Navigating the complex landscape of pensions can prove daunting, even for the financially savvy among us. From allowances to tax implications, understanding your workplace pension and how it fits into your overall financial strategy can be intricate. With the upcoming abolition of the pensions lifetime allowance, it’s never been more vital to know the ins and outs of your pension contributions. Investors Chronicle offered some guidance.

The Pension Landscape: Annual Allowances and More

Workplace pensions have always been a critical component of financial planning in the UK. However, there are valid concerns and legitimate reasons you might have for considering opting out of your workplace pension. Before delving into these considerations, let’s start by clarifying some key pension terms that will guide our unfolding discussion.

In the UK, the annual allowance for pensions typically stands at £60,000 or the value of your earnings, depending on which is lower. However, for higher earners or those who trigger the ‘money purchase annual allowance’, this could fall to as little as £10,000.

Think of the annual allowance as the total amount you can comfortably contribute to your pension every year without incurring an excess charge. If your contributions exceed this amount, the surplus is added to your taxable income for that tax year. In effect, this means the excess contributions become subject to income tax at your marginal rate.

Navigating Tax Charges Amid Employer Contributions

Even when faced with the prospect of a tax charge, maintaining your pension contributions – and thus your employer’s contributions too – might still prove more beneficial overall than choosing to opt out. The overall added sum might exceed what you would receive if you chose to discontinue your contributions.

Moreover, the tax charge levied might be settled directly from your pension if the amount surpasses £2,000, thereby circumventing a direct hit to your pocket. However, it’s essential to note that this would ultimately reduce the total value of your pension pot. John Corbyn, a pensions specialist at Quilter, reinforces this point: “In this way, you still benefit from the employer’s contribution to your pension, though potentially facing a tax charge on the cumulative surplus.”

When Opting Out May Make Sense

Notwithstanding the advantages of retaining your contributions, certain circumstances might warrant choosing to opt out. For instance, if you’ve already reached your pension annual allowance and your employer agrees to remunerate you using an alternative method instead of making further pension contributions, then it could be more beneficial to opt out.

Yet, opting out isn’t a decision to be taken cavalierly. If you receive extra salary in lieu of a pension contribution, you would still be liable to pay tax and National Insurance contributions on this additional amount. Moreover, this supplementary income could potentially catapult you into a higher tax band.

Deciding What’s Best For You

Of course, every circumstance is unique and different considerations apply. Struggling financially and lacking resources for pension contributions may necessitate opting out until you are on a more secure financial footing. If you have high-interest debt, for example, paying off this debt may be a priority.

Michael Lapham, director at Mercer & Hole, suggests those in this situation should consider the proportion of overall income and expenditure the debt represents and weigh this against the benefits of maintaining their pension contributions.

Opting out also means you lose the accompanying tax-efficient benefit of your pension contribution. This might seem negligible, as the monthly employee pension contribution by auto-enrolment is only a minimum of 5 per cent – some of which stems from tax relief.

However, the long-term implications warrant careful consideration. As Lapham notes, “Make sure you’ve thought it through, have valid reasons [for opting out], and have sufficient savings set aside for retirement. Consider how else you will fund your retirement.”

The road to pension planning can indeed be tricky, mired with jargon, allowances and precarious decision-making. However, careful evaluation of your personal circumstance, coupled with expert advice, can simplify this journey and optimise your retirement savings.

The Cayman Islands, renowned for their sunny beaches and no tax policy, seemed like the perfect escape for Claire, a young British woman, especially during the 2020 Covid-19 lockdown in London. But while the island’s sands shimmer, so does its high cost of living. Inews reports on her experience.

Claire, a 30-year-old from Suffolk, and her partner swapped their life in west London for George Town, the capital of the Cayman Islands, in November 2020. For them, the pull was not just the beaches but the absence of restrictions, apart from a two-week quarantine upon arrival.

However, Claire, a former British Airways flight attendant turned marketing and communications pro, soon realised the tax-free salaries didn’t automatically mean a luxurious, tax-free life.

Tax-Free Salaries, Sky-High Prices

Although Claire’s move to this tax haven meant no tax on income or corporations, the daily essentials told a different story. “Just because there’s no tax on our salaries, doesn’t mean everything else is cheap,” she notes.

