Inheritance Tax (IHT)

Potts & Co Accountancy

Tax Data 2019-20

By | Budget Update, Corporation Tax, HMRC, Inheritance Tax (IHT), Personal Tax, Potts & Co Accountancy & Business Advice News, VAT

All figures are annual amounts Tax

Personal allowance £12,500
Allowance withdrawn from £100,000
Transferable marriage allowance £1,250
Trading income £1,000
Property income £1,000
Rent-a-room £7,500
Tax on earnings
Earnings to £34,500 20%
£34,501 to £150,000 40%
Over £150,000 45%
Tax on earnings for Scottish residents
Earnings to £37,500 20%
£37,501 to £150,000 40%
Over £150,000 45%
Thresholds and rates for Scottish taxpayers TBA
Tax on interest
First £5,000 0%
20% taxpayers £1,000 @ 0%
40% taxpayers £500 @ 0%
Balance taxed at marginal rates
Tax on dividends
First £5,000 0%
Balance in band to £37,500 7.5%
£37,501 to £150,000 32.5%
Over £150,000 38.1%
National insurance
Class 1 employers 13.8% over £8,632
Under 21 (apprentices 25) 0% to £50,000
Class 1 employees 12% on £8,632 to £50,000;
2% above £50,000
Class 4 self-employed 9% on £8,632 to £50,000;
2% on profits above £50,000
Class 2 self-employed
Voluntary if profits under
Class 3 voluntary £780
Employment allowance
Set against employer’s Class 1 NIC
(Not available for one-person companies)
Pension contributions
No earnings £3,600 gross
Otherwise 100% of earnings
Annual contribution caps:
No pension taken
Some pension taken
Adjusted income over £150,000:
annual cap tapered to
Lifetime pension fund cap £1,055,000
Corporation tax
All profits 19%
Registration turnover £85,000
Deregistration turnover £83,000
Standard rate 20%
Reduced rate 5%
Inheritance tax
Nil rate band £325,000
Residence nil rate band £150,000
Excess taxed at 40%
Where 10% left to charity 36%
Capital gains tax
Within basic tax rate 10%
Higher tax bands 20%
Surcharge for residential property
and carried interest
Entrepreneurs’ relief 10%
Investors’ relief 10%
Annual exempt amount £12,000
Potts & Co - Accountancy & Business Advice

Gifts Liable To IHT

By | HMRC, Inheritance Tax (IHT), Personal Tax, Potts & Co Accountancy & Business Advice News

It’s not true that inheritance tax (IHT) is only due when you die. Capital gifts during your lifetime can be subject to IHT at the rate of 20%, unless the recipient is exempt or the gift is covered by a separate exemption.

There are exemptions for gifts made to political parties, charities and housing associations and for gifts used for a national purpose or for the maintenance of historic buildings. Gifts which don’t qualify for an exemption include those to hospitals which are not registered as a charity, those to charities which are registered outside the EU and those to political lobbying movements.

Lifetime gifts are not chargeable to IHT where they fall within your annual exemption of £3,000. If you don’t use all this exemption in one tax year, you can roll-over the unused amount to the next year, but not beyond. Now is a good time to review the gifts you have made during the tax year.

Small gifts of up to £250 per person per annum are exempt; so are regular gifts which amount to normal expenditure out of your income. Your nil rate band of £325,000 can cover gifts made in the last seven years which are not specifically exempt.

Capital gifts over your available nil rate band are potentially subject to IHT; it largely depends on who has received the gift.

Potts & Co - Accountancy & Business Advice

Inheriting Holiday Cottages

By | HMRC, Inheritance Tax (IHT), Potts & Co Accountancy & Business Advice News

When someone dies while they own a share in a private trading business, the deceased’s share of the business will qualify for 100% business relief from inheritance tax (IHT).

This business relief doesn’t automatically apply where the business involves letting holiday accommodation. Although holiday lets are treated as a trade for many tax reliefs, such as capital allowances, pension contributions and some capital gains tax reliefs, they are not regarded as a trade for IHT purposes.

This point was recently reinforced in a case where the deceased held a share in eleven holiday cottages and flats. Although substantial services were provided to holiday- makers, the court

decided that the properties were held mainly to obtain rental income. It followed that they were passive investments rather than an active trade, so the share of the business didn’t qualify for IHT business relief.

If you run a holiday lettings business we should review your IHT planning in the light of this case.