Archive for January, 2013

Ten-fold increase in Annual Investment Allowance

Monday, January 7th, 2013

One of the surprise announcements in the Autumn Statement 2012 was the decision to increase the Annual Investment Allowance (AIA) from 1 January 2013 to £250,000. The increase will apply for two years.

Obviously, this is an attempt to focus the minds of entrepreneurs on investment. For profitable, self-employed traders this could be a useful tax planning tool providing a means to drastically reduce higher rate tax payments. Indeed all businesses should consider this change as an opportunity to bring forward the tax relief on qualifying equipment purchases.

There may be an opportunity to quite legitimately create tax losses if the AIA claimed exceeds taxable trading profits for the year. If the losses can be carried back, perhaps tax paid in earlier years can be reclaimed… However, beware if your accounting period falls in the tax year 2013/14 or later, as loss relief may then be restricted by the new cap (see below).

We would advise business owners to consider a rounded approach to investment decisions as it would be imprudent for the “tax tail” to unduly influence other commercial considerations. For example, how would the capital expenditure be funded without depleting working capital?

Please contact us if you would like to discuss how your business would best make use of this new opportunity.

End of year tax planning

Monday, January 7th, 2013

Although we are now at the beginning of a new calendar year we are in the last quarter of the current tax year.

Whether you are a business person, property landlord or pay significant amounts of tax as an employed or retired person there is now a short window of opportunity to examine your likely earnings for the 2012-13 tax year, and more importantly, see what can be done to minimise those liabilities.

It is impossible to outline all of the possible tax planning issues that could be of benefit. We have listed below a few and would request that you give us a call to discuss your individual circumstances.

* Have you maximised your ISA investments this year?
* Have you maximised your pension contributions?
* If possible have you utilised your Capital Gains Tax personal exemption? Currently £10,600 2012-13.
* If your employer still pays for the private fuel used in your company car, you can effectively avoid the car fuel benefit charge if you repay your employer for the private fuel before the end of the tax year. It may be worth crunching the numbers as the tax benefit in kind is expensive and the private fuel refund may be less.
* For Inheritance Tax purposes each person can give £250 a year to any number of recipients, as well as £3,000 annually over and above that amount. They can also make regular gifts out of their income (not capital) that should fall to be exempt.
* If you are married or in a Civil Partnership and one partner/spouse has a much lower level of earned income, consider transferring income producing assets to the lower income earner. With Income Tax rates at a maximum 50% this current tax year, savings could be significant.
* If you are in business would it be prudent to bring forward capital expenditure so that you can take advantage of the increase in the Annual Investment Allowance from 1 January 2013 – see article that follows.
* If your income is likely to exceed £100,000 this tax year have you considered the potential reduction or loss of your personal tax allowance?
* If you are a high income earner paying tax at the 50% additional rate, could you defer taking bonuses or dividends until after 5 April 2013 when the additional rate reduces to 45%?
* Is it likely you will have business tax losses for 2012-13?

As indicated above every person’s circumstances are different and the above list is by no means exhaustive. Please call if you would like to organise a review of your tax planning opportunities for 2012-13.