GET IN TOUCH WITH YOUR DEDICATED CONSULTANT
Fill in the form below and one of our team members will be in touch with you to arrange a commitment free consultation. You'll be able to ask us questions relevant to your situation and we'll help you discover new ways to generate wealth and manage your finances.
SCURFIELD & ASSOCIATES | 17 College Road, Cheshunt, EN8 9LS
FREQUENTLY ASKED QUESTIONS
TAX PLANNING - What is Income Tax?
TAX PLANNING -What is Capital Gains Tax?
TAX PLANNING -What is an ISA?
An Individual Savings Account (ISA) is the most common and simplest account for tax-free saving and investing. Money held in ISAs is free from Income Tax and Capital Gains Tax. However, to offset these generous rules there is a limit to how much you can pay into an ISA each tax year. The annual ISA allowance is currently £20,000.
TAX PLANNING -What is the dividend allowance?
Everybody receives an annual allowance for dividend income received from shares held outside an ISA. The dividend allowance is currently £2,000. Any dividend income above this amount will be taxed at 7.5% for basic-rate taxpayers, 32.5% for higher-rate taxpayers and 38.1% for additional-rate taxpayers.
TAX PLANNING -What is a Venture Capital Trust?
Venture Capital Trusts (VCTs) are ‘pooled’ funds that invest in smaller and younger companies. VCTs are high risk as these companies can struggle and fail, and their shares can also be difficult to sell. To offset these risks, VCTs offer tax benefits. These include a 30% Income Tax rebate on investments up to £200,000 each tax year, but only if you have paid the amount of tax being rebated and stay invested in the VCT for a minimum of five years.
TAX PLANNING -What is the Enterprise Investment Scheme?
The Enterprise Investment Scheme (EIS) allows direct investment into small, unquoted companies (those that are not listed on the London Stock Exchange). Similarly to VCTs, EIS offers a 30% Income Tax rebate on investments up to £1 million. However, you must have paid the amount of tax being rebated and hold the shares for at least three years.
TAX PLANNING -What is the Seed Enterprise Investment Scheme?
The Seed Enterprise Investment Scheme (SEIS) is similar to EIS, and encourages direct investment into start-ups. However, the tax benefits are more generous than EIS as these companies are younger and may not have fully developed a product or service yet. You receive a 50% Income Tax rebate on investments up to £100,000 as long as you have paid the amount of tax being rebated and stay invested for at least three years.
ESTATE PLANNING - What is Inheritance Tax?
ESTATE PLANNING -How much is the rate of Inheritance Tax?
Inheritance Tax is usually charged at 40%. The charge drops to 36% if you give at least 10% of your estate away to charity when you die.
ESTATE PLANNING -What is estate planning?
Estate planning involves planning how to pass on your assets to the next generation in the most effective way. A significant part of this will usually be minimising Inheritance Tax. This could be achieved by using allowances, making gifts, setting up life insurance or simply spending your money.
ESTATE PLANNING -How much is the nil rate band?
The nil rate band is your personal allowance that is free from Inheritance Tax. It is currently £325,000 per person. Any unused allowance can be transferred between married couples and civil partners when one spouse dies.
ESTATE PLANNING -What is the residence nil rate band?
ESTATE PLANNING -How can you make financial gifts?
ESTATE PLANNING -What is a potentially exempt transfer?
Gifts that are not immediately tax-free are considered potentially exempt. If you die within seven years of making a potentially exempt gift, it counts as part of your estate and may be subject to Inheritance Tax.
ESTATE PLANNING -What is taper relief?
If you made a potentially exempt gift that was bigger than the nil rate band, you could benefit from taper relief (also known as the seven year rule). This gradually reduces the amount of Inheritance Tax that is chargeable over the seven years after you made the gift.
ESTATE PLANNING -What are the tax rules and allowances for making gifts?
ESTATE PLANNING -How can passing on a pension reduce Inheritance Tax?
Any money left in your pension when you die does not form part of your estate, meaning it isn’t taken into account when your Inheritance Tax bill is calculated. Taking income from other sources in your retirement means you might be able to reduce the size of your estate (and future Inheritance Tax bill) while passing on your pension to your beneficiaries tax-free.
ESTATE PLANNING -What is a trust?
A trust is similar to a treasure chest. It is a locked box holding money or other contents for somebody else’s benefit. A trust is set up by a settlor and is managed by the trustees, who distribute the contents of the trust to beneficiaries.
RETIREMENT - What is the difference between a defined contribution and defined benefit (or final salary) pension?
RETIREMENT -How much can you pay into a pension?
RETIREMENT -What is the tapered annual allowance?
For people with income of more than £150,000, the £40,000 annual allowance is cut down. It is reduced by £1 for every £2 of income earned above £150,000 down to a minimum of £10,000 for those with an income of more than £210,000.
RETIREMENT -What is pension carry forward?
Pension carry forward lets you pay more than your annual allowance into your pension by ‘carrying forward’ unused allowance from the previous three tax years (as long as you have sufficient earnings). You still will receive tax relief on the payments and it can be useful for those affected by the tapered allowance.
RETIREMENT -What is the lifetime allowance and how much is the tax charge for breaching it?
The lifetime allowance is the amount you can hold in your pension over your lifetime. The allowance is currently at £1.055 million. Your pension is assessed against the allowance when you take benefits, die or reach age 75. Any excess is taxed at 25% on top of Income Tax if taken as income, or 55% if taken as a lump sum.
RETIREMENT -What are the tax benefits of pensions?
Investments in pensions grow free from Income Tax and Capital Gains Tax. Pension contributions are paid from gross (pre-tax) income. Where tax has already been paid on a pension contribution it is refunded. The taxman will automatically top up pension contributions up to your annual allowance by 20% to cover basic rate tax. Higher or additional-rate tax payers can then claim back any higher or additional-rate tax that they have paid on contributions through their tax return.
RETIREMENT -What are your options for taking an income from your pensions?
You can normally take up to 25% of your pension tax-free – either as a single lump sum or as a series of smaller withdrawals. You can also take a regular income from your pension by making lump sum withdrawals, buying an annuity or setting up income drawdown.
RETIREMENT -What happens to a pension when you die?
A defined benefit (final salary) pension will usually stop paying an income when you or, if your pension income passes onto a dependant, your dependant dies. A defined contribution pension can be passed on to your beneficiaries. If you die before the age of 75 the pension will be passed on tax-free. If you die after 75, your beneficiaries will pay their usual rate of Income Tax on any money taken from the pension.
RETIREMENT -Do you pay Inheritance Tax on pensions?
Pensions do not usually form part of your estate so they are not charged with Inheritance Tax when you die. However, any income or lump sum death benefits paid from your pension may form part of your estate and therefore be liable to tax.