no taxable fuel benefit. The rates for the previous quarter, if different, are in brackets.
| Engine Size | Petrol | Diesel | LPG |
| 1400cc or less | 14p
(15p) |
10p
(9p) |
|
| 1600cc or less | 14p | ||
| 1401cc to 2000cc | 17p
(18p) |
12p
(11p) |
|
| 1601 to 2000cc | 17p | ||
| Over 2000cc | 26p
(27p) |
22p | 18p
(17p) |
Note that for hybrid cars you must use the petrol or diesel rate and for fully electric cars the rate is now 8p per mile (previously 5p per mile).
You can continue to use the previous rates for up to 1 month from the date the new rates apply.
Our experts at Beavis Morgan can ensure your tax affairs are as efficient as possible to fit your circumstances. In addition, we can look ahead to retirement and inheritance tax planning.
DIARY OF MAIN TAX EVENTS – JANUARY/ FEBRUARY 2023
Below is a list of the main tax events coming up which you should know about now. It is important to be aware that filing your tax return late or failing to pay the tax you owe on time, could mean you face extra penalty fees and interest charges. It is therefore recommended that you authorise a tax specialist such as Beavis Morgan to handle your tax affairs and deal with HM Revenue & Customs on your behalf. This will ensure that all deadlines are met and that you are not paying more tax than you need to.
| Date | What’s Due |
|
01/01 |
Corporation tax payment for year to 31/3/22 (unless quarterly instalments apply) |
|
19/01 |
PAYE & NIC deductions, and CIS return and tax, for month to 5/01/23 (due 22/01 if you pay electronically) |
|
31/01 |
Deadline for Self-Assessment tax return for 2021/22 if filed online. Also the due date for 2021/22 balancing payment and 50% payment on account of 2022/23 tax.
Note that if this liability is no more than £30,000 you can agree with HMRC to spread over 12 months |
| 01/02 | Corporation tax payment for year to 30/4/22 (unless quarterly instalments apply) |
| 19/02 | PAYE & NIC deductions, and CIS return and tax, for month to 5/02/23 (due 22/02 if you pay electronically) |
At Beavis Morgan, our diverse team of tax professionals are committed to ensuring that your tax reporting obligations are fully satisfied and that every opportunity to lawfully exploit tax savings is made known to you, restructuring your affairs in a tax effective and efficient way.
For more information and to discuss your tax affairs in further detail, contact your usual Beavis Morgan Partner or email info@beavismorgan.com.