Taxation

TAX IS A COMPLEX AREA

There are three main taxes on income and assets that might affect you:-

Income Tax
Capital Gains Tax
Inheritance Tax

INCOME TAX

This is the most frequently encountered tax, and many people pay too much.

Quite simply, we can help pinpoint ways to save tax, and ensure that your financial affairs are run in the most tax efficient manner by using all available allowances.

CAPITAL GAINS TAX (CGT)

This is a tax on capital gains made on disposal of assets.

You have an annual exemption and will only face an actual bill if your gains on disposals of chargeable assets in any one year exceed this.

For 2007/08 the exemption is £9,200 per person.

If you do face a Capital Gain in excess of your annual exemption then, in order to calculate your tax, this gain is added to your income for the year and taxed accordingly. Should the gain take you into a higher tax bracket then you will pay some tax at this higher rate, currently 40%.

There are a number of strategies that can be used to minimise or defer CGT.

INHERITANCE TAX

We are providing more and more advice to clients in ways of minimising the problem of Inheritance Tax on families.

When someone, dies their estate, which includes their home, vehicles, money in the bank, investments, furniture, etc. etc., is valued. The Inheritance Tax rules for 2007/08 say that the first £300,000 of this is taxed at zero percent (the nil rate band). Everything over £300,000 is taxed at 40%, unless Agricultural Property Relief, Business Property Relief or Charity Donation Relief apply.

There are numerous strategies to reduce this problem and almost certainly one or more will be suitable for you and your family.

The Inland Revenue collect huge amounts of Inheritance Tax because people and families are reluctant to discuss the issue. By the same token, if you discuss the issue with us we are likely to be able to save you and your family significant amounts of money.

Principal Personal Tax Rates and Allowances 2006/2007

Income Tax Rates - Taxable Income		Income Tax Allowances
Band	Rate %	Personal allowance - under 65	£ 5,035
0 - 2150	10	65 - 74 *	£ 7,280
2151 - 33300	22*	75 & over *	£ 7,420
Over 33300	40**	*Age allowance income limit	£20,100

* Except dividends 10% and savings income 20%		(Allowance reduces by £1 for every £2 over the limit)
** Except dividends 32.5%

Inheritance Tax Threshold	£285,000	Individual Savings Account
IHT limit will rise to £325,000 over 4 years		Mini - stocks, shares	£4,000
Capital Gains Tax Annual Exemption	£8,800	Mini - cash	£3,000
		Maxi	£7,000

National Insurance
Class 1 - employed, contracted in - Employee contributions
Weekly earnings
Up to £97	Nil
£97.01 - £645	11%
over £645	1% on earnings over £645

Class 2 - self employed
flat rate per week £2.10 small earnings exemption p.a. £4,465

Class 3 - voluntary
flat rate per week £7.55

Class 4 - self employed
8% on profits between £5,035 and £33,540 plus 1% on profits over £33,540.

Principal Personal Tax Rates and Allowances 2007/2008

Income Tax Rates - Taxable Income		Income Tax Allowances
Band	Rate %	Personal allowance - under 65	£ 5,225
0 - 2230	10	65 - 74 *	£ 7,550
2231 - 34600	22*	75 & over *	£ 7,690
Over 34600	40**	*Age allowance income limit	£20,900

* Except dividends 10% and savings income 20%		(Allowance reduces by £1 for every £2 over the limit)
** Except dividends 32.5%

Inheritance Tax Threshold	£300,000	Individual Savings Account
IHT limit will rise to £325,000 over 4 years		Mini - stocks, shares	£4,000
Capital Gains Tax Annual Exemption	£9,200	Mini - cash	£3,000
		Maxi	£7,000

National Insurance
Class 1 - employed, contracted in - Employee contributions
Weekly earnings
Up to £100	Nil
£100.01 - £670	11%
over £670	£62.70 plus 1% on earnings over £670

Class 2 - self employed
flat rate per week £2.50 small earnings exemption p.a. £4,635

Class 3 - voluntary
flat rate per week £7.80

Class 4 - self employed
8% on profits between £5,225 and £34,840 plus 1% on profits over £34,840.

The following is designed to provide a guide to some of the changes the Chancellor has announced for future years. It should be borne in mind that a these rates may be changed at any time ahead of their planned introduction and should be used as an indication of intent only.

Individual Savings Accounts (ISAs)

Lifetime extended from 2009 to "permanent".

Changes from 6 April 2008:
The mini/maxi distinction within ISAs will be removed.
Individuals will be able to hold these components with either the same or different providers.
The maximum amount which can be invested into a cash ISA will be increased to £3,600.
The maximum amount which can be invested into a stocks and shares ISA will be £7,200, subject to an overall limit of £7,200
placed into both ISAs in a tax year.

Additional changes are anticipated:
Cash components of ISAs from previous years will be able to be transferred into the stocks and shares component without affecting their annual investment limit.
Personal Equity Plans will be brought within the ISA wrapper.
Child Trust Fund accounts will be able to rollover into ISAs when they start to mature from 2020 onwards.

Personal taxation rates

The 2008/9 tax year promises very significant change in the tax system with alignment of tax and National Insurance Bands to be achieved over a period.
The 10% starting rate band will be abolished.
The basic rate of tax (currently 22%) will be reduced to 20%.
Higher rate will continue at 40%.

National Insurance

From 2008/9 there will be substantial increases in the current ceilings with alignment with personal taxation thresholds to be achieved in due course.

Inheritance Tax threshold

2008/2009 £312,000
2009/2010 £325,000

John K. Miln & Company is the trading name of John K. Miln & Co. Ltd. (JKML) registered in England Number 3350120. JKML is a wholly owned subsidiary of Midas Capital Plc (formerly iimia MitonOptimal Plc) (registered in England Number 05160210). www.iimia.co.uk Both companies have their registered office at 23 Cathedral Yard, Exeter, EX1 1EH. JKML is authorised and regulated by the Financial Services Authority (FSA) under firm reference number 126152. This can be checked via the FSA website (click here www.fsa.gov.uk/register).

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