The Private Taxpayer
 

The Private Taxpayer - Self Assessment

Self Assessment involves completing an online or paper tax return in order to tell HMRC about your income and capital gains (profits on the sale of certain assets), or to claim tax allowances or reliefs against your tax bill.  

There are different types of tax return and different 'supplementary pages' you may need to complete depending on your circumstances. There are also deadlines for sending your tax return in - and penalties and interest charges if it arrives late.

If you pay tax on your earnings or pensions through PAYE (Pay As You Earn) your employer or pension provider deducts tax on our behalf and you won't usually need to complete a tax return.

But if you have more complicated tax affairs such as owning investment or ‘buy to let’ property you may need to complete a tax return. There are also certain circumstances in which you will always need to complete a tax return - for example if you're self-employed, a company director or a trustee or if you have foreign income.

Self Assessment tax returns are normally sent out in April each year (or a notice to fill in a tax return if you file online). If you've not received a return but think you should complete one you can ask to complete a tax return at any time - for example, if you want to claim a particular tax relief or exemption. HMRC will send you a return if necessary. (You can't send in a Self Assessment return without first contacting them)

If you are newly self-employed, you must register as such and you'll then be sent a Self Assessment tax return.

Modus Consulting offers a complete service for all types of private taxpayers Please contact us for details 

The Private Taxpayer - Trusts

In the following information we use the example of an English discretionary trust. There are other types of arrangement available Please contact us for details

Trustees are liable to tax on the first £1,000 of income at the standard rate of tax, which is 10% for dividend income and 20% for bank interest. Income above £1,000 is taxed at 40%.

All income paid to the beneficiaries carries a tax credit at 40%. If the beneficiaries are basic rate, or ‘non-tax payers’ (i.e. have an income below their personal allowances) they will be able to reclaim some, or all of the tax already paid.

Depending on the type of trust, the trustees may choose to accumulate income so that it forms part of the capital of the trust – the trust fund itself. If at some point after this, the trustees decide to distribute the accumulated income the payment is deemed a capital distribution.

Trustees are normally liable to tax at 40% on any chargeable gain above an annual exempt amount.

Inheritance Tax (IHT) and Trusts

As long as a gift into trust is below the current nil rate band for inheritance tax there will be no inheritance tax to pay when the gift is made. The gift will be deemed a chargeable lifetime transfer. All lifetime transfers not covered by exemptions and made within seven years of death will be added back into the estate for the purpose of calculating the tax payable. Tax attributable to such transfers is then reduced on a sliding scale over a seven year period

It should be borne in mind that if the value of the trust fund exceeds the nil rate band for IHT then the periodic and proportionate charges will be payable. The periodic charge arises on the tenth anniversary of the creation of the trust and on every subsequent tenth anniversary. The maximum rate is presently 6%, computed broadly speaking as follows:

Tax payable at lifetime rate (20%) x 30%

Similarly there would be an exit or proportionate charge levied on any distributions of capital over and above the nil rate band at the time of the establishment of the trust. The rate of tax is computed in accordance with the effective rate of the periodic charge or if made before that time by reference to the number of quarter years that the trust fund has been in existence.

Modus Consulting offers a complete service for all types of trusts. Please contact us for details

The Private Taxpayer – Charities

UK Charities can claim relief from tax on most income or gains and on profits from some activities. Charities can also claim tax repayments on income received on which tax has already been paid including Gift Aid donations from individuals.

Charities established in the UK are exempt from tax on most income and gains from investments, estates, land and property so long as that income/gain is used for charitable purposes.

Your charity can arrange to have income received from some of these sources paid to your charity before UK tax is deducted they include:

·          bank interest

·          income from land including way-leaves and furnished property.

·          royalties.

We offer a complete service for all types of private taxpayers and their charities. Please contact us for details

The Private Taxpayer – Clubs, unincorporated associations and property management companies 

There is concern that many small clubs and societies which previously had no tax liability will now have to complete company tax returns, and pay corporation tax on very small amounts of income as a result of the abolition of the nil rate. Such income is often a negligible amount of bank interest.

However where the annual corporation tax liability of a club is not expected to exceed £100, and the club is run exclusively for the benefit of its own members, then HMRC will prevent the issue of a notices to file returns and treat the club as dormant, subject to review at least every 5 years.

This practice is also extended to a property management company. However, where a property management company receives service charges which it is obliged to hold on trust for the tenants the company will be liable to income tax on any interest arising on that fund. Generally, however where the income is below £1,000 and taxed at source, a return will not be required every year.

Most existing clubs and property management companies that meet the conditions are already likely to be treated as dormant by HMRC.

However if you are in doubt Please contact us for a free review.