Clarke and Son News

The following are predicitions of how the Emergency Budget on 22nd June 2010 could affect you and your business:

Rise in tax-free allowance - the Government has indicated that they intend to raise the personal tax-free allowance which currently stands at £6,475 to £10,000 over the lifetime of this Parliament. It is likely that in the first instance the allowance will rise between £700 - £1,000.

National Insurance Rise - A 1% rise in National Insurance Contributions is likely to kick in next April.

VAT Rise - There is speculation of an increase in VAT.

Corporation Tax - it has been announced that the headline rate of corporation tax will be reduced however there has, at present, been no indication as to the rate it may be reduced to.

Pensions - The Coalition Government has agreed to restore the link between the basic state pension and earnings. There is a likelihood that further pension reliefs will be taken away from high income earners, perhaps lowering the proposed threshold for tapering of higher rate relief which is set at £150,000 of income. The Government could go further and implement other reforms such as increasing the state retirement age for men and women.

Inheritance Tax (IHT) - there is unlikely to be any change to the current IHT threshold of £325,000.  However, there may be changes to some restrictions to IHT including the rules for non-domiciled individuals.

Capital Gains Tax (CGT) increase - the actual rate is yet to be determined but it is thought that there will be an increase in order to bring CGT in line with income tax, indicating it could go up (from 18%) to approximately 40%, leading to owners of second homes, share portfolios and other investments facing substantially higher CGT bills. It is predicted that this increase will begin at the start of April 2011. The increase is to be on non-business activities only, however there has been some discussion as to what is classed as ‘business’ and ‘non-business’.  The Emergency Budget may also introduce changes to Private Residence Relief which enables people to sell their only or main residence free of CGT.

For more information on any of these issues, please email Nia Wharry or Tel: 01256 320 555.

After the freeze of the nil rate band (the amount that can be given away on death without incurring inheritance tax - subject to lifetime gifts) at £325,000 it is estimated that a further 650,000 estates could be caught by inheritance tax.  Those whose joint assets are worth over £650,000 wil be particularly at risk.  Furthermore, those whose wealth is wrapped up in property with little liquid cash are also vulnerable.  It is thought that the long freeze will lead to more families considering estate planning opportunities.

If you would like advice on estate planning and inheritance tax issues, please contact Nia Wharry on Tel: 01256 320 555.

Experienced Wills & Probate Solicitor, Nia Wharry, has recently been made Partner at Basingstoke Law Firm, Clarke & Son LLP.  After just one year as Head of the Wills & Probate Deparment, Nia has made her mark on the long-established firm and is delighted with her promotion,

“Clarke & Son LLP is a fantastically friendly place to work and I have received a warm welcome from colleagues and clients alike.  I have enjoyed developing the Wills and Estate Planning Department and the services we offer and advising the people of Basingstoke and the surrounding community on various issues which affect us all from time to time.”

A member of the Society of Trust & Estate Practitioners, Solicitors for the Elderly and the Probate Section of the Law Society, Nia specialises in all aspects of private client work, including the preparation of Wills; administration of estates and intestacies; inheritance tax planning; elderly client advice and care fee planning; Lasting Powers of Attorney; general powers and registration of Enduring Powers of Attorney; Court of Protection applications including Statutory Will applications etc.

 For further information on any of these matters, contact Nia Wharry on Tel: 01256 320 555

Here is a summary of how the recent budget could affect you as an individual or business:

Inheritance Tax (IHT)

• The IHT nil rate band (the amount that can be given away on death without incurring Inheritance Tax - subject to lifetime gifts)  of £325,000 has been frozen for the next four years (i.e. 6 April 2010 - 5 April 2015)
• For chargeable events above the nil rate band IHT is charged at 40% on death, 20% on lifetime transfers

For further information on Inhertance Tax, please contact Nia Wharry.

Stamp Duty Land Tax (SDLT)

• The Threshold for first time buyers is to rise to £250,000 (applies where effective date falls on or after 25 March 2010 and before 25 March 2012).
• Introduction of an additional 5% rate of SDLT for residential properties £1 million plus. This rate does not apply until 5 April 2011.

All other SDLT rates and thresholds remain unchanged. For more information on Stamp Duty for residential properties, contact Jenny Axe.

Income Tax

• Introduction of an additional rate of 50% on income in excess of £150,000
• Gradual removal of personal allowances above £100,000 at the rate of £1 of personal allowance for every £2 of income
• Rates for basic (20%) and higher (40%) are to remain the same

 Capital Gain Tax (CGT)

• The annual exempt amount for tax year 2010-11 has been set at £10,000
• Entrepreneurs’ relief - doubled from £1 million to £2 million - i.e. 10% CGT paid on the sale of a business or shares in a personal company on or after 6 April 2010

If you have any queries on Business Rates or how the budget will affect your business, contact Peter Turner.

Other Taxes

• Fuel duty increase - to be phased at 1p in April, 1p in October and the remainder in January 2011
• National Insurance contributions to rise by 1% in April 2011. However, the threshold for NI payments is to rise so that nobody earning less than £20,000 will face extra charges.
• No change to VAT
• Business rates to be cut from October for one year
• Annual investment allowance for small firms - doubled to £100,000
• Duty on cider is to increase by 10% from 29 March and duty on wine, beer and spirits by 2% from 29 March

Savings - ISAs

• The annual amount individuals can contribute is to rise in line with RPI
• If there is a fall in the RPI then the amount will remain as for the previous tax year

Other Points of Interest:

Families:

• Provision of income tax relief for payments to special guardians/carers looking after children placed under a residence order.  The exemption applies to qualifying carers and qualifying payments made on or after April 2010
• Parents of one and two year old children are to recieve an increase of £4 per week in child tax credits from 2012
• Pensioners’ higher winter fuel payments to remain for another year

If you would like to discuss Parental Responsibility issues, please contact Bhupendra Sankhla.

Employment

• The length of time over 65s have to work in order to qualify for tax credits is to be reduced
• Youth employment guarantee scheme is to be extended to March 2012 (guaranteeing anyone under 24 will get a job or training once they have been unemployed for six months).

For employment issues, please contact Thomas Hunt.

Business Support

• State owned banks are to provide £105 billion of loans
• Time to pay scheme - allowing firms to agree extra timetables for settling tax bills to be extended for whole of next parliament
• New growth capital fund worth £500 million to help fast-growing SMEs

For advice on business matters, please contact Peter Turner.

The Economy & Government Finance:

• Predicton that growth for 2010 would be between 1% and 1.5%
• The prediction for 2011 is a growth rate of between 3% and 3.5%
• Government borrowing will be £167 billion this year, £163 billion in 2011, £131 billion in 2011/2012, £110 billion in 2013/14 and £74 billion in 2014/15

For more information on any of these issues, please contact Clarke & Son on Tel: 01256 320 555.

The Inheritance Tax Nil Rate band (the amount that can be given away on death without incurring Inheritance Tax - subject to lifetime gifts) is generally increased each year in line with inflation unless an alternative band is provided for.  The Finance Act 2007 currently provides that the nil rate band will rise to £350,000 for individuals dying on or after 6th April 2010.  It was however announced in the pre-budget report that legislation will be introduced in the Finance Bill 2010 to set the limit of Inheritance Tax Nil Rate band at £325,000 for the tax year 2010-11.  The chancellor explained they were reducing the level from £350,000 due to the fall in property prices.

 For more information on Wills & Probate and Inheritance Tax, contact Nia Wharry on Tel: 01256 320 555.