Tax and Financial Strategies 2012/13

We live in a world of complex and ever-changing tax legislation, in which making the most of your money and achieving your financial goals requires careful planning and expert advice.

Through tax and financial planning it may be possible to lower and defer the tax you pay, enabling you to free up cash for business or personal purposes and provide long-term financial security for you and your family.

This guide introduces some of the key areas to consider when planning to maximise your business and personal wealth, although your exact requirements will depend on your individual circumstances. Please contact us for one-to-one advice tailored to your needs.

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.

Riding the economic storm…

Following a turbulent year, an ongoing crisis in the eurozone, and with the gloomy economic outlook set to continue, having in place effective tax and financial planning strategies for yourself and your business is more important than ever.

Even in the current economic climate, measures can be put in place now that will help to maximise your income and protect your wealth, improving financial security for you and your loved ones into the future.

Boosting your business finances

A robust tax planning strategy is an essential part of running a successful business, and this is especially the case in times of economic difficulty.

Your tax-efficient planning strategy should include such areas as:

Choosing the right business structure
Making the most of allowances and reliefs
Claiming tax deductible expenses
Choosing a year end
Reducing your capital gains tax (CGT) liability
The role of family members in the business
Exiting your business.

Protecting your personal wealth

Proper tax planning can also have a significant impact on your personal wealth. We can help to ensure that your regular income is not being unnecessarily eroded by taxes, and that your personal wealth is protected as much as possible from more periodic taxes, such as inheritance tax (IHT) and CGT.

Areas to consider include:

Estate and inheritance tax planning
Remuneration strategies
Extracting profit from your business
Retirement planning
Tax-efficient gifting strategies.

Recent measures for business

A number of changes affecting businesses have recently been put forward, with the aim of stimulating growth, encouraging investment and reducing the burden on businesses. Some of the key changes, many of which are referenced in this guide, are outlined below.

Seed Enterprise Investment Scheme (SEIS)

A new Seed Enterprise Investment Scheme offers income tax relief of 50% for individuals who invest in shares in qualifying companies, with an annual investment limit for individuals of £100,000 and a cumulative investment limit for companies of £150,000. In addition, the scheme offers a CGT 'holiday' for investments made.

This will allow for a CGT relief on gains realised on disposal of an asset in 2012/13 and invested through SEIS in the same year.

A gain on the disposal of SEIS shares will be exempt from CGT as long as:

the shares obtained income tax relief, which has not been withdrawn, and
the shares are held for a least three years.

Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs)

The employee limit for both EIS and VCT purposes is now fewer than 250 employees (previously fewer than 50), while the gross asset limit has risen to £15m before the investment and £16m afterwards. The maximum annual amount that can be invested in a company has also increased to £5m and the maximum annual amount that an individual can invest under the EIS is now £1m.

Automatic pension enrolment

Starting from October 2012, the new pension auto-enrolment system will be phased in, on a staged basis. In October, larger employers will have to enrol all eligible workers into a qualifying pension scheme. Smaller businesses have been granted additional time to comply with the requirements of the new system, with the smallest firms having until April 2017 (and new businesses until 2018) to implement the scheme.

Tax and tax reliefs

The main rate of corporation tax has been reduced to 24% for 2012/13, and it will fall by a further 1% each year until reaching 22% in 2014.

The additional corporation tax deduction given to small and medium-sized businesses for qualifying research and development expenditure has also risen from 100% to 125%, in respect of expenditure incurred on or after 1 April 2012.

Meanwhile, the small business rate relief 'holiday' has been extended to April 2013, and larger businesses have the opportunity to defer 60% of the increase in their 2012/13 business rate bills, to be repaid equally across the following two years.

We can help with all of your tax and financial planning needs.

Please contact us for a strategic review of your finances.