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Tax Times With HMRC

The run-up to the end of the tax year provides ‘use it or lose it’ opportunities to help secure your financial future and pay less tax on the inheritance you leave to loved ones.

Over a decade since the financial crisis, the world is still a very uncertain place. Despite this, investors have enjoyed the benefits of a strong run by stock markets around the world, coupled with record-low volatility.1

However, it would be wrong to believe that market shocks are a thing of the past. From uncertainty over Brexit to the threat from North Korea, there are many risks that pose a challenge to investors now; and any number of unforeseen factors in the years to come.

But these are beyond our control; they cannot be allowed to prevent us from planning our financial futures. Indeed, we will give ourselves the best chance of achieving our financial goals if we focus on what we can control: how and where we invest our money, how much tax we pay, the size of our retirement fund, and how much of our estate passes to our family free of Inheritance Tax (IHT).

Effective financial planning should be a year-round activity. Nevertheless, the months of January, February and March provide us with an ideal opportunity to use reliefs and allowances that would otherwise be lost. These valuable tax breaks can help to create long-term financial security for ourselves and our family.

ISAs

Make the most of the increased allowance

ISAs have become one of the most popular ways to save, principally because they are simple and readily accessible.

The substantial increase in the ISA allowance to £20,000 for this tax year was a very welcome step in encouraging individuals to invest for their future. However, as interest rates in the UK remain near record lows, money being held in Cash ISAs is failing to achieve the very basic objective of keeping pace with inflation. The result is real losses for savers.

Those who are investing their ISA allowance for the long term – in assets offering the scope for attractive levels of income and capital growth – are giving themselves a better chance of maximising the tax-saving opportunities on offer.

As the end of the tax year approaches, individuals yet to use their ISA allowance, or with accumulated ISA savings, need to carefully consider their options to ensure that they are maximising this valuable opportunity to generate tax-efficient capital and income for the future.

Pensions

Maximise your annual allowance

Saving into a pension is even more attractive than it was a few years ago. This is because the money can be taken in a variety of ways and it can be more easily left as part of a tax-free inheritance. However, the advantages extend beyond drawing money and passing it on to loved ones; the government still rewards savers by providing them with tax relief on their pension contributions.

For every 80p you contribute to a pension, the government automatically adds 20p in tax relief. Higher earners can claim extra tax relief through their annual tax return, meaning that a £1 pension contribution can effectively cost just 60p.

While tax relief is seen as a means to encourage pension saving, the annual cost to the Exchequer of providing it has now passed £50 billion2. With the government under increasing pressure to reduce public spending, there’s no guarantee that the higher rates of tax relief will be maintained into the future.

Those wishing for a better chance of making their retirement plans a reality should consider fully utilising their annual allowance for this tax year to make the most of the tax breaks on offer. Unused allowances can be carried forward, but only from the three previous tax years.This year is the final chance for pension savers to use the allowance that was in place in 2014/15. If it is not used by 5 April 2018, it will be lost forever.

Inheritance Tax

Don’t waste your gifting opportunities

There are few more confusing – or unpopular – taxes than Inheritance Tax (IHT). But continued confusion and inertia means that HM Treasury can expect to see a 25% increase in IHT revenues over the next five years.3

However, there are a number of exemptions that allow individuals to reduce future bills. Perhaps the best known is the annual gifting allowance. This gives individuals the opportunity to remove £3,000 of assets from their estate immediately (£6,000 if they use the previous year’s unused allowance as well).

Taking steps to reduce your taxable estate by topping up a child’s pension or Junior ISA could go a long way to providing them with an invaluable head start in life. Nevertheless, with the end of the 2017/18 tax year looming, you only have a short amount of time to make this year’s £3,000 gifting allowance count – and to carry forward last year’s, if you haven’t used it already.

It’s a time of the year when individuals and couples are given an opportunity to put their long-term plans back on track by using reliefs and allowances that would be otherwise lost.
Nevertheless, legitimately protecting wealth from HMRC requires some knowledge and expertise to do it effectively. That’s why you should speak with a financial adviser to better understand how you can get maximum advantage for this year and the years to come.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and the value may fall as well as rise. You may get back less than the amount invested.

An investment in a Stocks and Shares ISA will not provide the same security of capital associated with a Cash ISA. The favourable tax treatment of ISAs may not be maintained in the future and is subject to changes in legislation.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

1 CBOE Volatility Index (^VIX), accessed 18 January 2018

Personal Pensions Statistics, HM Revenue and Customs, September 2017

3 Office for Budget Responsibility, March 2017

Sarah (2)

Cash Call Financial Management

Will ISA savers continue to turn away from cash as the impact of low returns and tax changes becomes clearer?

