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Sorting your financial matters

By Ensors Team
20th Dec 2019

Writing this month’s column a few days before November’s Black Friday, by the time you read this the election will be over and the New Year on its way. For a New Year’s Resolution, why not resolve to sort out some financial matters sooner rather than later – in some cases possibly before you lose the opportunity.

  • Consider how assets are held between spouses.If spouses hold assets jointly, they may be able to make better use of personal allowances, dividend and interest allowances and even potentially receive double the £1,000 sundry rental income allowance which can be used instead of against rental expenses.When spouses sell jointly held assets, there are also potentially two annual capital gains tax exemptions available.Under current legislation, transfers between spouses are generally exempt from capital gains and inheritance tax.
  • Have all family members reclaimed any tax to which they are entitled? Students and part-time workers can often suffer income tax due to being placed onto emergency (Basic Rate) or week 1/month 1 PAYE tax codes (the latter being a code that taxes each week in isolation to the rest of the tax year or use of Personal Allowances) which can end up with the individual being overtaxed.Whilst HMRC are getting a lot better in collating an individual’s work history and potential over payments, they still cannot review everyone and there is nothing to say that you must wait for them to make a repayment.If you have overpaid tax, you generally have four years in which to make a claim.This means that on 5 April 2020, the ability to make a refund claim for 2015/16 will generally be lost.
  • Staying on the subject of the 2015/16 tax year, whilst the Referendum distracted people, a new allowance was brought in – the Transferable Married Allowance (TMA).This allows one spouse to gift 10% of their personal allowance to the other.To be able to use it, neither spouse should pay income tax above the basic rate.Usually used by spouses with unused personal allowances, it can be advantageous in other situations as well if your circumstances permit.From 5 April 2020, the ability to make a retrospective claim for the TMA for 2015/16 is also lost under the four-year rule.
  • If you have self-employment or partnership income and your profits are below £6,365 (2019/20 rates) are you paying Class 2 National Insurance voluntarily?Class 2 NIC grants you entitlement towards your State Pension and paying it voluntarily is a far cheaper way of obtaining a full year’s credit than playing catch-up in later life to fill in any gaps, or by paying Voluntary Class 3 NIC to achieve the same end.Remember though, that under the current rules, you only need a maximum 35 years of contributions to obtain a full pension so if you have already hit that maximum (potentially as early as age 51), paying NIC voluntarily may not increase your entitlement.
  • Have you had a state pension forecast recently?This is not just for when you approach pension age as gaps, or worse, lost records or errors in your NIC history can be identified and rectified many years before they become a major issue.
  • Should you accelerate any actions due to tax changes?On 5 April 2020 there are changes to the Principle Private Residence relief and Let Property Relief for CGT, let alone any new proposals as a result of the election.Can doing something now give you in a better position.

And finally – you didn’t think I wouldn’t mention it, did you? – don’t forget that your Tax Return should be filed by 31 January 2020 if you haven’t already done it.  Late Tax Returns attract increasingly hefty monetary fines from HM Revenue & Customs.  These are worse if it is a Partnership Tax Return as the fines are multiplied by the number of partners in the business.

For further information on any of the above points or to discuss your affairs generally, please do not hesitate to contact Robin Beadle.