Tax In The Financial Affairs Of Individuals And Trusts Flashcards
What is the general tax planning strategy
Utilize available allowances and reliefs
Beware additional rate of income tax 45%
Effective marginal rate of income tax 60% on earnings £100k - £125k due to gradual withdrawal of personal allowance
What is the most important thing to remember when tax planning
The individuals priorities
Why do you need to review investments and tax planning strategies regularly
Governments change tax rules
Who needs to disclose arrangements of a tax avoidance scheme
Promoters
What do tax payers need to include in their tax return if they are part of a tax avoidance scheme
Scheme reference
What are the drawbacks of tax avoidance schemes
Might draw HMRC attention to the individual
Scheme may prove to be ineffective
Government increasingly introduce retrospective legislation
What is general anti abuse rule (game)
Special statutory rule that targets tax avoidance schemes which are outside the general tax legislation
How can couples and partners reduce tax liabilities
Transferable personal allowance since April 2015
Transfer income between spouses (absolutely)
If couple is not married there could be a cgt liability
Hold savings in joint names
Why should couples hold savings in joint names
To retain control but only be taxable on their share
How can business and companies mitigate tax liabilities
More scope when a spouse works for the business
Salary between £118 and £166 per week qualifies for state pension without having to pay NIC
Pension contributions are allowable business expense
Share profits by operating a partnership
If Ltd company and not a personal service company then slide or partner can hold shares and receive dividends
Who is married couples allowance for
Taxpayers born before 6/4/36
What is the threshold for married couples allowance before it gets reduced
£29600
What is a child’s personal allowance
£12500 as normal
If a child has income in excess of £100 form a gift from parents what is the tax basis
Income is taxed on parent
How much is the family element of child tax credit
£545
How much is the standard child element of child tax credit
£2780
Who pays child tax credit
Hmrc
How much is the tax credits reduced by for income over £16,105
41p for everyone £1
How can you reduce income to keep child tax credit
Make pension contributions
What is the high income child benefit charge
Income over £50,00 per year removes 1% of child benefit for every £100 of excess adjusted net income
What is the maximum income before child benefit is withdrawn
£60,000
What is adjusted net income
Income after gross pension and gift aid donations
Do dividends count as earnings for pension contributions
No
What options does a company director have for tax mitigation
Choose bonus or dividends
Consider tax position of share options
Consider taking dividends instead of remuneration
Company cars and free fuel for cars with low co2 emissions may be tax efficient. Oth ER wise check to see if the benefit is worthwhile
What things can affect a self employed persons tax liability
Retirement or ceasing to trade
Choice of accounting date
When do NIC stop being paid
At state retirement age
How can you reduce NIC
Take dividends instead of salary
Increase pension contributions by salary sacrifice
Lump sum bonus instead of taking a salary ( not effective for directors who have a special annual allowance)
How often should a will be updated
Every 2 years
How long after death is a deed of variation permitted
2 years
What needs to be considered when making PET
CGT consequences
How can you plan for liability on a PET on premature death
A 7 year decreasing term assurance plan to cover death liability
What is the best reason to make a chargeable lifetime transfer
Where it is advantageous to remove the asset from estate but the beneficiary is unknown
Which incentive has been removed by making 100% business relief available
Lifetime gifts of family business
How can business or agricultural relief be lost
On inter spousal transfers
How can you use IHT exemptions
Annual exemption for gifts
Or normal expenditure exemption for premiums on life assurance written in trust, to pay pension contributions or to pay CTF/JISA contributions
