Tax E-News January 2024
Happy New Year and welcome to the January edition of Tax E-News. We hope that you find this informative. Please contact us if you wish to discuss any matters in more detail.
Below we set out some of the main points.
NEW YEAR RESOLUTIONS TO SAVE TAX
At this time of year, we think about New Year’s resolutions. It is also a good time to start planning your tax affairs before the end of the tax year on 5th April. An obvious tax planning point would be to maximise your ISA allowances for the 2023/24 tax year …
TIME TO REVIEW, OR MAKE A WILL?
At the top of the New Year to do list for many individuals is to make or update their Will. Many think this is something to leave until later in life, but it is important to get things in place once property is acquired or when children come along.
In the absence of a will there are statutory rules which dictate how your assets are distributed on death. Those statutory intestacy rules may not be tax efficient, and you might to want to make specific provision in your Will for your unmarried partner or for the guardianship of your children …
PASSING ON THE FAMILY HOME
When considering the wording of your Will, you should note that the inheritance tax (IHT) nil rate band continues to be frozen at £325,000, subject to any announcements in the Spring Budget. There is currently an additional nil rate band of up to £175,000 for passing on the family home to direct descendants on death. We can work with your solicitor to make sure your Will is tax efficient …
LEAVING MONEY IN YOUR WILL TO CHARITY
If you leave at least 10% of your estate to charity, the rate of Inheritance tax on the amount chargeable Is reduced from 40% over the nil rate bands to just 36%. This would reduce the amount passing to other beneficiaries and needs to be carefully considered.
YEAR END INHERITANCE TAX PLANNING
Many were expecting an announcement from the Chancellor in the Autumn Statement about cuts to, or the possible abolition of, inheritance tax (IHT). Maybe he is saving that for his Spring Budget, but in the meantime, it may be worth utilising the £3,000 gifts annual exemption for 2023/24 and, if available, the unused amount from 2022/23. Note that £3,000 is the overall exemption for the tax year, not the amount for each done. More generous amounts can be given away by taking advantage of the exemption for regular gifts out of income.
REGULAR GIFTS OUT OF YOUR INCOME CAN SAVE IHT
One tax planning opportunity that many thought the chancellor might restrict was the exemption from inheritance tax for regular gifts out of an individual’s surplus income. Inheritance tax is designed to tax transfers of capital, so if the donor can demonstrate that the gifts are made out of surplus income then the transfers are not taken into consideration for IHT. The exemption applies where there is a regularity to the payments, such as a standing order to pay school fees or pension contributions on behalf of children or grandchildren …
PENSION CONTRIBUTIONS ON BEHALF OF OTHERS
Normally an individual’s payments into a pension scheme are limited to their relevant earnings in a given tax year. This restriction does not apply where the contributions are less than £3,600 gross, allowing parents and grandparents to make payments on behalf of children and grandchildren with limited income …
UPDATE PAYROLL SOFTWARE FOR THE JANUARY NIC CUT
The chancellor’s announcement of a 2% cut in national insurance contributions (NICs) for employees applies to payments on or after 6 January 2024. That doesn’t allow much time to update payroll software, particularly with the Christmas holidays in between …
ADVISORY FUEL RATE FOR COMPANY CARS
The table below sets out the HMRC advisory fuel rates from 1 December 2023. These are the suggested reimbursement rates for employees’ private mileage using their company car …