A quick grocery run brings this into sharp perspective. Claire highlights that a packet of bacon is a staggering CI$16 (£15.80) and three peppers can set you back by CI$9.99 (£10). Renting a home? Be ready to shell out CI$2,400 (£2,408) for a two-bedroom property, comparable to London’s city centre prices. Without the rent, a single person would still have monthly expenses averaging £1,440 in the Cayman Islands, almost double that of the UK’s £754.

Despite property prices being through the roof, Claire isn’t complaining too much. With her salary being approximately 11% more than what she’d earn in London – without any tax deductions – and her partner flourishing in the finance sector, they’ve found ways to make it work. She cheekily mentions, “Some professionals here, especially in finance and law, are raking it in!”

Island Life: Beyond the Costs

But it’s not all about money. The real charm of the Cayman Islands, as Claire paints it, lies in the unmatched island lifestyle. “The breathtaking surroundings, no rush-hour commutes, evening swims during sunsets, and relaxed Saturdays on the water, are experiences you can’t put a price on,” she exclaims. Plus, there’s no need to traverse more than 5km, and the London Underground? “I’m not eager to hop back onto that anytime soon.”

Claire reminisces about the lovely weekends by the beach, which don’t just offer relaxation but also some relief to the wallet. She’s also been swept up in the islands’ tight-knit community vibe. With fewer activities compared to bustling cities, sports have become the go-to social activity. Claire herself took up Gaelic Football at 28 and loves it! Her boyfriend? He’s back on the rugby field after a 10-year hiatus, mostly for the camaraderie.

Looking Ahead

Claire confesses, while they initially planned an 18-month stay, they’re now three years in with no immediate plans of returning. However, she’s also pragmatic. Given the high costs, they might reconsider their stay in the next five years, especially if they think about starting a family.

Reflecting on her journey so far, she concludes, “Life here is exceptional, but it’s a reminder that every paradise has its price. But for now, the sun, sea, and community spirit make it all worth it.”

The political winds in the UK are shifting. With an expected election around the corner in 2024 and the Labour party taking a significant lead in the polls, many are wondering: How will this change our finances? SpearsWMS looked into potential tax implications and what the experts have to say.

When’s the Big Date?

While the UK parliament will dissolve by 19 December 2024, with the general election five years prior as the starting count, it’s expected that Brits will head to the polls well before then. Most political pundits anticipate an election in late spring, around May 2024, as politicians tend to avoid campaigning in the chilly holiday season.

Labour’s Potential Rise

Since December 2021, the Labour Party has enjoyed a comfortable lead in national polls. A boost in October 2022 solidified their dominance, with a substantial 20-point lead over the Conservatives. Expert polling analysis by Electoral Calculus places the likelihood of a Conservative majority at a minuscule 1%. All signs point towards a potential Labour-led government by the end of 2024.

The Big Wealth Tax Question

Back in December 2020, the Wealth Tax Commission, a group of legal, academic, and economic experts based at LSE, proposed a one-time wealth tax. The goal? To help the UK’s economy bounce back from the Covid-19 crisis.

Although the Labour leadership hasn’t officially backed this proposal, various party members and left-leaning commentators have shown keen interest. Despite Shadow chancellor Rachel Reeves stating that Labour has “no plans” to implement a wealth tax, there’s ongoing debate.

When asked, tax experts were divided on the matter. A small 24% felt a wealth tax was a good idea – a noticeable drop from 48% in 2021. Implementing such a tax, however, raises practical concerns. A significant 75% doubted its feasibility, mainly because accurately assessing an individual’s total wealth can be a tricky affair, especially if there’s an incentive to hide it.

Rethinking Non-Dom Status

After reports in 2022 highlighted how the Prime Minister’s wife, Akshata Murty, was benefiting from her non-dom status, questions arose about the fairness of the system. Labour has hinted at overhauling current non-dom rules in favour of a scheme that taxes based on residency and eliminates the system of only taxing money brought into the UK.

Expert opinion seems to favour a system revamp. A popular idea? Encourage non-doms to invest in the UK by offering tax incentives. However, some caution that if new rules are too stringent, wealthy individuals might just pack up and move to more tax-friendly countries.

Tax Changes on the Horizon?

