Budget Breakfast 2012

Alan Boby - Tax PartnerEllacotts LLP

aboby@ellacotts.co.uk01295 250401

Introduction & Welcome

• Agenda & housekeeping

• What’s new? Alan Boby

• 2012 for investors Chris Beckett

Head of Quilter Equity Research

• Tax saving opportunities Alan Boby

Who is paying more tax?

Alan Boby Tax Partner

Personal tax rates and allowances

Individuals

• Income tax rate bands: 20% up to £42,475 40% from £42,476 to £150,00050% above £150,000 – down to 45% in April

2013

• Personal allowance £8,105 - restricted if income >£100k

• Pension payments tax relief capped at £50,000but can claim unused relief for 3 prior years

• Capital gains tax (CGT) main rate now 28% but 18% for ‘basic rate taxpayers’

• Trust income taxed at 50% – down to 45% in April 2013

Income tax bands

8105

4247

5

1000

00

116,

210

1500

00

1500

01+

0%

10%

20%

30%

40%

50%

60%

0%

20%

40%

60%

40%50%

2012/13

Income in £s

Tax

Per

cen

tag

e

Business tax rates and relief• Capital allowances on plant & machinery – 100% on

first £100,000 down to £25,000 from April 2012

• CGT 10% rate for entrepreneurs on gains of £10m

• NIC rates:

o 13.8% for employers

o 12%/2% for employees

o 9%/2% for self-employed

• New ‘cash basis’ for businesses with sales <£77k

• Corporation tax main rate down to 24%

Income v capital gains

Comparing tax rates

2007/08 2008/09 2009/10 2010/11 2011/12 2012/130

10

20

30

40

50

60

Income tax CGT - basic rate payers

CGT - higher rate payers CGT - entrepreneurs

Ta

x P

erc

en

tag

e %

Tax relief for business investment• Enterprise Investment Scheme (EIS) relief:

- investments up to £500,000 pa- income tax relief at 30%- deferral of other capital gains- no capital gains tax on EIS shares

• EIS limit to go up to £1 million pa from 6 April 2012

• New Seed EIS from 6 April 2012:- investments up to £100,000 pa- income tax credit at 50%- tax exemption for other capital gains (up to

28%)- no capital gains tax on Seed EIS shares

Other taxes and reliefs

• Inheritance tax – 20% (lifetime) + 40% rate (death)

o gifts to individuals tax-free after 7 years

o no tax up to £325,000 & business & agricultural reliefs

• Stamp duty land tax (SDLT)

o nil to £125k (residential) & to £150k (other)

o 1% up to £250,000

o 3% > £250,000

o 4% > £500,000

o 5% > £1 million for residential

o 7% > £2 million for residential

2012 for investors

Chris Beckett (Head of Quilter

Equity Research)

Tax saving opportunities

Alan BobyTax partner

Tax saving opportunities

• Keeping out of higher income tax bands

• Taking profits out of the business

• Cutting business taxes

• Sharing income or gains

• Using tax shelters & other ways to stay out of tax

• Converting income into gains

Keeping out of higher income tax bands

• Keep total annual taxable income below limits: £42,475£100,000£150,000

• Pension tax relief – up to £200,000!

• EIS investments – 30% income tax relief

• Seed EIS – 50% income tax credit

• Gift aid relief on charitable donations

Taking profits out of the business

NB: Top income tax rate drops to 45% in 2013!

• Change business accounting date

• Timing of dividends & interest payments

• Timing of bonus payments

Cutting business taxes

• Capital allowances – 100% on £25k from April

• Saving employer’s national insurance at 13.8%:

- Review car benefits - 45p/mile for using own car - Use salary sacrifice for pensions/benefits

• Incorporate to take advantage of lower corporation tax rates

Sharing income or gains

• Put assets into joint names with unequal shares

• Bring spouse/family members into business?* (NB personal allowances up to £8,105)

• Issue or transfer shares to spouse/family members to share dividends *

• Incorporate the business into a limited company

* Beware settlement anti-avoidance rules (eg parental settlements) & draft anti-income shifting law

Using tax shelters etc

• Individuals savings accounts (ISAs)

• Pension schemes

• EIS or new Seed EIS

• Leave UK – non-UK tax residence

• Tax planning structures

• Or .....

Convert income into capital gains

• Selling the asset or business - is the tax rate 28%,18% or 10%?

• Transfer to family, trust or pension fund

• Company buy-back of shares - eg on retirement

• Can entrepreneurs’ relief cut tax rate to 10%? - check the rules!

Summary

1. Refer to our website - www.ellacotts.co.uk

2. Check what tax rates apply to you

3. Consider the tax-saving ideas

4. Take specialist professional advice

Will you be paying less tax?

Questions?

Ellacotts LLP• These slides are intended for use in connection with

the presentation given on 22 March 2012. No action should be taken on the basis of information contained in these slides or in the presentation without obtaining professional advice specific to the circumstances.

• No responsibility for the loss arising to any person acting or refraining from acting as a result of the material in these slides or presentation can be accepted by the speakers or by Ellacotts LLP

Copyright 2012Ellacotts LLP