Archive for April, 2019

When do you pay capital gains tax?

Thursday, April 18th, 2019

If you personally disposed of an asset that is subject to a capital gains tax (CGT) charge, at any time during the tax year ending 5 April 2019, any CGT due will need to be paid 31 January 2020.

Accordingly, if you know the amount of the taxable gain, and the amount of CGT payable, you still have more than ten months to organise the funds to pay the tax.

Hopefully, when you sold the asset you were advised of the likely tax charge and reserved funds from the sale proceeds to settle the liability; after undertaking the necessary research – or professional advice – to claim any available exemptions or reliefs?

And there is still time to consider CGT planning.

Although the stable door has been closed – the gain has crystallised during the 2018-19 tax year, claims for any reliefs can still be made as part of your self-assessment return for 2018-19.

It is beyond the scope of this article to list all the reliefs that can be claimed to reduce a CGT bill, but we can help you consider your options. Please call for advice. We will need to know the following details to better consider these options:

  • A description of the asset(s) sold,
  • The disposal proceeds,
  • Any costs associated with the sale,
  • The date and costs of the purchase of the disposed assets.
  • Any costs you have incurred since acquiring the asset that have improved it in some way: for example, an extension to a property.

You have plenty of time to plan for the payment of your CGT liability for 2018-19 – latest date to pay is 31 January 2020 – and we recommend that you fully consider your planning options before submitting your 2018-19 tax return.

If you don’t submit an annual tax return, you will need to submit details to HMRC using the “real time” capital gains tax service. The following instructions on this option are reproduced below. However, even if you use this option, it is still advisable to take professional advice on the computation of the chargeable gain to ensure you only pay what is due and no more.

You can use the ‘real time’ Capital Gains Tax service if you’re a UK resident. You’ll need a Government Gateway user ID and password. If you do not have a user ID, you can create one when you report and pay. When you use the service, you’ll need to upload PDF or JPG files showing how your capital gains and Capital Gains Tax were calculated.

When to report

You can use this service as soon as you’ve calculated your gains and the tax you owe. You do not need to wait until the end of the tax year. You must report by 31 December after the tax year when you had the gains.

After you’ve reported your gains, HMRC will send you a letter or email giving you a payment reference number and telling you ways to pay. Do not pay your Capital Gains Tax bill until you’ve received your payment reference number.

What is a Debt Relief Order?

Tuesday, April 16th, 2019

The first Debt Relief Order (DRO) was approved 10 years ago in April 2009 with the aim of assisting people with small levels of assets and little surplus income deal with their debts*.

Since then, the Insolvency Service has approved more than 254,000 DROs to people with debts worth an average of £9,400.

People apply for a DRO through an authorised debt adviser, from organisations such as Citizens Advice, StepChange and PayPlan, who submit applications on-line to the Official Receiver on their client’s behalf.

Approximately 99% of DROs are approved within 48 hours of the application being received into the team in Plymouth and 2018 saw the Insolvency Service issue approximately £312 million of debt relief – the largest amount for a single year.

A DRO normally runs for 12 months after which the debts are written off and between 2009 and 2017, while 64% of DROs were granted to women, both genders experienced similar levels of average debt – £9,200 for women compared to £9,100 for men.

In the same period, 25% of DROs were granted to people aged between 25 and 34. London experienced the lowest rate of DROs in every year since 2009 – 3 per 10,000 adults – compared to both the North East and South West where the average rate of DROs per 10,000 adults was 7.8.

In October 2015, the upper limit for qualifying debt was raised from £15,000 to £20,000, and the asset limit was raised from £300 to £1,000.

There are 12 competent authorities: Angel Advance, Advice UK, Christian Against Poverty, Citizens Advice, CMAS, Debt Advisory Centre, Insolvency Practitioners Association, Institute of Money Advisors, Money Advice Trust, PayPlan, Shelter and Step Change.

Readers of this post who feel that their management of personal debt is running away from them, should contact one of the above support organisations to see if a DRO would be available.

