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What does Donating Under Gift Aid Mean?

Feb15

Donating under Gift Aid means that the charity you are donating to will be able to recover 28p for every £1 you donate from the Taxman.  This is available until 5th April 2011.

For your charity to recover this cash you must give a Gift Aid declaration. Where you make a donation over the phone instead of  using a website, your charity will write to you to confirm this Gift Aid declaration.

Another requirement is that you must be a taxpayer who has paid tax that is at least the amount  that you charity will claim under Gift Aid.  If you are not a taxpayer you cannot make a Gift Aid declaration.

If you are a higher rate tax payer you can also claim the difference the 40% high rate of tax and 20% basic rate of tax on your personal tax return. You need to keep your accountant informed of donations you have made under gift aid so he/she can claim the difference.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Income Tax for Dummies

Feb13

This is a plain English Guide to Income tax.

What is income tax?

This is tax paid on money you earn, It includes your salary, some state benefits, savings and pensions. If you are an employee benefits such as company cars are also taxed.

Please note the rates below are for the tax year 2009/10.

How much tax do you pay?

This depends on how much you earn.

All of us are entitled to earn up the the level of our personal allowance of £6,475 (for the tax year 2009/10) without being taxed. This is your tax free income that the taxman cannot touch.

Those of us who fall in the higher age bracket get a higher level of personal allowance:

  • Aged between 65 to 74 the personal allowance is £9,490
  • For people  aged 75 and over it is £9,640

There is also a blind person’s allowance, and married couple’s allowances based on age

After using your personal allowance, any income that you earn after £37,400 you will be taxed at 20% . Any income above £37,400 after using your personal allowance will be taxed at 40%.

Any interest paid on your savings, the first £2,440 above your personal allowance will be taxed at 10%.  However, if your other income (non savings) exceeds £2,440 after deducting your personal allowance, then any interest from savings will be taxed at the basic rate of 20%.

How is income tax paid?

If you are:

Employed: Tax will be collected through PAYE (Pay As Your Earn). If you receive a pension, your pension provider will collect the tax in the same way.

Self Employed: Tax will be paid through self assessment. You or your accountant will complete a self-assessment form to determine your tax bill.

Savings Income : Your bank will deduct tax from the interest you receive it.

 

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Do I need to pay tax on what I sell on ebay?

Feb12

If you are selling some stuff  that is lying around in the attic then the answer is unlikely. To pay tax on what you sell you either need to be trading or make a capital gain.

HMRC are likely to consider you as trading  where you are buying or making goods to sell them on to make a profit. This also applies where you sell these goods for a third party and you are paid a commission on your sales.

If  you just sell  odd items on Internet auctions, classified adverts or car boot sales it is unlikely HMRC will regard you as self-employed. This is because in most situations the amount you receive for goods sold is less than the amount you originally paid for the second hand goods you have put up for sale.  Tax is only to be paid where you make a profit.  You have have not made a profit here.

The same applies to capital gains tax. You only need to pay this tax on gains you made on selling certain assets. You will only make a gain where you sell the asset for more than what you paid for it or where the value of the asset has increased over the period your ownership and price you sell it for is above this increased value. The items you sell are more than likely to personal effects or goods – these are known as chattels, they are separately worth than £6k when you sell them. They are exempt from capital gains tax so it is unlikely that you will make a gain that is chargeable to tax.

If you would like us to help just get in touch.

https://www.southsideaccountants.co.uk/taxation-services.html#perstax

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

4Networking Putney Business Breakfast

Feb10

I am looking for people who would be interested in joining  a 4n (4 networking) group in Putney. Networking as you may know is the most effective way to form good relationship this in turn will further your business.

I was cynical about networking. After attending 4n networking  meetings I am converted. Very friendly and easy going meetings. You will not be held up by rules. I did not like BNI at all – just too many rules. 4n is different.

Please call me on 020 875 3314 if you are interested in attending  a meeting  just to find out more. You are allowed to attend two meetings before deciding to join.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Big Caution on Joining a Franchise

Feb10

This is just a big caution for those considering a franchise – be very careful. There are more than a few franchisors who are very good at presenting a positive picture of how well you will do. The reality may will be very different.

Do not take the fact that they are a member of  The British Franchise Association (bfa) as an indication of additional security. BFA  is funded by franchiors. In addition, it does not have any legal authority over franchiors. When you have problems, it may suggest mediation. This is likely to cost you.

I am sure they are some good franchisors but they are many who simply will not to do much to help you.

There are many people I know who have been bitten badly by money grabbing franchisors.

If you decide to join a franchise please make sure you go with your eyes fully open by doing  your own research. Proceed with extreme caution.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

 

Can I reclaim the VAT on team/moral building expenses?

Feb7

You as an employer can recover VAT on expenses incurred on staff team building where this event is wholly for the business purpose.  The same also applies to staff parties, staff outgoings and other similar events.

However, you will not be able to cover VAT where:

  • The event is exclusively for the directors of the business. For you to recover all staff should be invited to the event.
  • Where your employees merely acts as hosts to non-employees and the only purpose of the event  is entertaining non- employees.

