We are just over one month in now to a new tax year, so we thought it was a good time to highlight a few of the more popular tax topics we’ve been asked questions about over the last 30 days. Do any of these apply to you?
Personal and family planning
If your annual income is higher than £50,000, and you or your partner receives child benefit, you will be subject to a tax charge.
For those with income between £50,000 and £60,000, the tax charge is less than the child benefit amount, but gradually increases to 100% of the child benefit payments. For people earning more than £60,000, the tax charge is 100% of the child benefit amount.
To avoid the tax charge, you can opt out of receiving child benefit. If you do decide to opt out, you can still maintain your entitlement, which can help protect your entitlement to State Pension and other benefits.
Property
If you’re looking to purchase a second or subsequent home above £40,000, an additional 3% (England, Northern Ireland and Wales) or 4% (Scotland) is payable. This could include a holiday home, a buy-to-let or even your main residence.
Even if you already have just a share in a property, if that share is worth more than £40,000, when it comes to buying your first property you could be stung by the extra tax.
If the home you are buying replaces your main residence, you will not be liable for the surcharge, even if you own an additional property.
Estate planning
In the 2019/20 tax year, everyone is allowed to leave an estate valued up to £325,000, plus the new ‘main residence’ band of £150,000, giving a total allowance of £475,000 per person.
For estates valued under this threshold, beneficiaries won’t pay inheritance tax. Above that amount, anything left behind is subject to a tax charge of 40% (or 36% if you leave at least 10% of your assets to charity).
Retirement planning
It’s important to take advantage of tax relief at your highest tax rate on pension contributions, up to the limit set by your annual allowance.
The annual allowance for 2019/20 is £40,000, but you can bring forward unused allowances from the three previous tax years. The annual allowance must cover pension contributions made by yourself and your employer.
The allowance is tapered down to a minimum of £10,000 if your annual income exceeds £150,000.
Please bear in mind that the annual allowance is restricted to £4,000 if have already started accessing your pension.
Employment
Salary sacrifice schemes are becoming more popular because of the tax advantages associated with them.
Although the government has changed the rules on many salary sacrifice opportunities, schemes for boosting pension pots, accessing childcare and improving health (like cycling to work) continue to offer tax saving benefits. Make sure you fully explore all the options.
Looking for tax planning advice? Speak to our tax team today by calling 023 8061 3000 or emailing info@langdownsdfk.com.
