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Married couples & Civil Partners

The sections below contain tax saving advice for married couples and Civil Partners.

  • Transfer of assets

    If you pay tax at the higher rate of 40%, or the additional rate of 45% and your spouse/Civil Partner pays tax at a lower rate or doesn't pay tax, you could save tax by transferring assets between you. This would move part of the income taxed at the higher rate to be taxed at a lower rate or possibly not taxed at all (e.g. if there are unused personal allowances to set against the income). For 2013/14 both spouses/Civil Partners can earn £9,440 before paying income tax.

    There must be an actual transfer of the asset(s) involved from one spouse/Civil Partner to the other in order to qualify. If you do not want to transfer the full amount of the asset to your spouse/Civil Partner you could always transfer part of the asset or put it into joint names.

    The transfer of assets between spouses is exempt from capital gains tax and inheritance tax. (For 2013/14 both spouses can realise capital gains of £10,600 before paying capital gains tax.)

  • Married couples allowance

    Married couples and Civil Partners where one (or both) spouses/partners were born before 6 April 1935 are entitled to an allowance of £7,915.

  • Transfer of allowances

    If there is insufficient income to fully utilise the married couples allowance (for those born before 6 April 1935) or the blind person's allowance, the surplus allowance may be transferred between spouses/Civil Partner.

  • Pay your spouse

    If your spouse/Civil Partner helps you with your business, you can pay them a reasonable amount for the work they do. Regard should be given to the tax and National Insurance limits as both may be payable, depending on the amount paid. For 2013/14, if their salary reaches £109 per week, they would pay National Insurance. If you pay £109 a week or more you will also have to pay employer's NI.


People with children

The sections below contain tax saving advice for people with children.

  • Children's personal allowance

    All children, regardless of age, are entitled to their own personal tax allowance and capital gains tax exemption. Any income of the child below the personal allowance (£9,440 for 2013/14) will not have income tax deducted from it.

    There are rules in place to avoid parents transferring part of their own income to their children to avoid paying tax at a higher rate. If a parent gives the child capital and the income from that is below £100 per year, the income will be treated as the child's and will not be taxable. If the income is over £100 per year the income will be taxable on the parent.

    If money is given to the child from a grandparent or other relative then any income will be treated as being that of the child. This is a very complicated area and a tax advisor should be consulted before any action is taken.


The elderly

The sections below contain tax saving advice for the elderly.

  • Overseas pensions

    Some pensions paid from overseas governments are assessed in the UK after deducting a 10% relief. To qualify the pension must be paid by or through an agent, officer or public department of the overseas government.

  • State pension

    The state retirement pension is paid without the deduction of any tax. If you complete a tax return you must include it on your tax return as it is still taxable.

  • Employee pensions

    An exemption applies to some UK pensions awarded to former employees for injury at work or a work related illness. If this pension is more than you would have got if you had retired at the same time on ordinary ill-health grounds, the extra pension does not need to be declared on the self assessment tax return.

  • Buying an annuity

    If you have paid into a pension scheme you may not have to buy your annuity from your pension provider. By law personal and stakeholder pensions must give you an open market option.

  • Annuity income

    The full amount of a pension paid from a pension scheme is taxable. An annuity, however, bought with your own money (known as a purchased life annuity) has a capital element which is tax-free.

    The purchased life annuity can be bought with the tax-free lump sum from a personal pension scheme.

  • When you retire

    About four months before you are due to retire, you should receive a form from the DWP. You can use this form to advise them when you want to receive your state pension and how you want it paid. You should also inform your tax office when you are due to receive the pension so they can make any necessary adjustment to your tax code.

  • Married couples allowance

    Married couples and Civil Partners where one (or both) spouses/partners were born before 6 April 1935 are entitled to an allowance of £7,915.

  • Government allowances

    The winter fuel payment is currently £200. Since November 2000 pensioners aged over 75 can claim a free TV license.

  • National insurance

    Once you've reached State Pension age you do not pay national insurance contributions. The State Pension age is dependent on your date of birth and gender, and is moving over the next few years from 65 (men), 60 (women), to age 68.

    If you are self-employed you do not pay NIC after the 5 April following attaining State Pension age.

  • Investments

    If you were born prior to 6 April 1948 you will not receive the full higher age allowances if your taxable income is above the income limit (£26,100 for 2013/14). Choosing investments wisely, transferring income producing assets to your spouse, and giving to charity are just a few ways of ensuring you receive the full allowances you are entitled too.


Low incomes

The sections below contain tax saving advice for people on low incomes.

