HMRC has released guidance on the new reduced rate of inheritance tax available to estates which leave a ten per cent donation to a registered charity.
Currently, estates worth over £325,000 are liable to pay inheritance tax at a rate of 40 per cent, however, as of the 6 April 2012 estates leaving 10 per cent to charity may pay a reduced rate of 36 per cent. HMRC has stated that in order to qualify for the reduced inheritance tax rate, individuals must leave at least 10 per cent of the net value of an estate to a qualifying charity, and have outlined the following points:
According to calculations by the Telegraph, the move is to cost the Treasury £25 million for the tax year 2012/13, although it is hoped that charities will receive an additional £300 million over the coming three years. HMRC is also currently altering the way charitable donations are claimed through Gift Aid by reducing the amount of required paper work for smaller donations. We can help with inheritance tax planning. Please contact us for more details.
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An agreement between the UK's 'big six' energy companies, meaning they will be required to tell customers if they are overpaying and allow them to switch to a better deal , is to cut the bills of millions of consumers and businesses, according to the Government and business groups.
Deputy Prime Minister Nick Clegg said that the deal, which will cover 99 per cent of energy customers in the UK, will save households up to £100 a year when it is implemented in the autumn. According to ministers, seven out of 10 consumers are on inefficient and costly tariffs due to nearly 120 different and complicated tariffs available on the market. Announcing the move, Nick Clegg also alluded to the Government's Green Deal due to come into force in October this year, which will enable homes and businesses to recoup payments of energy efficient improvements through their energy bill. It is hoped the deal will reduce both carbon emissions and household and business energy bills. Retailers, tradespeople, energy companies and investors supplying the improvements will also benefit from the deal, with the Government estimating it to support 100,000 jobs within five years. Responding to Nick Clegg's speech Katja Hall, chief policy director of the Confederation of British Industry (CBI), said: "This pledge by energy companies is a positive step, which together with the Green Deal will make a real difference to the energy bills of consumers and businesses in difficult times. "It's increasingly important to argue the case for our green economy in helping to deliver much-needed growth. Energy efficiency and a shift towards a low carbon economy will not only bring benefits in cost savings, but also provide opportunities for growth and investment. "With the right policies in place, the Government can give investors the confidence they need to inject billions of pounds into our energy infrastructure and create thousands of jobs. The key is investor certainty and a new long-term industrial policy will be crucial to achieving this." Significant tax and benefit changes, which come into force with the beginning of the 2012/13 tax year on 6 April, will affect millions of families around the UK, according to Government and opposition figures.
Amongst the biggest changes is the increase in the income tax personal threshold - the amount of income that can be received tax-free - which is to rise by £630 to £8,105. Other benefits, including job seeker allowance and maternity benefits are to rise by 5.2 per cent in line with inflation. Opposition MPs and unions, however, have criticised the freezing of child benefits and changes which will see parents working a minimum of 24 hours per week - rather than the current 16 hours - in order to qualify for working tax credits. The Trade Union Congress has said the changes to tax credits will outweigh any benefits from the personal allowance being raised, with some families loosing up to 20 times more than they will gain as a result. TUC General Secretary Brendan Barber said: "Millions of people will be getting a small boost from the personal allowance increase this Friday, but working families are likely to have lost far more from cuts to tax credits. With unemployment at a 17-year high and full-time jobs being replaced with part-time ones, parents struggling to find 24 hours of work between them could lose thousands of pounds. "Complicated changes to child benefit for higher rate taxpayers will provide further financial headaches for many parents this year. "From tax credits to cuts in vital public services, families are bearing the brunt of the government's austerity measures. This approach is self-defeating as providing greater support towards the cost of raising children helps their development and boosts the economy, as parents tend to spend nearly every penny they earn." Other key changes include:
The Government has published the Finance Bill 2012, in which tax measures announced in Budget 2011 and 2012 come into force.
