Edwin Smith - Chartered Accountants
  • Home
  • About Edwin Smith
  • Accounting Services
  • Contact Edwin Smith

Inheritance Tax Reminder

Posted by: edwinsmith on February 29th, 2012

Just a reminder of the current rates and reliefs. If you did not use your annual exemption of £3,000 in 2010/11 then this carries forward for one year only to add to the 2011/12 exemption of £3,000 available.

You should keep a record of your gifts with the relief available.

If you would like some further advice then please contact us.

 

Rates

 

2011-12
Nil rate band *

£325,000
Rate of tax on excess on death

40%
Lifetime rates on excess

20%
Spouse exemption limit for overseas domiciled spouse/civil partner

£55,000
Reliefs

 
Annual exemption per donor

£3,000
Small gifts per donee

£250
Regular gifts out of excess income

 
Gifts in consideration of marriage by:

 
Parent

£5,000
Grandparent

£2,500
Remote ancestor

£2,500
Party to the marriage

£2,500
Other person

£1,000
 

 
* Potentially increased if you are a surviving spouse or civil  partner

 
 

Potentially exempt transfers
Gifts to individuals and trusts for the disabled that are not chargeable transfers are potentially exempt transfers. No inheritance tax is payable on a potentially exempt transfer but if death occurs within 7 years, it becomes a chargeable transfer at the date of the gift and tax is calculated at the full death rates applying at the date of death after applying the available nil rate band with the excess subject to taper relief below.
 
Reduced charge on gifts within seven years of death
Years before death

0-3

3-4

4-5

5-6

6-7
% of death charge

100

80

60

40

20
Filed under: Tax

Revised advisory fuel rates 1 March 2012

Posted by: edwinsmith on February 29th, 2012

H.M. Revenue and Customs (HMRC) have published the latest advisory fuel rates relating to mileage payments for business travel in company cars. These are as follows: 

Engine size Petrol LPG
1400cc or less 15p 10p
1401cc to 2000cc 18p 12p
Over 2000cc 26p 18p

 

Engine size Diesel
1600cc or less 13p
1601cc to 2000cc 15p
Over 2000cc 19p

The changes this quarter is the increase of 1p per mile in diesel for engines sizes of 1600cc or less and over 2000cc.

The new rates will be effective from 1 March 2012. However for the first month employers may continue to use the previously published rates if they choose to.

These rates will be reviewed again in May 2012 and any changes made will be effective from 1 June 2012.  The revised fuel rates will be published on the fuel rates page on the HMRC website when they are released.

Advisory fuel rates can be used to calculate the following:

  • Reimbursement to employees of fuel used for business travel in a company car
  • Repayment by employees of fuel used for personal travel in a company car
  • Allowable input VAT on business mileage claims

A more detailed explanation of the use of these rates is on the HMRC website.

The rates applying for earlier periods are also on the HMRC website.

If you have any questions regarding the use of advisory fuel rates or mileage payments please contact us.

Filed under: PAYE, VAT

Flat Rate Expenses for Employees and Tax relief for specialist tools and clothing

Posted by: edwinsmith on February 29th, 2012

As an employee you may be able to get tax relief if you spend money on any tools or specialist clothing you need to perform your job and your employer doesn’t reimburse you. You can go back several years and the time limit depends on whether you have previously submitted self assessment tax returns (see link – on ‘how to claim’ below).

Specialist clothing and Tools

As a general rule an employee can’t get tax relief for the cost of clothing they wear to work but there are certain exceptions dependent on the industry sector e.g. where you require protective clothing (building trade) or your job requires a specific uniform like a nurse or fire fighter. See HM Revenue & Customs: Tax relief for specialist tools or clothing for full details.

If you must pay for the cost of replacing, repairing or cleaning the specialist clothing then you are entitled to relief but you cannot claim the initial cost of buying this clothing.

If as an employee you have to buy – out of your own money – the tools you need to be able to do your own work then you are entitled to tax relief e.g.  As a hairdresser your employer might require you to provide your own scissors or a plumber your own tools. The tax relief also applies to the cost of maintaining and replacing tools.

Flat Rate expenses

If you have to spend money on tools or specialist clothing for your job you may be entitled either tax relief for the actual amounts you spend or a ‘flat rate deduction’.

Flat rate deductions are amounts that have been agreed with HM Revenue & Customs (HMRC). The deductions cover what's typically spent each year by employees in different trades. For example, someone working in the clothing industry can get a deduction of £60 each year or stone mason £120. You'll also benefit from less paperwork - you won't have to keep a record of all the individual amounts you spend. Follow the link below to see a table of agreed flat rate expense deductions Flat rate expense deductions .

If your industry is not listed on the table, you can still claim a standard amount of £60 for the laundry costs of uniforms or protective clothing.

How to claim tax relief

If you do not complete a self assessment tax return then you will need to contact HMRC by letter or phone and provide HMRC with various details about your employment, expenses being claimed for, industry sector, occupation etc. See HM Revenue & Customs: How to get allowances and reliefs - employees or directors for full details on making a claim and time limits for getting tax relief.

Please contact us if you require any assistance.

Filed under: PAYE, Tax

Pension payments before 5 April 2012?

Posted by: edwinsmith on February 10th, 2012

From 6 April 2011 the rules changed on tax relief on pension savings. The annual allowance, which is the maximum amount of pension saving that benefits from tax relief each year, became £50,000 (£40,000 net of basic rate tax).

If you have been saving in a registered pension scheme since 6 April 2008 and your pension savings were less than £50,000 per annum in any of the tax years since then, then you will have an unused annual allowance to carry forward from that year/years. Unused allowances can only be carried forward for three years so the unused allowance from 2008/09 will not be carried forward after 5 April 2012. 

There is a strict order in which you use up your annual allowance. You use the current tax year annual allowance first, then use your unused annual allowance from earlier years, using the earliest tax year first. Hence, to use any unused allowance of 2008/09 you must have pension savings in excess of £50,000 for the current year.

If however, you have not been a member of a registered pension scheme in earlier years then you will not have unused annual allowance to carry forward.

If you are self-employed, contributed into a pension scheme in 2010/11 and have made no contributions so far in the current tax year, then your payments on account for 2011/12 are based on your 2010/11 position. If your 2011/12 total income is similar to 2010/11 and you do not make a pension contribution by 5 April 2012 then you may have a large balancing payment of tax due by 31 January 2013 together with a higher payment on account for 2013/14.

Your pension savings in a tax year is the total of the increase in value for each scheme of which you are a member. For personal pensions, the increase in value is the amount you have contributed in the period, grossed up to cover the basic rate tax added by HM Revenue & Customs (HMRC), for example if you pay £500 a month into a personal pension, this is grossed up to £625 a month and your pension savings for that scheme will be £7,500.

For workplace pension schemes, the value of contributions made by your employer is also included in your pension savings. Where the scheme is a money purchase/defined contribution scheme, the increase in value for the period is the gross amount you have contributed out of your pay together with amounts contributed by your employer. For defined benefits schemes, the amount of your pension savings is the increase in the value of your promised benefits over the pension input period ending in the tax year. The valuation is based on a notional ‘capital’ value broadly based on 16 times the amount of annual pension achieved to date and any additional separate lump sum. Your pension scheme administrator will be able to provide you with a pension savings statement if you think your savings will be over the £50,000 allowance.

There are a number of wrinkles in the general situation set out above that may apply in particular unusual situations, so you should always check with us before making decisions.

Filed under: Tax