We recommend you undertake an annual review of your financial affairs to check if you are paying more tax than you need to and whether the structures you set up in the past are still appropriate.
Under Self-Assessment, your personal return for 2015/16 will have already been submitted, and the tax liability settled, by 31 January 2017. Between now and the end of the tax year (5 April 2017) is a good time to assess whether you are as well defended against the taxman as you can be.
Of course, the precise circumstances of each individual have to be taken into account in deciding whether any particular plan is suitable or advantageous – but these suggestions may give you some ideas.
We'll be happy to discuss them with you in more detail.
The Government is in a sticky position; tax revenues are not rising as expected and Brexit uncertainty hangs over the country like a cloud. In 2015 the Chancellor limited the scope to raise mainstream taxes by writing into law his pre-election promise not to raise the rates of Income Tax, VAT or employee and employer National Insurance.
Tax revenue therefore must be collected in less obvious and more cost-efficient ways. Automating the tax system so that more tax information is submitted digitally, and penalties issued by a computer, is an efficiency goal. Over the next five years the Government wants to “make tax digital”, which will affect almost every business and landlord.
Penalties for late submission of tax returns, or late payment of tax, are a sneaky way of raising more income without increasing tax rates. If you submit a return late an automatic penalty can apply, even when there is no tax to pay in respect of that return. HMRC has invented a number of new taxes and returns recently and each new return carries an additional risk of a late filing penalty.
Another way to increase taxes by stealth is to reduce existing tax reliefs. Individual landlords of residential properties will suffer a 25% restriction in the amount of interest they can set against their rental income from April 2017. From 6 April 2020 all the interest they pay will be blocked as a tax deduction& replaced by a tax credit only available at the basic rate, so landlords need to review the structure of their property businesses and financing with some urgency.
Further changes in April 2017 will see long term UK residents, who claim non-domicile status, lose the ability to shelter worldwide income from UK taxes. Individuals who have flexi-accessed their money purchase pension pots since April 2015, may be caught out by a change to the pension annual allowance, designed to prevent pension recycling.
The tax reliefs available for specific categories of expenditure have to be claimed within a tight window, such as for the costs of research and development, or investing in the small companies.
Our guide explains these tax changes in more detail. If you are likely to be affected, you may need to review the form in which you receive income, and the structures which you use to hold assets.