  • Receive interest gross

    If your personal allowances are higher than your total income and you receive interest from a bank or building society, you may be able to register to have the interest paid gross. This means that the bank or building society would not deduct income tax from your interest before it is paid to you. Your bank or building society will be able to give you form R85 which you will need to complete.

  • Repayment claim form

    If you do not fall within the scope of self-assessment and you feel you may be due a repayment of income tax for the year, you can ask your tax office for a Repayment Claim Form (R40). You should complete this and send it to your tax office. They will calculate your tax position for the year and send you any repayment of tax due to you. There is no time limit for this form to be submitted and claims can generally be made for the previous six tax years.

  • Multiple employments

    If you have more than one job and you earn less than your personal allowance (basic personal allowance for 2013/14 is £9,440) you should ask your tax office to split the allowance between your employments.


Employees

The sections below contain tax saving advice for employees.

  • Form P60/P11D

    Your employer must provide you with your end of year form P60 by 31st May following the end of the tax year and your P11D by 6th July (if applicable). You will need to keep these if you complete a tax return.

  • Dispensation items

    If your P11D does not include an item that you think it should (for example travel expenses paid to you) it is probably covered by what is known as a dispensation. This is where your employer has an agreement with HMRC that items that are benefits in kind but which are claimed as 100% business use by the employee do not need to be shown on the form P11D. If you are in any doubt you should check the position with your employer.

  • Multiple employments

    If you have more than one job and you earn less than your personal allowance (basic personal allowance for 2013/14 is £9,440) you should ask your tax office to split the allowance between your employments.

  • Pool cars

    If you use a company car at work, there is no tax payable if you use a pool car. To qualify, the car must be available to, and be used by, more than one employee. It shouldn't normally be kept overnight at or near an employee's home. Private use of the car must be incidental to business use.

  • Using your own car

    If you use your own car for work, employers usually reimburse your expenses. You will normally receive a set amount for each business mile you travel. These payments are taxable over a certain limit.


Self employed

The sections below contain tax saving advice for the self employed.

  • PAYE and NIC payments

    Employers who make average monthly PAYE and NIC payments to the HMRC of less than £1,500 may choose to pay this quarterly rather than monthly.

    This also applies to contractors in the construction industry.

  • NIC and benefits in kind

    Since 6th April 2000, employers will pay National Insurance Contributions on all benefits in kind which are taxed.

  • Dispensations

    HMRC is keen to minimise the paper work involved with year end P11D forms. If there are expenses that are paid to your employees which they claim back as 100% business use, you may be able to agree with HMRC that these do not need to be shown on the P11Ds. If they agree they will issue a formal dispensation.

  • Year end forms

    You must provide your employees with their end of year forms P60 by 31st May following the end of the tax year and with forms P11D by 6th July.

  • Annual Investment Allowance

    Businesses can claim an Annual Investment Allowance on qualifying capital expenditure.

    The current rate (effective 1 January 2013) is £250,000. With effect from 1 January 2015, the maximum will reduce to £25,000.

    If your accounting period spans 1 January 2013, then a hybrid maximum based on the previous maximum (£50,000) and the current maximum on a time apportioned basis is used to calculate the overall maximum.

    This is a complex area, and professional advice should be sought if in any doubt.

  • Short life assets

    A claim can be made for assets with an expected life of less than eight years, for example computers, to be treated as short life assets. As the asset is expected to be disposed of before the eight-year period, you will obtain relief on the disposal straight away, rather than if it was added to the general pool. If you still have the asset after the eight-year period it is transferred to the general pool at the written down value at that date.

  • Pre-trading expenditure

    If you have expenses in respect of your self-employment in the seven years before you commenced trading, you may be able to claim these items against your profits. The expenditure is treated as an expense incurred on the first day of trading.

  • Partnership tax return

    Having completed your partnership tax return, a nominated partner must sign and date the declaration on page eight of the return. Some tax districts will reject the return if the name of the partner signing the return is not printed underneath the signature.

  • Turnover less than £77,000

    If your annual turnover is less than £77,000 you do not need to itemise every expense on the tax return. Instead you can fill in the three boxes on the self-employment pages.

  • Pool cars

    If you use a company car at work, there is no tax payable if you use a pool car. To qualify, the car must be available to, and be used by, more than one employee. It shouldn't normally be kept overnight at or near an employee's home. Private use of the car must be incidental to business use.

  • Pay your spouse/Civil Partner

    If your spouse/Civil Partner helps you with your business, you can pay them a reasonable amount for the work they do. Regard should be given to the tax and National Insurance limits as both may be payable, depending on the amount paid. For 2013/14, if their salary reaches £109 per week, they would pay National Insurance. If you pay £109 a week or more you will also have to pay employer's NI.