While the election looms, experts don’t anticipate any drastic tax changes beforehand. If they were to play chancellor for a day, their suggestions lean conservative. Most feel VAT, stamp duty, and top-tier income tax should remain stable. There’s some push for higher energy taxes and aligning capital gains tax with income tax. As for inheritance tax, many see it as ineffective and propose a rework or removal.

Prepping for a New Dawn

With potential changes ahead, many high-net-worth individuals are strategizing. Some consider moving assets or even relocating internationally. However, experts also advise patience, expecting any major policy shifts to be gradual.

The Trouble with HMRC

Beyond tax rates, there’s growing concern about the HMRC’s operational efficiency. Experts report slower response times and less technical knowledge from HMRC representatives. A whopping 49% rate the HMRC’s performance in dealing with high-net-worth matters as “poor” or “very poor”. Most attribute these challenges to budget constraints and reduced staffing.

The UK economy has had its struggles, bouncing between stagnant and mediocre growth which has been heavy news for the Treasury. However, the summer carried a glimmer of surprising upbeat news for our public coffers, with collected capital gains tax (CGT) reaching a record high.

UK Capital Gains Tax Hits Record High

In the fiscal year ending in April 2022, Britons coughed up £16.7 billion in CGT, representing a remarkable 15% increase compared to the previous year. Concurrently, HMRC also observed a substantial upsurge (20%) in the number of individuals paying this tax. According to HMRC, this increase is due to a rise in the number of residential property sales, as well as larger gains on these transactions.

Unearthing the Reasons Behind the CGT Increase

But why has there been such a rise in CGT? Are rising property prices and increased sales the main causes of this windfall? Some experts, despite the logical connection, aren’t entirely convinced. That’s because CGT liabilities are only incurred when one chooses to sell an asset. The opportunity to accumulate capital gain might be a factor, but experts argue it’s certainly not the lone factor.

Camilla Wallace, a private client partner at Wedlake Bell, reckons fear could be a significant trigger in these disposals of assets. This trend first emerged as wealthy Britons contemplated the possibility of a Jeremy Corbyn-led Labour Party taking over Downing Street. The fear, she explains, has lingered on even under a more moderate Labour leadership.

Even as current Labour leader, Sir Keir Starmer, attempts to put to rest wealthy voters’ fears that a Labour government wouldn’t seize their finances, not everyone appears convinced. The Conservatives, led by Jeremy Hunt, haven’t provided much assurance either. The CGT personal allowance was sliced from £12,000 to £3,000 and the threshold for the highest tax rate was reduced, resulting in earners paying 45% tax on anything above £125,140.

A New Chapter for Capital Gains Tax?

Green energy entrepreneur and Labour donor Dale Vince is currently legal action against ‘carried interest’ – profits kept by private equity fund managers – being treated as capital gains instead of income. This could potentially lead to a broad restructuring of the CGT system.

Despite the uncertainties and rumours of future changes to the CGT legislation circulating, the government’s ultimate decision is far from certain, especially in light of the forthcoming general election.

Increasing Taxation for Wealthy Britons: An Unavoidable Reality?

The tough economic horizon begs the question: is it time for the well-off to reconcile with the idea of paying more taxes? Despite this bleak picture, Wallace reminds wealthy investors not to adopt an overly negative attitude.

Inheritance Tax: The ‘Death Tax’ Effects

Another tax making big headlines is the so-called ‘death tax’. Once a small part of the Treasury’s money-collecting toolkit, inheritance tax has significantly increased over the recent years, rising from just over £2 billion in 2010 to an anticipated £7.2 billion this fiscal year.

A major driver of this increase has been something known as the ‘fiscal drag effect’. This is when the threshold for a certain tax remains frozen – as has the inheritance tax’s nil rate of £325,000 since 2008 – while the value of assets escalated.

Exploring Lesser-Known Inheritance Tax Relief Options

Despite the increase, some affluent Brits are looking to lesser-known options for relief. These include taking advantage of agricultural and woodlands reliefs, which seem to be gaining popularity partly due to the rewilding and ESG trends. These reliefs can provide significant benefits for the next generation, in more than just financial means.

An increasingly popular method is the Family Investment Company (FIC). Established under the Companies Act 2006, an FIC is a company that invests on behalf of the family member shareholders. As any growth is shared or transferred to the shareholders, including a family trust, it can reduce the estate of the founder for inheritance tax purposes.