Green light for pension dashboards

Friday, April 12th, 2019

The government has given the green light to allow pension providers to create user-friendly services that display pension information for individuals on-line.

Savers will be in the driving seat with all the facts and figures about their pensions and potential retirement income at their fingertips in one place for the first time – on smartphones, tablets and computers.

Work and Pensions Secretary Amber Rudd said:

With record numbers saving for retirement as a result of our revolutionary reforms, it’s more important than ever that people understand their pensions and prepare for financial security in later life.

Dashboards have the potential to transform the way we all think about and plan for retirement, providing clear and simple information regarding pension savings in one place online. I’m looking forward to seeing the first industry dashboards later this year.

Key details of the government’s plans, published today in its response to a consultation on dashboards, include:

  • a commitment to bring forward legislation at the earliest opportunity to compel all pension providers to make consumers’ data available to them through a dashboard,
  • an expectation that the majority of schemes will be ready to ‘go live’ with their data within a 3 to 4 year window,
  • confirmation that State Pension information will be included as soon as possible,
  • dashboards will help to reconnect people with ‘lost’ pension pots, benefitting savers and providers.

Ministers support the development of multiple industry-led dashboards displaying the same basic information. Industry have told government that initial models will be developed and tested from this year. A non-commercial dashboard will be delivered and overseen by the new Single Financial Guidance Body (SFGB).

An industry delivery group will be brought together by the SFGB which will set out a clear timetable and roadmap to drive progress towards fully operational dashboards, setting standards and ensuring security to protect users and their information.

Can\’t pay your tax?

Friday, April 12th, 2019

A reminder that HMRC may consider extended options for settling your outstanding tax bill. The key is to contact HMRC, explain why you can’t pay on time, and discuss how you can settle any outstanding liabilities.

If you can’t pay before the deadline, call the Business Payment Support Service. Anyone can use this service, not just businesses.

Business Payment Support Service

Telephone: 0300 200 3835
Monday to Friday, 8am to 8pm
Saturday and Sunday, 8am to 4pm
 

Nominated partners in business partnerships can negotiate time to pay with HMRC on behalf of the partnership or individual partners.

If you’ve missed your payment date

 

If you’ve received a payment demand, like a tax bill or a letter threatening you with legal action, call the HMRC office that sent you the letter.

Call the Business Payment Support Service if you haven’t received a bill or letter about payment yet.

 

Self-Assessment

 

Call the Self-Assessment helpline if you’ve missed your payment date.

 

Telephone: 0300 200 3822
Monday to Friday, 8am to 8pm
Saturday, 8am to 4pm

Tax-free property and trading allowances

Tuesday, April 9th, 2019

Since April 2017, you can earn £1,000 from a trading activity and £1,000 of property related income, without being liable to income tax.

These tax-free allowances on property and trading income are useful as families can generate an extra £2,000 a year of income without increasing their tax bills.

Obviously, these small amounts will not be a replacement for your day-job, but they do contribute to financing your monthly bills.

What property income could this cover?

You could rent out:

  • your drive as a parking space if you live in an area where parking spaces are at a premium,
  • a part of your garden as a paddock or allotments if you have the space.

One interesting aspect of this relief is that if you own property jointly, both parties are eligible for the £1,000 property allowance to set off against their share of the gross rental income.

What trading income could this cover?

The scope for using the £1,000 trading allowance are perhaps easier to exploit. Any hobby where you have an opportunity to sell goods produced, for example:

  • internet sales
  • craft products
  • hiring power tools
  • or any service related activity, mobile hairdressing, gardening support, babysitting.

If you do claim either of the above allowances, you cannot claim any expenses related to the activity.

Also, you cannot claim the allowances if the property or trading income is linked to a company, partnership to which you are connected, or your employer or the employer of your spouse or civil partner.

Record keeping

Even though there may be no tax consequence, you are still required to keep a record of your income covered by these allowances.

And one final note, these miscellaneous income sources may also affect your eligibility for benefits and tax credits.

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