In the tax year 2015/16, over £58 billion was deposited into Cash ISAs: last year that figure fell by a staggering 33%.¹ Will the traditional rush to use ISA allowances before the end of this tax year see this trend continue?

It certainly appears that Cash ISA providers are doing little to encourage savers. At 0.73%², the average no-notice Cash ISA rate is still significantly below its level in August 2016, when the base rate was also at 0.5%.

Further analysis shows that, compared to when interest rates last went up in 2007, providers have been much slower to pass on the rise.³ They have also introduced cuts more quickly; symptoms of a deposit market that is now far less competitive than it was before the financial crisis. Funding initiatives such as the Funding for Lending Scheme, introduced to reinvigorate the banking sector, have made the need to compete for savers’ cash almost redundant.

One in five savings accounts now pays just 0.10% – earning £20 annual interest on a £20,000 deposit.⁴  Of 1,759 savings accounts on the market, not one currently pays a rate that matches inflation.⁵

But despite years of derisory returns, the cash habit is proving a hard one to break. In the UK, we hold an average 69% of our investable wealth in cash; a figure that has actually gone up since 2015.⁶ Indeed, the same research revealed that 54% of people intended to increase their cash savings over the next 12 months.

Of 1,759 savings accounts available, not one matches inflation.

Cash ISA savers have, until recently, epitomised that trend. Cash ISAs have typically accounted for 80% of ISA subscriptions every tax year and more than ten million accounts have received contributions in each of the last ten years. Consequently, over £270 billion is now deposited in Cash ISA accounts.⁷

“It’s clear that Cash ISAs form a key part of these individuals’ longer-term savings strategy,” says Phil Woodcock, Head of Investment Communications at St. James’s Place. “But with cash returns still near record lows, that is a lot of money failing to achieve the very basic objective of keeping pace with inflation. Alongside pensions, ISAs have an important part to play in creating wealth for the future; yet cash savers are at real risk of failing to make the most of the long-term tax breaks on offer.”

Signs of shift

But there are signs that savers’ attitudes and behaviours may be changing. In contrast to Cash ISAs, last year saw contributions to Stocks & Shares ISAs rise by 6% to £22.3 billion.⁸ This shift, coupled with the strong stock market returns in recent years, means that, for the first time since ISAs were introduced in 1999, the amount of money held in Stocks & Shares ISAs is greater than that deposited in the cash alternative.⁹

It appears that savers are increasingly recognising the greater long-term potential of Stocks & Shares ISAs to create tax-efficient capital growth and income.

Another factor influencing this trend was the introduction of the Personal Savings Allowance in April 2016, which enables basic rate and higher rate taxpayers to earn tax-free interest from standard savings accounts of up to £1,000 and £500 respectively each year. The new allowance effectively nullifies the tax advantage of Cash ISAs for the majority of savers.

At the current average no-notice rate of 0.48%¹⁰, the allowance enables a basic rate taxpayer to hold around £208,000 on deposit and receive all their interest tax-free; for a higher rate taxpayer, the equivalent figure is half that amount.

“The only thing that will bring Cash ISAs back to life, particularly for higher rate taxpayers, is significantly higher interest rates,” says Woodcock. “Those with larger cash balances could then exceed their Personal Savings Allowance; but it could be a long wait, as markets currently forecast that interest rates will reach only 1% by 2020.”

In the meantime, and as the end of the tax year approaches, individuals yet to use their ISA allowance, or with accumulated ISA savings, need to carefully consider their options. Maximising this valuable opportunity could go a long way towards achieving financial security.

 

The value of an investment with St. James’s Place will be directly linked to the funds you select and may fall as well as rise. You may get back less than you invested.
An investment in a Stocks & Shares ISA will not provide the same security of capital associated with a Cash ISA.
The favourable tax treatment of ISAs may be subject to changes in legislation in the future.

 

¹’ ⁷’ ⁸’ ⁹ Individual Savings Accounts (ISA) Statistics, HMRC, September 2017
²’ ³’ ⁵’ ¹⁰ Moneyfacts, January 2018
⁴ savingschampion.co.uk, January 2018
⁶ BlackRock, May 2017

Harrison Hinchliffe App

Accountants in Glossop Launch Powerful App | Harrison Hinchliffe Accountants in Glossop

It’s landed!

The Brand new App from Harrison Hinchliffe Accountants

As a firm we are constantly looking for ways we can improve the service we offer our customers and we are proud to announce the launch of our brand new Harrison Hinchliffe Accountants App.  It’s completely free of charge and it’s available for iPhones, iPads and Android devices.