Essentially what all this indicates is both tax scenarios – CGT and Inheritance – are complex and fluid. Whether wealthy Britons will face higher total tax bills in the near future depends on various factors. These include house prices, their investment decisions, and not least, the decisions made by our politicians. It’s a challenging terrain, but with careful navigation, and perhaps some professional advice, it’s one that can be successfully traversed.

More and more UK investors are exploring alternative assets beyond traditional stocks and shares. Among the top picks are chattels—a fancy term for personal treasures that, surprisingly, has roots stretching back to livestock and, oddly, wives! Today, however, chattels encompass everything from luxury watches to exquisite artworks and even high-end handbags. SquareMile dive into this fascinating world to understand how we can protect and grow our wealth using these tangible assets.

Chattels: A Historical Overview

Originally deriving from Latin and French terms related to movable property and wealth, the term “chattels” in today’s parlance refers to collectable pieces that increase in value over time. Gone are the days when this term only conjured up images of Rolex watches or fine art. These tangible assets are not just items of aesthetic beauty but also reservoirs of investment potential, offering scarcity value and benefits related to Capital Gains and Inheritance Tax (IHT).

Chattel Varieties and Their Potential

1. Luxury Watches: Timeless Investments

Recent years have seen luxury watches skyrocketing in popularity. Brands like Rolex, Patek Philippe, and Audemars Piguet have watches that are not just precise and beautifully crafted, but also command high prices at auctions. To safeguard your investment:

• Maintenance is key: Regular servicing and keeping original documentation ensures value retention.
• Protection: Secure insurance specifically tailored for high-value items. Specialised insurers like Lloyds of London and Zing Cover can provide tailored protection for these assets.
• Tax Benefits: Antique or vintage watches are not subject to capital gains tax in the UK, but remember not to attract HMRC’s attention with excessive trading.

2. The Art of Fine Art Investing

The art world has always been an enticing space for investors. The aesthetic appeal is undeniable, but so is the potential for significant returns. To navigate this world:

• Resources: Use auction houses, galleries, and art investment firms for insights.
• Preservation: Consider climate-controlled storage and insurance to safeguard your collection.
• Regular Valuation: Engage certified appraisers to keep abreast of your art’s ever-changing value.

3. Luxury Handbags: From Fashion to Fortune

Designer handbags have morphed from mere fashion accessories to lucrative investment pieces. To make the most of them:

• Condition is crucial: Proper storage and regular cleaning will protect their value.
• Authenticity: Use certified services to ensure and prove the authenticity of your handbag.

Chattel Investment Essentials

Accurate Valuations

Understanding the true worth of your chattel is vital. Engage experts for fair evaluations, especially when considering insurance, sales, or inheritance.

Insurance Protection

Protecting your assets is non-negotiable. Opt for coverage tailored to your specific chattel, and consider advanced security measures like tracking devices.

Navigating Tax Waters

Inheritance Tax (IHT) can be a burden in the UK, but expert guidance can help you leverage available allowances. Additionally, Heritage Relief (Conditional Exemption) may offer IHT deferrals under certain conditions.

Estate Planning and Legal Guidance

A well-drafted will ensures your chattels reach intended heirs without disputes. Keep detailed records of your collection, and consider professional legal guidance for smooth navigation.

Passing On The Legacy

Sharing your passion with the next generation ensures the preservation of your legacy. Gifting chattels during your lifetime offers potential tax benefits and the joy of witnessing their appreciation by loved ones.

In Conclusion

While chattels offer a refreshing alternative to traditional investments, successfully navigating their intricate landscape requires a blend of passion, knowledge, and expert advice. Whether you’re a seasoned collector or just starting out, the right approach and guidance can help you safeguard, grow, and pass on your tangible treasures for generations to come.

Many landlords are grappling with the choice of buying properties in their individual names or via limited companies. The real concern here is the tax implications and financial incentives. The Daily Mail’s financial expert unravels some of the complexities, shedding light on the options available and how they affect both the landlord, and your retirement plans.

The Property Investment Conundrum

The focus is based on a question by a landlord grappling with the decision between buying a second property in his personal name or using a limited company. His main concern is the possibility of being double-taxed in the case of a limited company. He wonders if the seeming higher mortgage costs associated with limited companies could be offset against tax. At the same time, he considers the alternative option of channeling his rental profits into his pension if he decides to buy the property in his own name.