This year's Bill includes ongoing measures to maintain the Government's deficit reduction strategy, whilst supporting growth and employment. It also hopes to undertake significant tax reforms. Key legislation in the Bill includes:
"The measures in this Bill will create a tax system which supports a strong economy and promotes a fair society. In other words, a tax system that works for Britain". The Treasury has published an internal review of how it handled the 2007/8 financial crisis, admitting its staff were 'stretched' and that it 'did not see the crisis coming'.
Following recommendations from the Public Accounts Committee and the National Audit Office, the 60 page review found that the Treasury was slow in recruiting an adequate number of people to handle the crisis. It also admitted that its high staff turnover must be addressed if a future crisis is to be handled effectively. Treasury salaries are also some of the lowest in Whitehall, with employees only averaging 32 years of age and a high proportion of those leaving within three years for promotion or higher pay. "The Treasury, like many other institutions, did not see the crisis coming and was consequently under-resourced when it began," the review said. "Overall, the Treasury was stretched and could have been better prepared," it added. The review has been led by Sharon White, former director general at the Ministry of Justice and now head of spending for the Treasury, who will now face difficulties raising wages at a time when the Treasury itself is imposing wage freezes throughout the rest of Whitehall. The Treasury is part of a tripartite system of regulation which divides responsibility between itself, the Bank of England, and the Financial Services Authority (FSA). The FSA had undergone a similar internal review process in December and MP's are now calling for the Bank of England to publish a full account of its handling of the crisis. The Treasury report found that relationships between principal levels of regulator management were 'strained.' The Treasury now aims to improve the 'retention of people with the necessary skills, expertise, and experience.' Commenting on the review, Sir Nicholas Macpherson, permanent secretary to the Treasury, said: "This report will help the Treasury learn the lessons of its handling of the financial crisis which started five years ago and ensure the department has the right capability to fulfil its duties in relation to financial services in the future." With the end of the financial year approaching, investors have less than a week to make the most of their annual tax-efficient Individual Savings Account (ISA) allowance.
Currently, savers are able to invest up to £10,680, of which no more than £5,340 can be invested in cash, and receive any income tax free. Alternatively, the full £10,680 ISA annual limit can be invested into a stocks and shares ISA. The deadline for the current ISA allowance is the end of the financial year on 5 April. Figures from the Office of National Statistics (ONS) released at the end of February revealed that Britons invested more into stocks and shares ISAs (£15.837 billion) than personal pensions (£14.28 billion) in 2010/11 - the first time investment into ISA's has overtaken personal pensions since 2001/2. Billy Mackay, marketing director of AJ Bell, said: "These figures show that pension saving had already been falling even before the Government limited the amount that can be saved into a pension from the start of the current tax year." Economic and political uncertainties were also cited as reasons for the increased popularity of ISAs. The ISA limit for the 2012/13 tax year beginning on 6 April will increase to £11,280, of which a maximum £5,640 can be invested in cash. The remaining £5,640 can be invested into a stocks and shares ISA with either the same or a different provider. HM Revenue and Customs (HMRC) has confirmed that it will be going ahead with a major reform of the PAYE system.
The overhaul will involve a switch to a real time information system. The new system will mean that employers must supply HMRC with details, such as income tax, national insurance contributions and student loan payments, on each payroll day rather than at the end of the year. HMRC said that the change would bring several benefits. These include making it easier to ensure individuals pay the right tax after a change of job and removing the need for the P45/P46 process over time. There would be a simplification of the PAYE end of year reconciliation process for employers, and much of the uncertainty that leads to errors in the tax credits system would be lifted. Following a period of consultation, HMRC said that it is to embark on a pilot scheme in April 2012, involving volunteer employers and software developers. Work to ensure data quality will begin in October 2011 and continue until all employers have moved to the new system. Once the pilot scheme has been successfully completed, the plan is that employers will be expected to start using the real time information system from April 2013. It will become mandatory by October 2013. David Gauke, Exchequer Secretary to the Treasury, said: "Real Time Information will support improvements to the PAYE system making it more accurate for taxpayers and easier for employers and HMRC to administer. "We need a PAYE system that can meet the demands of the 21st century workplace and ensure that the tax system works better." Stephen Banyard of HMRC added: "We wanted people who use the system every day to give us their views on the collection of Real Time Information. We have listened to the concerns of payroll providers and employers surrounding the proposed mandation date and amended our plans to take these into account. "We want to work with software developers and employers to help us deliver the new system. I urge anyone interested in being involved in the pilot to contact us." This week marks the beginning of the new tax year and some significant changes to the tax system.
