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Tax and Financial Strategies 2015/16

Tax has become a political hot topic in recent years, but the fact remains that sensible tax planning within the law - making sure you take advantage of the allowances and incentives that the Government has deliberately put in place - is perfectly sound practice.

The UK tax system is extremely complicated, and you need expert advice and careful planning in order to remain compliant, while also ensuring that you don't pay more tax than is necessary.

Lowering or deferring tax should form a part of your wider financial goals, such as growing your business or achieving financial security for yourself and your family. As your advisers, we can help you to meet those goals.

In this guide we have explained some of the key areas to consider when planning how to optimise your business profits and personal wealth. However, every one of our clients is unique, so do please contact us for one-to-one advice tailored to your individual circumstances.

How to benefit from our services:

Please read those chapters which are relevant to you as soon as possible.

  • Take note of the key points arising from this guide, and any action you may wish to consider
  • Contact us to discuss your action points, and to evaluate your long-term financial plans.

We would welcome the opportunity to assist you.

The general effect of the Civil Partnership Act is to treat registered civil partners on a consistent basis with married couples. For the purposes of this guide we have on occasions referred only to spouses.

'HMRC' refers to HM Revenue & Customs.

This guide is based on current understanding of legislation and the Government's proposals at the time of publication and under no circumstances should action be taken without first seeking appropriate professional advice.

Economic outlook

The outlook for the UK economy may be increasingly optimistic, but with the eurozone in crisis, concerns remain over the ongoing risks posed by a fragile global economy. In the 2015 Summer Budget, Chancellor George Osborne sought to emphasise the importance of economic security and pledged that Britain would 'fix the roof while the sun shines'.

Proper forward planning remains the best way to ensure that you are on course to obtain your own business and financial goals.

Business strategies

A good, comprehensive business tax strategy will include considering such elements as:

  • choosing the right business structure
  • making the most of the available incentives, allowances and reliefs
  • claiming tax deductible expenses
  • deciding on the best year end date
  • minimising your liability to capital gains tax (CGT)
  • taking into account the role of family members
  • plans for a tax-efficient exit from your business.

Personal financial strategies

Meanwhile, a robust personal tax strategy will focus on ensuring that your long-term financial goals are met for the rest of your life and for the future of your family and dependents. Our role is to help you make the most of the many allowances available and to suggest strategies that suit your particular circumstances.

An effective personal strategy will include such elements as:

  • a tax-efficient remuneration package
  • tax-efficient ways to extract profit from your business
  • planning to ensure a comfortable retirement
  • estate and inheritance tax (IHT) planning
  • tax-efficient gifting strategies.

Recently announced measures

The Government has recently announced a number of key measures affecting businesses and individuals, with the stated aim of encouraging savers and supporting business and working families.

Measures for savers

The Spring Budget on 18 March unveiled some significant measures for savers, including a relaxation of the rules on annuities, and a new Personal Savings Allowance, both of which take effect from April 2016. In addition, a new Help to Buy ISA will from 1 December 2015 begin to assist first time buyers with the purchase of their first property, while plans to increase flexibility for Cash ISAs will in the future allow savers to withdraw and replace money without it counting towards their annual subscription limit.

The Chancellor subsequently made a number of additional announcements in the Second Budget on 8 July, some of which are outlined below.

Business measures

Annual Investment Allowance (AIA)

After 31 December 2015, the maximum amount of AIA for all qualifying expenditure on plant and machinery was set to fall from £500,000 to £25,000. However, in the Second Budget it was announced that the limit will instead be set at £200,000 with effect from 1 January 2016.

Employment Allowance

From April 2016 the Employment Allowance will increase by 50%, allowing businesses to save up to £3,000 on their national insurance bill.

Corporation tax

In addition to previous cuts, the main rate of corporation tax will be reduced to 19% for the financial years beginning 1 April 2017, 1 April 2018 and 1 April 2019, and 18% for the financial year beginning 1 April 2020.

Personal measures

Inheritance tax (IHT) allowance

Changes to the IHT rules will include a new main residence allowance starting at £100,000 and rising to £175,000 by 2021. This could allow families to pass on up to a total of £1m to their children without paying IHT.

Pensions annual allowance

For those with income (including the value of any pension contributions) above £150,000, the benefits of pensions tax relief will be restricted by tapering away their annual allowance to a minimum of £10,000. This will be effective from 6 April 2016.

A new National Living Wage

From April 2016 a new National Living Wage (NLW) in the form of a premium on top of the National Minimum Wage will be introduced for workers aged 25 and above. Initially set at £7.20, it is expected to rise to over £9 by 2020.

We can help with all of your tax and financial planning needs. For a strategic review of your finances, please contact us.