This individual, like many others, sees property investment as not just a means to secure his retirement, but also as a potential inheritance for his children. With one buy-to-let property under his belt and earning around £60,000 annually, plus an extra £11,000 from his current investment, he still worries about increased tax burdens, especially inheritance tax, if he does not adopt the limited company structure.

A Shift in Buy-to-Let Property Purchases

It appears our friend is not alone in this property investment conundrum. There has been a surge in landlords buying properties via limited companies rather than in their personal names. This is largely driven by the lower corporation tax rates and the ability to offset all mortgage interests against their rental income before tax obligations.

This tax relief method, albeit beneficial, differs for landlords who dwell on personal ownership. They only enjoy a 20% tax relief on their mortgage interest payments – a far cry for higher-rate taxpayers who used to receive a 40% tax relief on mortgage costs before the 2016 rule change.

Rates and Implications of Corporation Tax

Corporation tax rates are pretty straightforward. For a company that records over £250,000 as profit, a 25% corporation tax rate is applicable. However, profit of £50,000 or less attracts a ‘small profits rate’ of 19%. And as a middle ground, there’s what we call ‘marginal relief’ for profits between £50,000 and £250,000. Keep in mind though that the £50,000 and £250,000 thresholds could be reduced proportionately for short accounting periods and based on the total number of ‘associated companies’ your company has.

By leveraging the potential benefits of owning rental properties under a limited company, landlords are able to invest faster into additional properties than they could have done if they bought property in their personal names.

Considering Mortgages and Company Structures

With the average two-year fix now reportedly at 6.48%, the cost benefit of holding properties in a limited company has risen significantly. But the catch is that taking advantage of this model depends largely on the landlord’s specific situation.

For instance, lower-rate taxpayers, especially those without huge mortgages on their buy-to-let properties, might be better suited to keep their properties in their personal names. On this note, it is significant to note that owing to the perceived risk, lenders tend to offer fewer and more costly mortgage options to limited companies. Buying a property via a limited company also involves some degree of bureaucracy – formal account preparation and filing, record-keeping and director appointments are tedious tasks a landlord has to handle.

In light of these factors, we sought out advice from three distinguished financial professionals – Manjinder Bains, a chartered tax advisor at UK Landlord Tax, Natalie Field, an accountant at TaxScouts, and Chris Sykes, technical director at mortgage broker, Private Finance.

The Bright Side of Buying as a Limited Company

As per advice from Natalie Field, it could be quite advantageous for a higher rate taxpayer to set up a limited company for managing a new buy-to-let property. Purchasing property with a limited company offers greater flexibility as you are only taxed when you remove money from the company. And if you carefully plan how you withdraw your money, either as salary, dividends or pension options, you stand to gain a more tax efficient deal.

Keep in mind though that as a limited company, you will not be charged capital gains tax (CGT) when you sell your buy-to-let property, you’ll just have to pay corporation tax which is charged at between 19 and 25%.

Dealing with the Fear of Double Payment

The fear of being double taxed under a limited company model is not unfounded. If you are given to think this way because of the two-pronged tax – corporation tax and dividend tax, don’t fret quite yet. Field explains that the combined corporation and dividend tax could still be lower than the income tax if the properties were personally owned.

However, how much you cough out in tax depends on your tax rate and the level of money you have pulled from your limited company. If you have a long-term view to your property investments, you may want to look into the possibility of adding your children as shareholders at some point to gain from inheritance tax savings. A word of caution though, you should seek the advice of a qualified tax adviser before proceeding with this.

Shifting from Personal to Limited Company Ownership

If you already own properties in your name and hope to move them into your limited company, you must be prepared for some possible hitches. In trying to sell the properties as an individual seller to your limited company, you’d be caught up in the web of several financial burdens such as capital gains tax, stamp duty and other accompanying legal fees. As many have found out, this move is usually expensive and not worth the stress.

The Cost Implications of Limited Company Mortgages

Contrary to what some might think, mortgaging a property in the name of a limited company is more costly. Limited company mortgages attract higher fees which could range from legal to valuation fees, accounting as well as business banking fees. However, on properties involving multiple occupation and freehold blocks, the rates are rather comparable.

