We all want to leave something behind for our loved ones. It’s what we get up in the morning and work hard for. But a financial gift unfortunately has a tax implication to it. Research shows that only 45% of people making financial gifts are aware of Inheritance Tax.

 

It is always recommended to write a will, you can get a professional to do this for you for as little as £150. Make sure your money goes to who you want it to.    

 

We are hearing a lot of cases where there is no will. It can cause issues in a couple of situations example if your partner needs to go into a nursing home. What happens to children under the age of 18. Your wife, husband or civil partner having difficulty accessing family funds.

 

The treasury benefits from £5.8 billion income in inheritance tax each year. There are also 10,000 unclaimed estates where a no next of kin has been found worth more than £150,000, plus thousands more amounting to several million pounds. After 30 years that money is gone if a direct descendant cannot be found, it goes straight to the treasury and not to your family.    

  

Live in partners are not next of kin, even if they have been living with you for 20 years or more. Under inheritance tax law they have no rights to anything if a will has not been created.

 

So, what is Inheritance Tax?

Inheritance Tax is a tax on an estate of someone who’s died. An estate is the likes of property, money and possessions. There is a tax-free threshold of £325,000. You normally don’t have to pay inheritance tax if the value of your estate falls below the £325,000 threshold.

 

If you pass all your assets to your wife/husband, civil partner there is no inheritance tax to pay, its only when you give assets away to other people that inheritance tax is payable. Its 40% tax over and above the nil rate band.

 

There is an elected transfer to your spouse, civil partner or charity where both your nil rate band and your partners can be added together to make a maximum tax-free amount of £650,000. The transfer is claimed on the occasion of the 2nd partner dying. It’s not automatic there is a form to complete for this. Don’t assume its Automatic.

 

Your threshold can also increase if your estate is worth more than £325,000 and you give your home away to your children (this includes adopted, foster or stepchildren) or grandchildren. There is up to an extra £150,000 available to be added to your threshold. If the estate is below £325,000, you will still have to report this to HMRC. Probate forms usually must be completed within a certain timeframe of someone dying.    

 

Example

Say your estate is worth £550,000, your tax-free threshold is £325,000. You will get an increase of up to £150,000 if your home is given to direct descendants. The inheritance tax charged will be 40% of £75,000.

 

Who pays the tax bill?

Funds from your estate are used to pay the Inheritance Tax to HMRC.  If there is a will this is done by the person dealing with the estate known as the executor. The beneficiaries are the people who inherit your estate do not normally pay the tax on the things they inherit.

 

7 Year Rule

There is normally no inheritance tax to pay if you gift your home and live for another 7 years, although capital gains tax might come into play.  If you die within 7 years of giving all or part of your property, your home will be treated as a gift and the 7-year rule applies. There are many tax reliefs that can be gained between the 0 years and 7-year rule. Always use an accountant if your estate has multiple sources of income. Don’t miss out on the hidden tax reliefs.

 

Gifts

You do not have to pay any tax on gifts between spouses, you can give them as much as you like during your lifetime.   

 

Anyone is entitled to give gifts of up to £3,000 per annum without any inheritance tax being involved. You can carry over an unused annual exemption to the next financial year, this can only be the next financial year that immediately follows. It’s important to record this in a diary as proof to avoid it being used to reduce your nil rate band.

 

You can also give away the following, in each tax year:

·         Wedding gifts of up to £1,000 to any person (£2,500 to a grandchild, and £5,000 to a child)

·         Normal gifts out of your income, such as Christmas or birthday presents

·         Payments to help another person’s living cost such as an elderly relative

·         Gifts to charities and political parties

You can also give as many gifts of up to £250 per person as you want during the tax year if you have not used another exemption on the same person.

 

Inheritance tax is a complicated tax system that encounters many of the other tax systems within it, always seek professional advice if this is not a straightforward estate.

For those of you watching the Glastonbury Festival over the weekend.     

It was a great boost to our UK economy.   Some £40 million turnover taken over the 5 day event.  Over 200,000 people attended and 3 million people tuned in to see Kylie Minogue, with Stormsy and The Killers pulling in great ratings too.

Donations to Oxfam, Green Peace and Water Aid were the main charities benefiting from the event.

The area I want to draw to your attention was over 200,000 attended the event this year, and over 400 small food and merchandise providers helped make the event a great success.

Whether you love it or hate it,   its provided a great boost to what has been so far quite a difficult 2019 for many retail and service outlets.

Those 400 food and merchandise providers will be providing jobs to thousands of people, creating work for not just the Somerset area but all over the UK, as a lot of the suppliers would have travelled to the area for work.   

There was also 2,000 volunteers mainly representing and supporting the three main charities.

With our continuing confused political market at the moment, with uncertainty with what is happening with Brexit.    A lot of small businesses are struggling to keep a float,  they are finding it harder to gain long term contracts, and being able to gain fixed prices for goods that may be coming from overseas.    The uncertainty affects everything.    The exchange rate of the Pound Sterling to Euro is also still highly volatile.

Please keep supporting your local businesses, they are keeping millions of people employed at the moment, we most definitely need them into 2020.

We never hear about them in the news when they suffer, they just go about their business quietly.       We only hear about the larger companies finding things tough at the moment.

Our economy and stability we all like to take for granted heavily relies on them.

Give your local business whoever they are your full support in 2019 regardless of the political outcome.      Lets keep our economy robust to ride the storm.

#shop local

We’re halfway through the year and 2019 is not slowing down for anybody. There are approximately 5.7 million businesses in the UK, of which 96% are considered small or micro. So, we small businesses are crucial to the UK economy, there is no denying this.

