Saturday, 31 October 2015

3 points to note on New Rules For Dividends From 2016/17

Summer Budget 2015 came up with the new taxation of dividends that will apply from 6 April 2016. Further guidance has now been published by HMRC setting out how the new rules will operate and it seems the rules don’t work as many people expected.

1. As previously reported, there will be no 10% credit against the tax on dividends which means there will be a 7½ % increase in the rate of tax on dividends once the £5,000 dividend allowance has been used up.

2. Currently dividends falling into the basic rate band are effectively tax free. However the £5,000 allowance needs to be taken into consideration in determining the rate of tax on your dividends.
For example if you have salary and other non- dividend income of £40,000 next year and £9,000 in dividends, the £4,000 of taxable dividends are taxed at 32.5%, not £3,000 at 7.5% then £1,000 at 32.5%. This is because the £5,000 is added to the £40,000 income pushing the taxable dividends into the higher rate band.

3. If you own your own company it may be beneficial to bring forward dividend payments from next year to save the additional 7.5%. However, it would be important to consider all of the tax implications of such actions so come and talk to us to discuss your options.

Feel free to contact us for further advice.
020 89310165 | 📱 07900537459 |

Friday, 30 October 2015

Transfer Of Tax Losses

Where a company makes a trading loss that cannot be relieved against other profits that year, or the previous year, the unrelieved loss can be carried forward against future profits from the same trade that incurred the losses. This carry forward also applies where the trade is transferred to another company under common control (basically 75% common ownership before and after the transfer).

A recent case before the First Tier Tribunal has held that where the trade is transferred to another company under common control carrying on the same trade, the brought forward losses may be set against the future profits of the merged trade as it was successfully argued that the loss making trade was subsumed into the profitable trade. The two companies concerned were both trading as department stores and the similarity of the two trades and rebranding of the stores into the same trading name was seen to be critical.  In the particular case (Leekes Ltd v HMRC) the loss making trade was hived up following the acquisition of a competitor and merged with a profitable trade.

HMRC may yet appeal the court’s decision but it may be something to take into consideration if you are considering an acquisition or reorganising your group structure.

Feel free to contact us for further advice.
020 89310165 | 📱 07900537459 |

Thursday, 29 October 2015

Downsize (or Upsize) to Save Inheritance Tax?

From 6 April 2017 an additional Inheritance Tax (IHT) Residence Nil Rate Band (RNRB) starts being phased in to enable individuals to pass on their family home to direct descendants. The additional nil rate band starts at £100,000 and rises to £175,000 for deaths after 6 April 2010. When fully phased in the additional nil band will enable a married couple to pass on a family home valued up to £1 million free of IHT, although the additional relief is restricted if they have assets worth more than £2 million.  The proposed new legislation, if enacted, will provide relief even if the individual downsizes to a smaller property where the downsizing takes place after 8 July 2015. Like the £325,000 IHT nil rate band, the unused residence nil band can be transferred to the surviving spouse and used on the second death.


A widow sells a home worth £400,000 in August 2020 for cash and moves to a home worth £210,000. At the time of the sale the available RNRB is £350,000 as, had she died at that time, her executors would be able to make a claim to transfer all the unused RNRB from her late husband. The new downsizing relief will entitle her to an additional £140,000 (£350,000 - £210,000) nil rate band. This would be added to her nil rate band (up to £650,000 (2 x £325,000) and can be set against any of her assets including cash and investments.

If the replacement property was worth £225,000 on her death then the additional nil band would be reduced to £125,000 if the allowance remains at £350,000.  The new inheritance rules are complicated so please get in touch if the changes impact on your family’s tax position. It may even be worth considering upsizing before you downsize to maximise this new relief!

Wednesday, 28 October 2015

UK Tax Deadlines in November & December 2015!

Tax Diary Of Main Events For November/December 2015:

UK Tax Deadlines in November & December 2015!

What’s Due
1 November
 Corporation tax for year to 31/01/15
19 November
 PAYE & NIC deductions, and CIS
 return and tax, for month to 5/11/15
 (22 November if paid electronically)
1 December
 Corporation tax for year to 28/02/15
19 December
 PAYE & NIC deductions, and CIS return and tax, for month to 5/12/15 (22  December if paid electronically)
30 December
 Deadline to file 14/15 SA tax return online if unpaid tax up to £3000 is to be  collected via 15/16 PAYE code

Contact us for your Tax Needs:
☎ 020 89310165 | ☏ 07900537459 | ✉