Welcome to our round-up of the latest business and tax news for our clients. Please contact us if you want to talk about how these updates affect you. We are here to support you!
I hope you have a good weekend.
Kind regards,
Steve
Steven Hillman BSc (Hons) ACA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk
Managing inheritance tax
Like many other taxes, inheritance tax (or IHT) allowances have been frozen. This sounds generous of the chancellor at a time when the government is strapped for cash. But it actually means that we are paying more. Data from HMRC has revealed that Inheritance tax collected between April 2022 and February 2023 totalled £6.4bn, which is £900m higher than the same period last year.
The rise is actually due to the frozen tax-free allowance for inheritance tax (also known as the nil-rate band) – coupled with the rocketing rise of house prices.
It’s estimated 10,000 more families could end up paying IHT, while the Treasury could receive nearly £8 billion a year over the next few years.
How can you reduce your inheritance tax bill?
When you die, your estate is valued, and this value is subject to inheritance tax (IHT). Generally, any excess over the nil-rate band (currently £325,000) is chargeable to inheritance tax at 40%. But there are ways to reduce your inheritance tax bill.
1. Give it away
The easiest way to pass your wealth onto your loved ones without paying tax is simply to give it to them.
- You can give up to £3,000 to loved ones each tax year without it becoming liable for IHT. If you didn’t use the allowance last year, you can combine it and pass on £6,000.
- Gifts of £5,000 to children for a wedding are also protected from IHT; grandchildren can have up to £2,500.
If you die within seven years of making a larger gift, IHT will be payable. There’s a sliding scale. Die three to four years after giving, the IHT rate lowers to 32%. At six to seven years it falls to 8%.
There is another way to give. Donate at least 10% of your estate to charity and get a 4% discount on your IHT rate for the rest of your estate, lowering it from 40% to 36%.
2. Put it in a pension
Your pension, depending on the type of pension plan you hold, if it is kept invested could be used to pass on wealth as it is usually excluded from your estate for IHT purposes. Nominate beneficiaries for your pension should you pass away before you receive it, and IHT isn’t normally payable.
If you die after the age of 75 your beneficiaries will need to pay income tax on the money they take out.
3. Invest it (carefully)
Making the right kind of investments might help you avoid IHT. An individual savings account (ISA) can’t help. ISAs are exempt from income tax and capital gains tax, but they form part of your estate for IHT.
There could be other solutions such as with Alternative Investment Market (AIM) holdings.
The companies listed on AIM tend to be smaller and more highly speculative in nature, in part due to AIM’s relaxed regulations and listing requirements. However, Investing in AIM companies tends to be high risk investing and is not a route most people should consider. You should seek independent financial advice before considering investing in this market, remembering that, when investing, your capital is at risk and you could lose some or all of your investment.
4. Put it in trust
Setting up a trust to hold your assets could keep them out of your estate, and out of the taxman’s reach – but the position has become more complicated in recent years, and it might not always be suitable. They may still have their uses. The trustee can control the assets, rather than them being passed onto the beneficiaries right away. This might help if your beneficiaries are not known for financial prudence or are young children. You should seek Independent financial/legal advice before establishing a trust.
5. Insure it
You can take out a whole of life insurance policy large enough to mitigate some or all of your IHT liability. You may need to regularly review the level of cover if your estate increases in value as the original sum assured may not cover the whole IHT liability. Alternatively, you may choose a plan where the cover increases with inflation. Whichever option is chosen, have it written in trust. Your beneficiaries won’t struggle with a huge inheritance tax bill when you die, but while you are alive you will be paying monthly premiums.
6. Get some help
Expert advice can be vital to help work out the total value of an estate, calculate how much inheritance tax is likely to charged and understand what options are available to manage that tax bill. Advice on writing up a will to be tax efficient is also essential.
Please talk to us about any tax related questions you may have and if you need a financial adviser, we can pass you the contact details of a local IFA.
ICO offers new Innovation Advice Service
The Information Commissioner's Office (ICO) has launched a new service for UK organisations looking to use personal data in new and innovative ways
As part of their commitment to helping organisations innovate and grow, the ICO is trialling a new Innovation Advice Service, designed to answer specific data protection questions.
The service is aimed at organisations planning to use the personal data of people living in the UK, to drive a new or innovative product, service, or business model that is not currently live.