Even so, Sykes suggests that the disparity in pricing between limited company mortgages and personal name buy-to-let mortgages, might close up in the future if major high street lenders kickstart the offering of limited company mortgages.

Limited Company Fees for Accountancy Firms

The accountancy firm fees for limited companies vary from firm to firm. However, hold on to your hat because the most basic services for limited companies can go for anything between £400 plus VAT and £2,000 plus VAT, depending on the geographical location and the services offered.

Inheritance Tax, Anyone?

For most average landlords, the options for escaping inheritance tax are rather limited. You may either go with the option of paying 28% in capital gains tax when you pass on properties to your children or accept paying 40% inheritance tax on the market value of your property at death.

But good news. If you establish a limited company with your children included and structure it correctly, you can save a great deal in inheritance tax without giving up your rental income. Your company, however, must be explicitly set up as a family investment company as a standard limited company would not offer this advantage.

The Retirement Angle

Yet, if you end up selling your properties to fund your retirement, using a limited company ownership model might lead to you paying more in tax than if you had owned the properties personally.

This conclusion is hinged on the possibility of you paying 19% corporation tax, before taking out remaining director loan account funds tax-free and then paying income tax on the dividends.

However, depending on the prevailing circumstances, you might not always end up paying more in taxes as compared to the 28% capital gains tax rate levied on higher rate taxpayers.

Finally, remember that it’s all about the duration of ownership. The longer you keep your properties under a limited company, the better off you are, while the converse is true for short-term ownership. However, bear in mind that from next year, the capital gains tax annual exemption will be reduced to £3,000. But this law only applies to properties held in personal names.

With all this information on hand, we hope that the decision-making process will be smoother for you. Remember that each scenario is unique, so it’s always best to seek professional advice tailored to your specific circumstances. Oh, and don’t forget to enjoy the adventure of property investing!

In recent times, the UK’s tax system has been making headlines, but not for the best reasons. Delays at the tax office are causing a great deal of concern, both for individuals and the economy at large, as The Telegraph reports

Tax Office Delays: More than Just a Wait

According to accountancy professionals, HM Revenue & Customs (HMRC), the UK’s chief tax-collecting body, is experiencing chronic delays that are doing more than just frustrating callers – they’re hindering the UK’s economic growth.

Trade bodies representing accountants have labelled customer service at HMRC as hitting a “new low.” This isn’t just a matter of not picking up the phone quickly; it signifies deeper operational issues. The prolonged phone waiting times and backlog in postal services are causing significant disruptions for businesses and individuals alike.

The Real-World Impact of these Delays

Gary Ashford, president of the Chartered Institute of Taxation, succinctly highlighted the broader economic consequences of these HMRC hiccups. While it’s easy to think of these issues as merely bureaucratic, their ripple effects can be profoundly felt.

“Businesses can’t trade effectively, ordinary people are waiting endlessly for vital repayments, and expenses rise as they consistently pursue HMRC for updates,” said Ashford.

These sentiments aren’t standalone. Michael Izza, the chief executive of the Institute of Chartered Accountants in England and Wales (ICAEW), echoes similar concerns. He highlights that tax agents, who are crucial in ensuring the smooth functioning of the tax system, are being held back by these delays. When they can’t operate efficiently, it’s the UK economy that bears the brunt.

Dwindling Confidence in HMRC’s Services

Recent moves by HMRC have further exacerbated these frustrations. For instance, HMRC announced the removal of its ten-minute waiting time goal on its agent helpline, even though current wait times hover around a staggering 20 minutes.

Furthermore, the quality of HMRC’s online services has raised eyebrows. Many members of the ICAEW have found themselves relying more on phone lines and traditional written communication due to inadequacies in online provisions.

“To reinstate trust and adapt to modern needs, we’re advocating for a comprehensive review aimed at bolstering services and accelerating digital adoption,” Mr Izza pointed out.

And it seems he’s not alone in his worries. A survey from the Chartered Institute of Taxation disclosed that a whopping 94% of its members expressed dissatisfaction with HMRC’s service quality. Additionally, 95% remarked that these service flaws had hampered their business operations.

Addressing the Backlog and the Way Forward

It’s evident that HMRC is feeling the pressure. Last summer, they shut down their self-assessment helpline to address a mounting pile of postal queries. A special taskforce was even established to handle over 37,000 pieces of correspondence that were collecting dust for nearly a year.