Self assessment

The sections below contain tax saving advice for people completing self assessment tax returns.

  • Self assessment diary

    Please note the following self assessment tax dates.

    31 October

    The tax return must be submitted to HMRC by this date if you want them to calculate your tax position for the year, or if you wish to submit your tax return by paper.

    If your underpayment for the year is below £2000, you can ask for this to be included in your notice of coding if your tax return is submitted by this day.

    31 January

    All tax returns must be submitted by 31 January following the end of the tax year. From 1 November, all tax returns must be submitted online, unless covered by an HMRC Exclusion

    Balancing payment for the year and the first payment on account for the following year is due for payment by this day.

  • Round down figures

    When filling in your tax return round down income figures to the nearest pound (e.g. £22.99 becomes £22). For expenses round up the figures (e.g. £486.22 becomes £487).

    You can also round up tax credits and tax deductions. If there are a number of tax credits (e.g. a list of dividends) you should round up the total figure not each individual amount.

    Advise of chargeability

    Even if you are not issued with a self assessment tax return form, it is your duty to inform HMRC of your chargeability to tax by 5 October following the end of the tax year.

  • Other sources of income

    If you receive income from a source and you cannot find where it is entered on the tax return and supporting schedules, you should enter it on from SA100, page 3 “Other UK Income", providing further details under the additional information box on page 8 of the return.

  • Provisional figures

    If you tick box 20 on page 8 of the tax return to show that some of the figures are estimated, you must advise HMRC of the correct amounts as soon as they are available.

    You should state in the additional information box when you expect to be able to provide the correct figures.

  • Copy your return

    Before sending your return to HMRC, make a copy of it for your records. If HMRC raises a query about the form, it will be easier to discuss the problem with them.

  • Do you need a tax return?

    It may be that you have completed a tax return for a number of years. If your tax affairs are now relatively straightforward, you may not need to complete one. HMRC is keen to remove people from the self assessment system if they no longer fall within the various categories. Write to your tax office advising them of your situation.

  • Blind persons allowance

    You may still be able to claim the blind persons allowance for 2012/13, even if 2013/14 is the first year you are on the register, provided you already had evidence of blindness before 6 April 2013. This is usually an ophthalmologist's certificate on which the local authority subsequently based your registration.


Home owners

The sections below contain tax saving advice for home owners.

  • Rental income

    If you rent out a property owned by you, you must include on your tax return details of all income expected to be received during the tax year, even if it hasn't been received until after 5th April.

    A property will qualify as furnished holiday lettings if it is in the UK and is available for holiday letting to the public for 210 days or more during the year. It must actually be let for 105 days or more during the year and must not be occupied continuously for more than 31 days by the same person, for at least 7 months of the year.

  • Rental losses

    If you make a loss from your rental income in the year, you can carry this forward and set it against the rental income of the following tax years until it is used up.

  • Mortgage lenders

    If you let out rooms in your home, or a separate property, and you have a mortgage on that property, you should inform your mortgage lender of the situation to ensure you are not breaching the contractual agreement between you. If your letting income falls within the rent-a-room scheme, most lenders will not have a problem.

    Similarly you should also inform your insurer.

  • Rent a room relief

    If you rent part of your home out you may be able to claim the rent-a-room relief (£4,250) to set against your letting income. You do not need to claim this if the expenses related to the letting are greater than the rent-a-room relief (eg advertising for tenant, wear and tear on furnishings supplied etc).

  • Stamp duty

    Stamp duty is payable on property transactions where consideration is over £125,000. The bands are £125,000 - £249,999: 1%; £250,000 - £499,999: 3%; £500,000 - £999,999: 4%; £1,000,000 - £1,999,999: 5%; £2,000,000 or over: 7%.


Investments

The sections below contain tax saving advice for people with investments.

  • Life insurance gains

    If you have a gain on a life insurance policy and there is a notional tax credit attached to it, you should enter the details in boxes 4 & 5 on page 1 of the SA101. If there isn't any notional tax you should enter the gross figure in boxes 6 & 7. If you are unsure whether there is a tax credit you should ask your insurance company or financial adviser.

  • Gains on void ISAs

    If you have subscribed to more than one life insurance Individual Savings Account (ISA) during the tax year, the most recent policy will be voided. If you have made a gain on this policy you will have to pay the tax due. Your ISA provider should inform you of this in writing. This needs to be included in boxes 8 to 10 on page 1 of the SA101.

