Hot Tips

At Leon Herman we have prepared some free tax and business advice to help your organisation to grow.

Our hot tips have been prepared by experts and can be used as a handy guide to increase profitability, cut costs and reduce your overall tax exposure. However to ensure that we meet your exact needs, why not contact us today for a tailor made solution specific to your individual business?

Personal Tax Planning

ISA’s and other Tax Efficient Investments

The overall annual investment limit for ISAs is currently £7,200 of which £3,600 can be in cash. If you have not made full use of your ISA, then this should be done before 5 April. Any income earned in ISA's is free from income tax. If you wish to make tax efficient investments beyond ISA’s, then you could also consider National Savings or Premium Bonds.

Capital Gains Annual Exempt Amount

The Capital Gains Tax annual exempt amount will also be increased for individuals to £9,600 per annum for 2008/09.

Pensions

Higher rate taxpayers looking to reduce their 2008/2009 tax liability should consider making contributions into their pension before the end of the current tax year. Any pension contribution paid will extend the amount of income taxable at the current basic rate of income tax of 20%, rather than the higher rate of 40%. Individuals aged 55 and over can also potentially have 25% of any contribution repaid to them as a tax-free lump sum.

To qualify for tax relief against 2008/2009 income, contributions must be paid by 5 April 2009. The annual pension allowance for the current tax year is £235,000. The lifetime allowance for pensions is currently at £1,650,000 for the 2008/09 tax year.

Marriage Separation and Capital Gains Tax

If your marriage is breaking up permanently, try and split assets up within the year of separation and avoid paying any Capital Gains Tax. Leaving it until later could prove very costly.

Company and Business Tax Planning

Salary and Dividends in Company’s owned by married couples or civil partners

Where this is the case it would be beneficial for both parties to be Directors and Shareholders. The government has introduced legislation preventing people from saving tax by having dividends paid to the lower paid spouse or partner. If both parties are Directors and have an active role within the company then it is less likely that you will be caught under the new legislation.

Salary Sacrifice

It is possible for employers to give an employee a pay rise without any actual increased expense, due to the intricate tax laws that surround pensions. This is a tax planning point that is generally overlooked.

Incorporation. Still Beneficial?

Corporation Tax rates have recently increased for small companies from 20% to 21%. Although this is the case, for small companies with a profit of approximately £50,000+ there are approximately £3,500 in savings to be gained over trading as an individual or partnership if you receive most of your earnings in the form of dividend.

VAT Flat Rate Scheme

A Flat rate scheme may be beneficial for those small companies that have few costs or overheads and a turnover of less than £150,000.

The VAT you pay is calculated by applying a flat rate percentage against your gross sales, ignoring any vat on purchases. The flat rate is dependent upon what business sector you trade in.

This makes the scheme very simple to administer and in the first year there is a 1% reduction in the flat rate percentage making the scheme initially, even more cost effective.

The Right Company Car

If your company provides you with a company vehicle, are you using the right vehicle? Investment into vehicles with an official CO2 emission rating of 110g/km or less attracts a 100% allowance for tax in the year of purchase. The car driver will also benefit from a lower tax charge.

Limited Liability Partnerships (LLP's)

Are you trading through the correct vehicle? There are commercial reasons and certain tax advantages associated with operating your trade through an LLP that you may have never even considered.

Personal Tax Estate Planning

Wills

Do you have concerns about possibly having to sell the family home to pay for residential care in old age?

The family home can be protected if your will is correctly structured.

If you die without making one, the rules of intestacy will apply and your assets will be distributed among relatives having first attracted Inheritance Tax at 40% on the estate value above £312,000.

Your will should be reviewed on a regular basis in order to ensure that any efficient tax planning is within current tax legislation and does not require amending.