 

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

How to Reduce Tax on Rental Income?

Feb4

On a buy to let mortgage you get tax relief on the interest on this mortgage and not on the capital repayment part.

With a repayment mortgage, the interest element decreases over the period of the loan as more of the mortgage is repaid. This means the amount of interest you can offset against your rental income decreases and your tax bill rises.

The solution  may be to take out an interest only mortgage…

  • Repayments would be less each month and the mortgage would not reduce so the interest would  remain high.
  • The saving on the lower mortgage payments can be  added to the repayments on say your normal home mortgage and so repay this off quicker instead.

By organising  your mortgage in this way, you ensure your tax on the rental income is minimised. What you are doing is paying less interest on your residential mortgage which is not tax deducible and more interest on your buy to let mortgage which is!

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Inheritance Tax – What is it All About?

Feb2

What is it?

Inheritance Tax is usually paid on your estate when you die. Most estates don’t have to pay Inheritance Tax because they are valued at less than the threshold (£325,000 in 2009-10).

 

Give It Away And Live For 7 Years

No inheritance tax (IHT) is payable on most gifts in your lifetime so long as you live 7 years after the gift. These gifts are known as a Potentially Exempt Transfers (PET)

If a gift is made but there is some reservation on it, such as gifting your house with the understanding you can still live there until you die, this will not count as a PET and will still form part of your estate that is subject to IHT on at death. However, the gift will be effective for capital gains tax, which can create a double tax charge for the person that inherits the house.

If you give away cash that is used to purchase your house, you can be liable to income tax on the benefit of living in the house. This is called the pre-owned asset charge.

There is a sliding for scale for the amount of IHT payable for death within the 7 years. Of course if your estate is worth less than £325,000, no IHT is ever payable.

 

Other Gifts That Are Always Free Of Inheritance Tax

The following will always be free on IHT, whenever they are made…

  • Small gifts to the same person of not more than £250 in a year.
  • Gifts in consideration of marriage of £5,000 from parents, £2,500 from grandparents and £1,000 from anyone else.
  • Normal expenditure out of income where the amounts given are part of your normal expenditure taking one year with another.
  • Amounts up to £3,000, with any unused amount being allowed to be carried forward to the following tax year.
  • Capital transfers for family maintenance – often connected with divorce.
  • Any gifts between spouses/civil partners, where the person who receives the gift is domiciled in the UK.
  • Any gifts to charities or political parties.

 

Husband and Wife (or civil partners)

 

No inheritance tax is payable on gifts between spouses or civil partners as long as both parties are domiciled in the UK. This is often used as a basic method of IHT avoidance. If the gift is a transfer to a foreign domiciled spouse it is only exempt up to £55,000.

With effect from 9th October 2007 spouses and civil partners will now be able to make full use of the nil rate band belonging to each spouse. This is retrospective and applies to anyone with a spouse or civil partner previously deceased. That gives a total inheritance tax exemption for a married couple of £650,000 (for 2009/10). The new rules allow any unused part of the nil rate band on the death of the first spouse or civil partner to be passed to the surviving spouse or civil partner for use on their death.

Say Fred dies on 1 October 2009 with an estate worth £650,000 and his wife did not use her nil rate band when she died previously, he now has the benefit of two nil rate bands totalling £650,000. Now Fred’s executors will pay no IHT at all. The amount of the nil rate band that can be transferred is the proportion of the nil rate band that was unused on the death of the first spouse or civil partner.

For example if on the first death, 50% of a 325K nil rate band was unused, if on the second death the nil rate band is 350K at that time, then 50% x £350K = £175K is available for use in addition to their own nil rate band. There is a maximum of an amount equal to the nil rate band in force at the time of the second death that can be used in addition. Therefore, it doesn’t matter how many ex-spouses or civil partners there are, it is not possible to have a total nil rate band of over 650K in 2009/10.

 

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Tax position where listed company shares are sold at a loss?

Jan17

Where you sell listed company shares at a loss this would be treated as capital loss. This loss can be offset against capital gains araising  in the same tax year or in future tax years.

Capital gains/ losses are calculated by deducting the orginal cost of the asset, plus any enhancement expenditure, from the selling price. The cost of the shares includes any fees paid on the purchase of the asset (shares)  and the money received on sale is reduced by any fees incurred on the sale of the asset (shares).  Tax allowable fees include legal fees, stamp duty and stockbroker’s fees.

Any Capital losses must be offset against any gains arising in the same tax year and if there is a net gain, then the annual tax free exemption (currently £10,100) is applied. If there is a net loss, it  is carried forward to future years until relief can be given.

Using  losses in this way is a key tax planning point, so it is  recommend you take advice from us before selling any shares at a  loss.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Is Personal Injury Compensation Taxable?

Jan17

Payments made on personal injury claims are not taxable, regardless of how this payment is received – lump sum or through periodic payments. Further, any interest paid as part of the damages is tax free but interest paid as result of late payment of the award is taxable.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.