The service is open to organisations of any size and in any sector.
You can ask questions at any stage of planning, designing or development of your project. However, the ICO may prioritise questions where their response has the greatest potential to influence your thinking and planning, or where it could be helpful to lots of other organisations.
Your question must be about specific aspects of your new or innovative use of data. The ICO will not accept questions that are vague or generic.
See: Innovation advice service | ICO
What is Greenwashing?
Greenwashing is the practice by which companies claim they are doing more for the environment than they actually are.
Greenwashing has increased as:
- companies’ climate commitments are on the rise;
- consumers increasingly seek to buy more sustainable products;
- companies are incentivised to make products more attractive to consumers; and
- employees are attracted to work for companies with strong sustainability credentials.
Making false environmental claims hampers decarbonisation progress and impact. If greenwashing is not addressed, it will undermine the efforts of genuine leaders, creating confusion, cynicism, and a failure to deliver urgent climate action. It is a collective problem which requires collective action.
Watch The Carbon Trust’s webinar on how to avoid greenwashing and read their top tips on how to counter greenwashing through transparent communications for your business.
See: Briefing: how to counter greenwashing with transparent communications | The Carbon Trust
Consultation: The Border Target Operating Model
The United Kingdom Government, in collaboration with the Scottish and Welsh Governments, has published its draft Border Target Operating Model (TOM), setting out a new model for importing goods from all countries into Great Britain, including the EU, in line with their 2025 Border Strategy.
The draft TOM proposes a new approach to security controls (applying to all imports), and sanitary and phytosanitary controls (applying to imports of live animals, animal products, plants and plants products) at the border. It sets out how controls will be simplified, digitised and, over time, delivered through the UK’s new Single Trade Window.
The Cabinet Office will run a programme of engagement with stakeholders from all nations of the UK and international partners. It will consist of sector specific workshops and international events, as well as wider stakeholder groups and bespoke sessions, covering all aspects of the TOM.
- Tuesday 18 April 2023, 2pm to 4pm – Cabinet Office Seaports and Airports Workshop (online)
- Monday 24 April 2023, 2pm to 4pm – Cabinet Office Carriers Workshop (online)
- Wednesday 26 April 2023, 2pm to 4pm – Cabinet Office Hauliers, Logistics & Customs Intermediaries Workshop (online)
- Wednesday 17 May 2023, 2pm to 4pm – Cabinet Office Final Workshop, Stakeholder Reflections (online)
See: The Border Target Operating Model: Draft for Feedback - GOV.UK (www.gov.uk)
Volunteering: guidance for employers on how to manage the risks
The Health and Safety Executive (HSE) has guidance on how to manage the risks to volunteers.
The guidance explains how health and safety law applies to volunteering.
There is also information on:
- when to report incidents involving volunteers, and
- including volunteers in your risk assessments.
The pages provide some specific advice for volunteers who manage non-domestic premises such as village and community halls, as well as guidance on charity retail and fundraising.
See: Volunteering: How to manage the risks - HSE
Grant to boost domestic tree production re-opens
Applications are now open for the Forestry Commission’s Tree Production Capital Grant. The funding will drive the production of tree seed and saplings through developments in machinery, automation and the expansion of facilities.
In line with the aims of the England Trees Action Plan and Government ambitions to treble tree planting rates by the end of this Parliament, the Tree Production Capital Grant will support efforts to build nursery capacity and grow long-term tree seed and sapling supply.
The grant will enable suppliers to boost production rates at pace and has been designed to complement the Tree Production Innovation Fund, which provides support for research projects that enhance UK tree production methods.
Successful projects will be awarded up to £175,000 in grant funding to cover up to 50% of costs, with money coming from the Tree Production Capital Grant as part of the Government’s £750 million Nature for Climate Fund. In comparison to the 2022 application process, the minimum grant value which can be applied for has reduced from £10,000 to £5,000, enhancing accessibility for smaller projects.
Examples of eligible projects include investments in seed trays, developments in machinery such as transplanting systems and grading machines, improved polytunnel infrastructure and irrigation systems, or in biosecurity through improved water treatment and refrigeration equipment. Applications are encouraged from tree seed and sapling suppliers of all sizes and sectors, as well as new entrants looking to diversify into the area.
See: Grant to boost domestic tree production re-opens - GOV.UK (www.gov.uk)
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