There’s also been scrutiny over HMRC’s staffing decisions during the pandemic, with almost two in five employees from regional centres working remotely throughout the year leading up to this past March. However, HMRC has defended its stance on this matter, claiming remote working hasn’t impacted their phone response capabilities.

HMRC has also been promoting its improved online services, urging customers to opt for digital methods before resorting to calls or emails. As an HMRC representative stated, efforts are being redirected to enable advisers to assist those who genuinely require personal support. Encouraging the use of online services is central to this strategy.

Conclusion

While the role of digital in streamlining services is undeniable, it’s crucial for HMRC to balance technological advancements with genuine human touchpoints that ensure accuracy, trust, and efficient service. With accountants and businesses sounding the alarm on service delays, the path forward for HMRC is clear: reassess, adapt, and deliver more efficiently for the health of the UK economy.

In the hustle and bustle of daily life, many of us might not be aware of the potential financial benefits waiting just a click away. A tax break, known as the Marriage Allowance, could be waiting for millions of UK couples. Lovemoney.com estimates that 2 million couples are not claiming it. Are you one of them?

What’s The Marriage Allowance?

Introduced by the Government in April 2015, the Marriage Allowance is a tax relief designed specifically for married couples or those in a civil partnership. It lets one partner share part of their tax-free Personal Allowance with the other, which can reduce the couple’s overall tax bill. Imagine if one of you doesn’t earn enough to pay tax, you can transfer a chunk of your unused tax-free allowance to your partner to cut down on their tax bill.

Just How Many Are Benefitting?

According to the taxmen at HMRC, while 2.2 million eligible couples are already enjoying this perk, there’s another two million who haven’t yet taken advantage of it. That’s a staggering number of people who could be pocketing a saving!

What’s In It For You?

For the current tax year (2023/24), you can transfer up to 10% of your unused tax allowance to your spouse or civil partner. To put that in pound signs, if you were to transfer the entire 10%, that’s a whopping £1,260! This would translate to an overall saving of £252 for the year, split evenly between you two.

And here’s the cherry on top: you can also apply for this allowance to be backdated for up to four years. So, if you’ve missed out previously, you could be looking at a tidy sum of about £1,256 in total.

Who Can Claim It?

Now, before you rush off to claim, here’s a quick checklist to see if you’re eligible:

• Both of you need to be in a marriage or civil partnership.
• Cohabiting couples, even with children, unfortunately don’t qualify.
• Both partners should be born on or after 6 April 1935. If you were born before this, look into the Married Couple’s Allowance.
• One partner should be a non-taxpayer, earning under the Personal Allowance threshold of £12,570 for 2023/24.
• The other partner needs to be a Basic Rate taxpayer, earning under £50,270 for this tax year.

Remember, if you’re thinking of claiming for past years, the tax thresholds and allowances were different, so it’s worth double-checking those figures.

Lost A Loved One? There’s News For You

If you’ve lost your spouse but were eligible for the allowance after its 2015 introduction, there’s good news. The Budget has made provisions for you to make a retrospective claim. In earlier times, bereaved partners couldn’t claim any backdated amount, but this has changed.

Ready to Claim? Here’s How

Applying is straightforward. All you need is:

1. A visit to the HMRC website.
2. Both of your National Insurance numbers.
3. ID for the non-taxpayer.

The non-taxpayer should be the one to fill in the application. Once you’ve applied, HMRC will give you the green or red light on your eligibility and also inform you about any backdated allowances.

Typically, the Marriage Allowance is factored into the recipient’s tax code, adjusting it for the year. The partner who transfers some of their allowance will also see a revised tax code.

And remember, this isn’t a one-time thing. The Marriage Allowance will continue until you decide to cancel it or if your circumstances change, in which case, just let HMRC know.

If you’ve been hearing about the latest changes to pension rules in the UK, you’re not alone. In today’s Inews Money Clinic, a reader asked for help to clarify how they would affect him.

I’m about to turn 55 and I’m thinking of taking 25% of my pension pot as tax-free cash. But I’m still working and don’t need the income right now. I’ve not added much to my pension recently because I was worried about hitting the maximum limit. However, with the recent government changes, can I add more to my pension using allowances I haven’t used in the past years? Specifically, can I take out £268,000 tax-free and then put back £180,000?