  • Pension premiums paid

    If you are claiming for pension contributions made during the year, you should ensure your date of birth is entered on page 1 of the self-assessment tax return.

  • Types of investment

    Different types of investment exist, catering for the various needs of the investor. They include:

    • Children's Bonus Bonds
    • UK life assurance endowment policies
    • Enterprise Investment Schemes
    • Enterprise Zones
    • Gilt's (UK Government Stocks and Bonds)
    • Individual Savings Accounts (ISAs)
    • Investment bonds
    • Various national savings accounts
    • Pension Schemes
    • Venture capital trusts
    • Bank/building society accounts

  • Individual Savings Accounts (ISA)

    You can invest up to £11,520 for the 2013/14 tax year. Up to £5,760 of this amount can be in a cash ISA, with the balance in a Stocks and Shares ISA

  • Charitable giving

    Deeds of covenant were replaced by the new gift aid scheme on 6th April 2000. Existing deeds of covenants will continue to run until the end of their term.

    With no minimum donation, all gift aid payments qualify for basic rate tax relief. Higher rate tax payers can claim back 20% tax relief through their tax office.

    Payroll giving (payments to charities made through the payroll) also attracts the tax relief as for gift aid payments.


Share holders

The sections below contain tax saving advice for people buying and selling shares in the stock market.

  • Accumulation units

    Income from unit trust investments that are accumulated (i.e. reinvested into the account) should be shown as taxable income on your tax return. The dividend voucher should show the "appropriate amount in cash".

  • Accrued income

    When purchasing or selling certain stocks, part of the price may include a proportion of the next payment of interest. This is known as accrued income. If you receive the income you will be taxed on this. If you pay the charge you will be given tax relief on the payment. The tax return guide tells you where to put the accrued income, depending on which type it is.


Capital Gains Tax (CGT)

The sections below contain tax saving advice for those eligible to pay CGT.

  • Exemptions

    If, for 2013/14, your capital proceeds are below £42,400 and your capital gains are below £10,600 you do not need to inform HMRC. If either of the limits is exceeded you must inform HMRC as soon as possible to avoid paying unnecessary penalties.

    If you are likely to exceed either of the above exemptions, consider disposing of part of the asset before 5 April and the other part after 5 April. This will mean you can utilise the exemptions for two tax years.

    If you have an overall loss which you wish to claim, this must be notified to HMRC

  • Transfer of assets

    If you pay tax at the higher rate of 40%, or the additional rate of 45% and your spouse/Civil Partner pays tax at a lower rate or doesn't pay tax, you could save tax by transferring assets between you. This would move part of the income taxed at the higher rate to be taxed at a lower rate or possibly not taxed at all (e.g. if there are unused personal allowances to set against the income). For 2013/14 both spouses/Civil Partners can earn £9,440 before paying income tax.

    There must be an actual transfer of the asset(s) involved from one spouse/Civil Partner to the other in order to qualify. If you do not want to transfer the full amount of the asset to your spouse/Civil Partner you could always transfer part of the asset or put it into joint names.

    The transfer of assets between spouses is exempt from capital gains tax and inheritance tax. (For 2013/14 both spouses can realise capital gains of £10,600 before paying capital gains tax.)

  • Letting your home

    If you let all or part of your main home you may have to pay capital gains tax when you later dispose of the house. The amount will depend on the proportion of the house that was let together with the length of the letting.

    Generally, there is no tax to pay if the gain from the part that is let is below £40,000 and is less than the gain on the part you have lived in. On disposal of the main residence, the last 36 months are always ignored when computing any capital gain.

  • Capital losses

    Capital losses in a tax year are set against capital profits in the same year. Unused losses for the tax year will be carried forward to set against any capital gains in future tax years.


Tax payments

The sections below contain tax saving advice for people making tax payments.

  • Reduced payments on account

    To avoid claims for reducing payments on account from being missed, use form SA303, available from HMRC. If a claim is included on the tax return sent by post or in a letter it may not be seen.

  • Tax calculation

    If you calculate your tax position, HMRC will issue a copy of their tax calculation to you once they have processed your return, if they disagree with your calculation. This could be due to an error on either side. Unless you query the difference HMRC will request payment of the figure shown on their calculation. So always check the tax calculations and statements of account.

  • Payments on account not due

    If you calculate your own tax position for the year, you will need to consider whether payments on account of your following year's tax liability are due. They are not due if:

    • your total income tax, minus deductions, in the previous year is below £1,000, or
    • at least 80% or more of the tax due is covered by tax deducted at source (eg PAYE, tax credits etc).