 

Whether you are a start-up and excited for the times ahead, or an establishment renewing your challenges, we all want to be successful with our business. In our latest blog, we talk about tips we think are vital to any business.

 

We all have a vision in mind, of where we’d like to see our business in the future. This vision needs to be translated on paper as your business plan. A business plan is a must for all business owners. This can help outside investors get an insight of your business, for if ever you need funding to grow your business.

 

Business Plan


A business plan should consist of;

·    Summary – What is your purpose, what is your vision?

·    Target market – Who are you likely to sell to

·    Competitors – What is your rivals weakness? Why are you different?

·    Staff – Do you need people to help run your business. What level of skill and pay is required?

·    Suppliers – Who will be your main supplier?

·    Marketing Plan – How will you advertise yourself to the world

·    Operations – Which is the best way to run your business.

·    Finance – How much money do you need? Determine the profitability of the business.

 

Business Structure

As well as a business plan, you will need to have a business structure. Sole trader, partnerships and limited companies all have their own pros and cons. Deciding which structure to choose is not always straightforward. If an asset is owned outright, then you would need to consider retaining personal ownership on incorporation. If you’re not sure which structure model you should go for, then here at Cross Accounting we can give tailored advice to you.

 

Year End

We cannot stress enough the importance of doing your year end as early as possible. Once completed, this will give you peace of mind as you will not have to worry, until next year. It will also give you more time to budget for your tax bill. You will not be in a rush to find the money for the tax bill and not kill your cashflow. Keep all receipts for your expenses, these will all help lower the tax bill. If you buy equipment or tools, mobile phone bills, petrol, these are all deductible. HMRC can conduct random spot checks, so it’s important to keep paperwork, recommended for 6 years.

 

Budgeting

Having budgets in place for your business can help you predict the near future. This allows you to have a spending plan, so you can make sure you have money for the things you need and the things that are important to you. You can see what is eating up your cash and avoid spending on unnecessary fees. Below is an example of a very simple budget.

 

 

Month 1 (Budget)

Month 1 (Actual)

Variance

Month 2 (Budget)

Month 2 (Actual)

Variance

Month 3 (Budget)

Month 3 (Actual)

Variance

Starting Cash

10,000

10,000

0

11,630

11,600

-30

 

 

 

Income

2,500

2,500

0

 

 

 

 

 

 

Total Income

2,600

2,600

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rent

800

800

0

 

 

 

 

 

 

Mobile

50

55

5

 

 

 

 

 

 

Travel

20

50

30

 

 

 

 

 

 

Gas and Electricity

100

95

-5

 

 

 

 

 

 

Total Expense

970

1,000

30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income - Expense

1630

1,600

-30

 

 

 

 

 

 

 

These tips will keep you motivated and more importantly give you an idea of where your finances lay, helping you to quickly identify if there are rainy days ahead.

If you need expert tailored advice, please do get in touch as we are always happy to help.

Welcome to our latest blog. Christmas is around the corner and it’s our favourite time of the year here at Cross Accounting. It’s the time of giving and is there any other way to give your business a boost a grant to get your finance in place.

 

A business or an individual will be given a sum of money for a specific project or purpose. A grant usually covers only partial costs involved. Grants are given depending on your business activity, the amount of jobs that will be created due to this investment or if you are in a specific industry sector. Sometimes grants are linked to geographic areas. Such as those areas in need of an economic transformation.

 

Business Wales can support in finance, take a look at their finance locator to see if grants and other finance your business may be eligible for at https://businesswales.gov.wales/zones/business-finance/funding-search-tool-form

 

You should ensure that you meet the requirements of the scheme before applying for grants and finance. You’ll have to ensure you are ready to put up some of your own money as grants only cover partial costs. You’ll also need to have a detailed description of your project or purpose and a work plan with full costings. We can assist with a budget and full detailed cashflow to secure the finance you need.

 

The application process for grants can sometimes be time consuming and there usually is a lot of competition but on the plus side, most grants don’t have to be paid repaid giving your business that extra boost.

 

If you’re looking for that push to reach some New Years goals, the Development Bank of Wales can support to get the finance your business needs to succeed. Visit https://developmentbank.wales/ to get you ready for the New Year.

 

You will need to have a polished business plan at the ready.  If you would like us to look at your business plan, then you can book in for a free one-hour consultation where we can discuss how to start the New Year strong. Visit our website on www.crossaccountingservice.co.uk or call us on 02920 653 995. We wish you all a Merry Christmas and a prosperous New Year.

There has been a change in the VAT Flat Rate Scheme since April 2017. The government are concerned that some businesses are using the scheme to pay less VAT than appropriate. Read our blog to be reminded of the rules and regulations.

 

The Flat Rate Scheme is designed to simplify your records of sales and purchases. It allows you to apply a fixed flat-rate percentage to your gross turnover to arrive at the VAT due.

 

The scheme is for businesses with a turnover no more than £150,000 a year, excluding VAT. The Flat Rate Scheme is a simpler method of working out the VAT you have to pay to HMRC. The flat rate percentage you use depends on your business sector. The correct sector is the one that most likely describes what your business will be doing in the coming year. Click here to find out your sector percentage https://www.gov.uk/vat-flat-rate-scheme/how-much-you-pay

 

From 1 April 2017 the flat rate changes if you’re a limited cost business. The flat rate percentage will be 16.5% regardless of your sector if you are a limited cost business. You’re a limited cost business if the amount you spend on relevant goods including VAT is either, less than 2% of your VAT flat rate turnover or greater than 2% of your VAT flat rate turnover but less than £1000 per year.

 

You will also get a 1% discount if it is your first year as a VAT registered business. If you’re unsure about your VAT and would like to discuss, then please don’t hesitate to contact us.