Let’s break down the reply.

Breaking Down the Pension Basics

Accessing Your Pension Pot

From age 55, people with defined contribution (DC) pensions can take up to a quarter (25%) of their savings tax-free. But, in 2028, this age will rise to 57. To get this tax-free cash, you’ll need to decide how you want the rest of your pension to be paid – either keep it invested (drawdown) or buy an insurance product (annuity) to give you a fixed income.

The Changes in the Pension World

1. Lifetime Allowance Charge Abolished: In the past, there was a maximum limit on the total amount you could hold in your pension without facing extra tax charges. This was called the lifetime allowance. Good news – this charge has now been scrapped! From April 2024, this limit will disappear altogether. The maximum tax-free cash you can claim remains at £268,275.
2. Increased Annual Allowance: Currently, the most you can put in your pension each year is £60,000. However, if you take taxable income from your pension, this maximum drops drastically to £10,000.

Carrying Forward Unused Allowances

You might have heard about “carry-forward” rules. This simply means that if you haven’t maxed out your pension contributions in the past three years, you could add more this year, using up those allowances. For the 2023/24 tax year, the maximum you could put in, using these rules, is a whopping £180,000. However, the amount you contribute can’t be more than what you earn in a year.

The Potential Pitfalls

While the recent changes sound tempting, there are some things to watch out for:

1. The Recycling Rule: There’s a risk in taking out your tax-free cash and then immediately putting it back into your pension. This could go against the HMRC’s “recycling” rules, which could land you with a big tax bill. So, tread carefully!
2. Inheritance Tax Implications: If you take out your tax-free cash, it’ll be counted as part of your estate if you pass away. This means it might be subject to inheritance tax.

The Best Advice? Talk to an Expert

Given the many considerations and the big money at stake, it’s a smart move to get some professional advice. Speaking to a regulated financial adviser can help make sure you make the best decisions for your pension pot.

The recent spate of interest rate rises will make it impossible for the government to cut taxes this autumn, according to a report in Inews.

Recent rises in interest rates have thrown a spanner in the works for plans to reduce taxes or boost Government spending. Even though there was a halt in rate increases just last week, insiders from the Treasury are concerned.

Why does this matter for you? Well, if the government finds it challenging to manage its budget, it could have trickle-down effects, influencing things like public services, potential tax breaks, and overall economic stability.

The Politics of it All: Tax Burdens and Elections

Jeremy Hunt, a significant figure in UK politics, is feeling the heat. There are whispers in the corridors of No 10 about possibly reducing inheritance tax in the upcoming Budget next year. However, with the financial strains from rising interest rates, promises of tax cuts have started to sound more like wishful thinking.

Back when the Office for Budget Responsibility (OBR) made its fiscal forecasts, they believed interest rates might hit a peak of 4.3%. However, they’re now at 5.25%, even after the Bank of England announced a break in its pattern of rate increases.

Here’s the real kicker: The OBR reckons that if interest rates rise by just one percentage point, it will pile on an extra £10.3bn to the Government’s debt interest bill for next year. This is due to a significant chunk of state borrowing being closely linked to these fluctuating rates.

Inflation Throws Another Punch

On top of the interest rate challenges, inflation is another beast rearing its head. Initially, the OBR thought inflation would average around 6.1% this year. Now, forecasts are setting it at a staggering 7.2%. This bump translates to another £6.4bn in costs for the Exchequer, meaning the UK is staring at nearly £17bn in additional spending.

To provide some insight into the gravity of this situation, an anonymous source from the Treasury mentioned the substantial impact on national debt due to its close tie with interest rates.

The Public Voice: Mixed Reactions and Concerns

With households feeling the strain of these fiscal challenges, some Conservative MPs are urging the Bank of England to halt their interest rate hikes. Sir Geoffrey Clifton-Brown suggests pausing further increases to assess the inflation trend, especially after an unforeseen dip recently.

In contrast, despite the financial climate, there are rumblings about potential changes to inheritance tax by the time spring’s Budget comes around. Defence Secretary Grant Shapps expressed concerns about the current tax system, implying that it might not resonate with the aspirations of many.

As the general election approaches, political experts are skeptical about the impact of last-minute tax cuts on swaying voters. The looming question is whether these potential changes genuinely cater to the average UK citizen or if they’re just political theatrics.