Tax Archives - The Retirement Blog

Income Tax: How Much Tax Do You Pay on A Second Job

For a lot of people, a second job is vital to being able to survive and pay their monthly bills. For my family and me, we could not survive without taking on second jobs and earning a second living. It pays for holidays and helps bolster the pension fund, but like all income I make, …

How Do I Find Out My UTR Number?

by TheRetirementBlog.co.uk

If you are self-employed, you will receive a UTR number after registering with HM Revenues & Customs (HMRC). The UTR number is a way for them to identify you for tax purposes. It stands for Unique Taxpayer Reference, and each one is 10 digits long. This is a sensitive number. It allows HMRC to identify …

Expert Advice: How Can I Get A Copy Of My P60

by TheRetirementBlog.co.uk

Her Majesty’s Revenue and Customs (HMRC) is the part of the UK Government that is responsible for the collection of taxes, state-support, national minimum wage and the issuance of national insurance numbers. Sadly HMRC is not known for their simplicity but is known for issuing various tax forms to us throughout our working lives, and …

Ten UK Inheritance Tax (IHT) Questions and Answers

by TheRetirementBlog.co.uk

There are two guarantees in life, death and taxes. Unless you plan your IHT correctly, you could end up paying considerably more than you expected in Tax, rather than leaving it to your family. As its currently stands in the UK, upon death, Inheritance Tax is due on your estate (property, money and possessions) at …

Eight Great Ways to Avoid Inheritance Tax in the UK? It’s going to happen to us one day, and sadly there is very little we can do about. That said, we can prepare financially and make sure once we’re dead, our money does not simply go to the government in the form of Inheritance Tax. Minimise Your UK Inheritance Tax Liability The first step of any Inheritance tax planning is to make a “Will” to make sure your assets are distributed in line with your wishes. Without a will, your assets will be distributed in line with intestacy rules in the UK and could be liable to inheritance (IHT). If your assets are fairly simple, its very possible to pop to your news agency who will probably have a “will template”, however if your assets are complex due to owning your own business or extensive assets, then you may need to see the help of a solicitor to develop your will. Who Should Benefit and By How Much? This is such a tough decision especially as there will always be someone unhappy with what you decide. Sometimes it doesn't even come down favouritism, but who you think will benefit from your wealth the most. Or will spend or invest it most wisely. As frightening prospect as it sounds, one of the best ways to deal with it is to have a conversation about it with the entire family. Explain to them your reasons for dividing the money as you are and perhaps give them the chance to have their own say. If there is too much friction you can always divide the money up equally between your more immediate family members. One common way of doing this to give a small fixed amount to grandchildren and divide the rest equally between the children. If you are worried about any old grudges the meeting could dig up, you may consider bringing a financial advisor along who can act as a mediator. In this guide, we’re looking at ways how to avoid inheritance tax in the UK Nil Rate Band It is important to note first and fore most that each individual benefits from a nil rate band (NRB) which currently stands at 325,000 GBP. You will not pay Inheritance Tax (IHT) on the first 325,000 GBP of your estate. Married couples and those in a Civil partnership have a combined total band of 650,000 GBP as the deceased spouses band is transferable in the event of death. Note that you are can benefit from a maximum of two bands. In theory, anything in excess of the band will be subject to 40% IHT. Gifts “The Seven Year Rule” As we mentioned earlier, each individual benefit from a 325,000 GBP NRB and it is important to clearly plan and implement an IHT strategy for anything in excess of this figure at your earliest convenience. One such beneficial solution to make use of is the ‘Seven-year rule’. Under this rule, you can make ‘Potentially Exempt Transfers’ (gifts) to your children and family for which they will not have to pay IHT as long as you live for a period of 7 years from the date of the gift. If you were to pass away within the seven-year period, the gift will become known as a Chargeable Transfer. Any gift outside of the NRB made within three years or less of your death will be subject to 40% IHT with this percentage diminishing to 0% in line with the number of years since the gift was made, this is known as “Taper Relief”. More Gifts Other ways to distribute your wealth and avoid paying tax include giving money as a gift under the following conditions; • Married Couples – are allowed to transfer assets between themselves during their lifetime or upon death • Small Gifts – you can gift anyone you want up to £250 each tax year • Annual Exemption – you can give up to £3,000 worth of gifts each year without being subject to IHT. As a benefit, you can also gift any unused allowance from the previous year. • Weddings – you can give your children up to £5,000, your grandchildren up to £2,500 and one else, a gift of up to £1,000 for their wedding. Charitable Gifts Giving a sum of money totalling 10% of the net value of your estate whilst you are alive, or written into your Will, to a registered Charity, will reduce any IHT payable within your remaining estate from 40% down to 36%. The charitable contribution will not be subject to IHT. Business Relief If you have your own company and it’s going to be part of your estate, business relief could offer you a solution to make sure you’re not liable for IHT tax. While there are a selection of qualification rules, if the deceased has owned the business or asset for at least 2 years before they died, you might be able to pass on a family business without being subject to an IHT charge. Children/Grand-Children Like all parents, you want the best for your children and grandchildren. Setting up a junior ISA or a junior pension has the benefit of providing for your children’s future but can also be part of your IHT Plan. One point, the seven-year rule from above does apply in this situation. • Junior ISA’s – are both tax free and allow you to add up to £4,368 per year for children that are under the age of 18. • Junior Pension – You can add up to £2,880 to their pension’s each year and receive 20% tax relief from the government. As a result, £3,600 each year Set Up A Trust This is where things start to get rather complicated and therefore, we would highly recommend that you seek out the help of a financial adviser who can advise you on the best course of action. In principle, a Trust works by allowing you to save tax while keeping control of your assets via a set of trustees who will make a decision on when and to who the trust is distributed. On point, you can make gift into a trust from your estate at any time, however the seven-year rule does apply, even though technically, you now don’t own the assets, the trust does. Across the market, there are a selection of different trusts that you could potentially set-up depending on what you’re trying to achieve. Each type of trust will be taxed differently, however they all involve a Settlor, Trustees and a Beneficiary. The most common trust is a Bare Trust which is commonly used to pass assets to children once they’re old enough to take responsibility. In this example, the assets are held in the name of the trustee, however the beneficiary has the right to the assets at anytime once they’re 18 or over (in England and Wales), or 16 or over (in Scotland). Spend It Lastly, rather than worry trying to reduce your IHT liability through different methods, why don’t jut get on and enjoy your money. Spending it will reduce the value of your estate and therefore the IHT liability. One point, you need to spend the money. There’s not point in buying investment items such as cars, wine or artwork. You might be spending your money, but these expensive items will stay in your estate and be part of your estate when your IHT liability is calculated. You need to spend your money on holidays, dinners and enjoying you time with your family to reduce the value of your estate.

Expert Advice: Eight Great Ways to Avoid Inheritance Tax in the UK?

by TheRetirementBlog.co.uk

It’s going to happen to us one day, and sadly there is very little we can do about it. That said, we can prepare financially and make sure once we’re dead, our money does not merely go to the government in the form of Inheritance Tax. Minimise Your UK Inheritance Tax Liability The first step …

How Much Tax Will I Pay On Earnings of £200 a Week

by TheRetirementBlog.co.uk

This weeks question comes from one of our readers Paul, who has asked how much tax will I pay on earnings of £200 a week. In the UK, the first £11,850 (2018/2019) or £12,500 (2019/2020) of income is free of income tax. In this example, £200 per week or £10,400 per year is below this level …

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