Tax and Financial Strategies 2010/11

Achieving your financial goals requires careful planning, particularly in today’s climate of continually changing legislation.

Through tax and financial planning it may be possible to lower and defer the tax you pay, enabling you to free up cash for business or personal purposes and provide long-term financial security for you and your family.

This guide introduces some of the key areas to consider when planning to maximise your business and personal wealth, although your exact requirements will depend on your individual circumstances. Please contact us for one-to-one advice tailored to your needs.

How to benefit from our services:

• Please read those chapters which are relevant to you as soon as possible
• Take note of the key points arising from this guide, and any action you may wish to consider
• Contact us to discuss your action points, and to evaluate your long-term financial plans.

We would welcome the opportunity to assist you.

The general effect of the Civil Partnership Act is to treat registered civil partners on a consistent basis with married couples. For the purposes of this guide we have on occasions referred only to spouses.

‘HMRC’ refers to HM Revenue & Customs.

This publication has been based on current understanding of legislation. It is for general information only and under no circumstances should action be taken without first seeking appropriate professional advice.

Foreword: Planning in a time of change

Planning to protect your business and your personal wealth is always important, but in times of economic change it is even more essential that sound tax and financial strategies are put in place.

Strategies for your business

Some of the key business strategies to consider during such times may include:

• Controlling costs
  Examine areas where the business might be able to cut its expenditure. For example, you might want to review your levels of stock – are you carrying more than is sensible?
   
• Monitoring cash flow
  Drawing up a realistic cash flow forecast is essential and will allow you to identify the likely peaks and troughs in net cash over the coming months. This will then enable you to take appropriate action if the business is expected to encounter difficulties.
   
• Managing credit control
  Late payment can pose a serious threat to a business. Minimise the risk by performing credit checks on new and potential customers, sending invoices in a timely manner, and enforcing a rigorous debt collection policy.
   
• Planning ahead
  Planning ahead could be key to your business’s survival and growth, particularly in times of change. Through forward planning you can not only minimise the amount of tax you pay, but also protect and strengthen your business for the future.

We can help you to build a prosperous future for your firm.

Contact us for advice on a range of tax-efficient strategies for your business, including: reducing the tax burden; making the most of capital allowances; minimising the cost of company cars; and timing expenditure and income to minimise taxes.

Protecting your personal finances

In a time of change, you should ensure that you are making the most of your personal finances. While saving for the future is increasingly important, recent trends and low interest rates may mean that this is more difficult. If you are looking to boost your personal wealth in the short term, you may want to consider cutting your spending costs.

Your income and personal wealth can also be significantly reduced by regular income-related taxes, and more periodic taxes, such as inheritance tax and capital gains tax. As your accountants, we can work alongside you to help you: save money tax-efficiently; make the most of personal allowances; review your pension arrangements; and reduce your inheritance tax liability.

Please contact us for a review of your personal and business finances.

The Emergency Budget

2010 saw two separate Budget statements: a pre- Election Budget in March, and on 22 June a special Emergency Budget for the new Coalition Government, delivered by George Osborne.

A large number of important tax announcements have been made that could affect your planning. These include:

Capital gains tax (CGT): From 23 June 2010 CGT has risen from 18% to 28% for higher rate taxpayers.

Entrepreneurs’ Relief, which reduces the tax on gains on the disposal of qualifying assets is extended to £5 million (from 23 June 2010) and the applicable tax rate is confirmed at 10%.

The rate of CGT for trusts and personal representatives is increased to 28%, for gains arising on or after 23 June 2010, except where Entrepreneurs’ Relief applies.

Income tax – 50% rate: Since 6 April 2010 income in excess of £150,000 has been subject to a 50% top rate of income tax (42.5% on dividends). This was not overturned by the Coalition Government.

Income tax – personal allowance: The basic personal income tax allowance will be raised from £6,475 to £7,475 from April 2011. The advantage is lost to higher rate taxpayers as the basic rate band will be reduced.

ISAs: From 6 April 2010 the ISA limit was raised to £10,200, up to £5,100 of which can be saved in cash. From 6 April 2011 and over the course of the next Parliament, the annual ISA limits will increase each year in line with the RPI.

Inheritance tax (IHT): The IHT threshold is frozen at £325,000 from 2010/11 to 2014/15. The rate of IHT remains 20% for lifetime transfers and 40% for death estates. Transfers within seven years before death brought back into the estate for the purpose of calculating the tax due at death may also suffer up to 40% tax depending on the reliefs available.

VAT: The standard rate of VAT will rise from 17.5% to 20% with effect from 4 January 2011.

Corporation tax: The main rate of corporation tax will be reduced from 28% to 27% on 1 April 2011, followed by reductions of 1% a year thereafter until it reaches 24% in 2014. The rate for small companies will also be reduced from 21% to 20% from 1 April 2011.

Make sure you talk to us about your specific circumstances, and about how we can help you or your business to save money.