So the next time you need to look up a tax rate or work out a VAT calculation, our new App can help.  It provides you with up to date, important accountancy data at your fingertips.  PLUS:

Photo Receipt Management, Email and Store

Never lose a receipt again! Using the latest App, you can track receipts and expenses literally at the touch of a button. With minimal effort you can take a picture of any receipt and save it to your App. Any additional information can be added later and receipts stored by amount, category, and date. It can help you track all your expenses with ease and enable us to interact digitally with you.

GPS Mileage Tracking and Management tool

When it comes to mileage tracking, half the battle is keeping an accurate tab on your journeys. Using the built-in GPS on your device, it will automatically track your mileage, helping you to record every single trip at the touch of a button. It also manages trips as well, storing them and allowing you to view, edit or email them with complete ease.

Keeping in touch via ‘Push Notifications’

As a firm we are committed to finding ways to communicate and interact with clients in the most efficient possible way.  The new App enables us to send push notifications to all App users.  We will be using this feature to share important news, deadline reminders and financial updates with you.

This App was designed to provide every service you could ask from us. We’ve put your favourite business systems, invaluable tools and features such as calculators, tax tables, logbooks, receipt and income management, instant access to the latest financial news and information and valuable company info, directly from us. With all this on one App, our App will likely be your go-to tool in the future.

It’s available for iPhone, iPad and Android devices completely free of charge right now! 

Enjoy our App with our compliments and you can download by clicking the app image below

Harrison Hinchliffe App

Accountants Glossop

In Case of Emergency

In case of emergency for the self-employed

A lack of protection against serious illness is most prevalent among the self-employed

Paul Pickford was fit and healthy and ran a car dealership until two-and-a-half years ago. In November 2012 at the age of 42 he suffered a brain stem stroke while at work. He is now paralysed and cared for by his wife Vicky.

“I was taken to hospital where, for a variety of care-related reasons, I spent 14 months as an in-patient. I was discharged in January 2014, paralysed from the neck down, nil by mouth and unable to speak,” Paul explained via his computer, which speaks whatever he types.

While he was fit and healthy, Paul and Vicky didn’t think about lost income or the extra costs that inevitably result from such a devastating event, so they didn’t put any critical illness cover in place. When Paul fell ill and could no longer work, there was no policy to fall back on, and no income to help them cope.

“I wish we had put other things in place,” says Vicky. “We honestly didn’t think anything like this could happen.” And it’s not just Paul who has suffered from a loss of income. “My life’s on hold as much as his,” she adds.

Unfortunately, there is a growing number of people who don’t have cover in place. This protection gap is particularly prevalent among those who run their own business. The economic upheaval over the last six or seven years has seen the number of self-employed individuals increase dramatically. Yet many who left behind employee protection insurance policies haven’t replaced them with personal policies. This growing need for personal cover has been exacerbated by the reduction in sickness benefits from the state.

Expect the unexpected

Paul’s story is a powerful one that demonstrates the value of protection to anyone who thinks “It won’t happen to me.”

People never expect this sort of thing to happen, but statistics show you’re four times more likely to be off work with a serious illness than die before you retire.

Small business owners without the correct cover should ask themselves what would happen if they suffered an illness or disability and found they could no longer run their business.

Understanding the need for protection, whether this is income protection, critical illness cover, or something else, and examining your options with the help of a financial adviser is the first step to preparing for the sort of events that can happen, but we hope never will.

Contact us to discuss making sure you have the right life cover and protection in place for you and your family.

Clair (1)

Your Accountants for Middleton and North Manchester

Here at Harrison Hincliffe we have many clients in the Middleton area of Manchester. Many of our local Middleton customers are tradesmen, sole traders and self-employed people that need to have their VAT Returns and Tax Returns handled quickly and efficiently. When it comes to your end of year tax returns, our customers understand that it is a complicated affair but we have the skills to deal with it quickly and easily keeping your business in pocket.

We also pay out £50 to every customer that refers another customer to us – after all, referrals are the best form of building your business.

If you own a business in the Middleton area of Manchester why not get in touch with us today or visit our Middleton page to see more about our services that will benefit you and your business.

Modern communication technology mobile phone

New Website Launched

Welcome to our new website, same great accountancy service you have come to expect from us, just with a new website to showcase our accountancy services. We have been working hard with local businesses in the Glossop and Manchester area to provide expert advice on Tax Planning, Bookkeeping, Payroll and other standard accountancy services and our aim is to keep this local service going with our clients to forge long lasting relationships. If you want to take a look around our website, please do, get a feel for all our services and keep this blog saved in your favourites as we will be posting latest news that could affect your business.