Many of the changes have been introduced as a way of helping with the Government's efforts at budget deficit reduction. Among many changes, one of the biggest differences people will experience is in income tax. As from 6 April, the personal allowance, which marks the point at which income tax becomes payable, rises by £1,000 to £7,475. However, the threshold at which higher earners become liable for the 40 per cent tax rate falls to £42,475. The employee national insurance contribution for those who qualify climbs from 11 per cent to 12 per cent. Anyone who pays NI over the upper earnings limit sees their charge rise by 2 per cent. A land tax stamp duty rate of 5 per cent is to be charged on residential property transactions worth more than £1 million. Pension contributions that are entitled to tax relief now have an allowance of £50,000, down from the previous figure of £225,000. There is no longer a requirement to purchase a pension annuity by the age of 75. Savers who are willing to keep their money in long-term savings accounts are benefiting from improved interest rates.
According to Moneyfacts, the financial information website, the returns provided by fixed-rate bonds have been on the increase since last summer. Although that improvement needs to be set in context - the increases have been from a historic low of just 2.25 per cent - it appears to have been prompted by speculation that the Bank of England will be looking to raise official interest rates later this year. Moneyfacts reported that the average interest rate for a one-year fixed-rate bond is now 2.85 per cent, a high water mark not seen since March 2010. Two-year bonds hold out the promise of an average 3.42 per cent return. Locking in money for three years rewards savers with an average interest rate of 3.7 per cent, while committing to four years produces an average rate of 4.17 per cent. Michelle Slade of Moneyfacts said: "The biggest increase in rates is on short-term deals, which are the most popular amongst savers. "Most of the best deals are from smaller building societies. If savers want to make the most of their money they may need to look further afield than their local High Street. "The markets expect a rise in Bank base rate in the not too distant future and this is being factored in to the rates being offered to savers." But Ms Slade advised that people would come face to face with a sizeable penalty charge if they decided they wanted access to their money during the fixed-rate term, and should, therefore, consider carefully whether or not they could afford to tie their savings up for a lengthy period. The ability of the UK's smaller manufacturers to help re-balance the economy is being put at risk because many are finding it difficult to promote their products in new and emerging markets.
A study by the Forum of Private Business (FPB) found that 26.2 per cent of respondents to the survey cited problems in reaching emerging markets as their top concern, above operations management (18.7 per cent), human resources issues (13.4 per cent) and new product development (12.1 per cent). As a consequence, many smaller manufacturers consider that they need to amend their business and marketing strategies immediately (28 per cent) or within six months (23 per cent), compared with those willing to delay changes until later in the year (7 per cent) or the longer-term (13 per cent). However, most firms said that they required more support and guidance when it comes to breaking into new markets. In all, three-quarters of the smaller manufacturers surveyed think they will need help on sales and marketing in the coming six months, but almost one third (31 per cent) claimed that the necessary advice is not available to them. Phil Orford, the FPB's chief executive, commented: "Smaller manufacturing businesses should be able to be more flexible than their larger competitors and can move into new and emerging markets more quickly as the economy recovers - but this is not going to happen by itself. Producing a sales and marketing strategy should be a top priority, not an afterthought. "Customers are highly unlikely to seek out your services under their own steam so it is important that smaller manufacturing firms embrace all of the options that are available to get their message out there." Elsewhere in the survey, just 20 per cent of firms said they believe 2011 will be easier for their businesses, compared with the 61 per cent who fear it will be even tougher. However, one in ten are beginning to see an increase in new orders, with one in four saying they expect to do so within six months. Some 36 per cent expect to see a surge in orders in the 'longer term'. Subsequently, only 6 per cent of respondents are looking to recruit staff at the present time; this contrasts with the 41 per cent that believe they will be creating new jobs only beyond the coming year. |