Tax

TAX

The American, Benjamin Franklin said 'In life there are two things that cannot be avoided being DEATH and TAXES.' It is therefore better to try and deal with both. (See our Wills page) Tax is not as frightening as most people think but many still get that sinking feeling when a letter from Revenue & Customs arrives

There are three major types of personal taxation and we can assist with all of them.

Tax' factsheet

INCOME TAX

You have to pay tax on income from your job, profits from self-employment, interest on savings and dividends from investments and rental income.

Everyone is allowed a certain amount of income before they have to pay tax (for 2008/2009 the Personal Allowance is £5,435). Any income over this sum will be subject to Income Tax. The first £36,000 will be taxed at 20% and any remainder will be taxed at 40%..

Most people do not have to complete a Tax Return - those who do mainly being the self employed, higher rate taxpayers and those who make a Capital Gain.

Tax Returns are issued in April and we will inform you of the deadlines for submitting the Return and making payments.

CAPITAL GAINS TAX (CGT)

Anyone who sells or makes a gift of an asset has the potential to make a gain chargeable to CGT. There are various ways to minimise your exposure to CGT but the rules are complex and advice is best given on an individual basis. If you do not normally complete a Tax Return then you have until 5th October after the tax year in which you disposed of the asset to inform HM Revenue & Customs that you have made a chargeable gain.

Everyone has a CGT allowance of £9,600 (2008/2009) which cannot be carried forward to another tax year if it is unused. CGT is payable at a flat rate of 18%.

The calculation of CGT is not complex if you have all of the information but normally problems are caused by not knowing what the right information is. We can assist in calculating your CGT and also in estimating how much CGT will be payable before a transaction takes place.

INHERITANCE TAX (IHT)

Each individual can leave up to £312,000 (2008/2009) free of Inheritance Tax on their death. Anything over this sum is taxed at 40%.

From October 2007 married couples will be able to combine their individual allowances thereby leaving £624,000 to their heirs tax-free on the second death. This transferable Nil Rate Band will be backdated for widows and widowers indefinitely.

There are various ways of reducing your potential Inheritance Tax liability and we can give advice on an individual basis.

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