Tag Archives: tax

What Everyone Needs to Know about Tax: An Introduction to the UK Tax System Book Review

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What Everyone Needs to Know about Tax- An Introduction to the UK Tax System Book Review

What Everyone Needs to Know about Tax: An Introduction to the UK Tax System By James Hannam immediately caught my eye. Sure I have an interest in finance and the workings of the society that we live in, but I have always been interested in tax. Now tax is a good thing; it is how society runs. No tax and no NHS, education or public services at all. But are we overtaxed? I thought that most people are overtaxed before, after reading this book, even more so. As the book points out there is income tax, employee national insurance (of various classes), employer national insurance, VAT, stamp duty, council tax, inheritance tax. The list just goes on. We are overtaxed and the government tries to make some of these taxes as invisible as possible. Did you know that someone on a salary of £26,000 pays almost £8000 in tax a year? Or that the top 0.05% of the UK population pay over a quarter of all income tax? The top 10% of earners pay over half the income tax, which is about 100 billion a year. Just 5% of the population pay more in income tax than the rest of the population put together. How much do you have to earn to be in this top 5%? Just over £50,000 a year. Another great section goes on about how taxes cause the poverty trap that people on benefits can get caught in when they try to get off benefits, they can essentially get taxed at 90%. More than the richest in society. Depressing? Yes. Fair? No. The book also has a great section on pensions versus ISAs. I have always been wary of pensions and the book helped clarify my thoughts.The book is full of great facts like that by a man who really knows his stuff. The book is chock full of essential information and interesting fact. I can highly recommend it to anyone who wants to get a grip of the complex UK tax system.Due to be published by Wiley, 23rd March 2017
£19.99, Paperback and e-bookISBN: 9781119375784“You pay a lot of tax. Of course, you know that. But I bet you don’t know just how much you pay, or all the ways the government has to extract the cash from you.” – James HannamIn his new book, What Everyone Needs to Know about Tax, James Hannam takes look at the UK tax system and provides non-specialist readers with an easy-to-understand explanation of tax and tax policy to show them just how much they pay, how the money is collected and how tax affects ordinary people every day.With no accounting or legal knowledge required, it contains practical case studies to illustrate how tax functions in the real world, for example: how the VAT on a plumber’s bill all adds up; why fraudsters made a movie to throw HMRC off their scent; how a wealthy couple can pay minimal tax on a six-figure income; and the way tracing the money you paid for your iPad sheds light why the EU is demanding Apple pay billions extra in tax.Written in a conversational style, What Everyone Needs to Know about Tax gives readers a real-world look at how tax works. In it they will:

  • Learn about the many ways that the tax system separates us from our money
  • Discover how Brexit could change the way we pay taxes
  • Understand how changing tax policy affects people’s everyday lives
  • See through the rhetoric from politicians and the media surrounding tax controversies

The system’s underlying logic is illustrated through three ‘golden rules’ that explain many of the UK tax regime’s oddities:

  • Lots of small taxes together add up to make big tax bills – “The point of all these taxes is to spread the pain so we notice it less.”
  • No matter what name is on the bill, all taxes are ultimately suffered by human beings – taxes levied on manufacturers are passed on to the consumer through a higher price for the product
  • Taxes are kept as invisible as possible – “Since we all hate paying taxes, the government has perfected the art of ensuring that we rarely have to hand over the money ourselves. Most taxes are paid by businesses on our behalf.”

With tax, there are no easy answers. No one enjoys paying them, but without them, the government would shut down.Whether readers are self-employed, have a general interest in the way the UK tax system works, are a finance or tax professional, or students wanting to understand more about taxation in a break from traditionally dry text books, What Everyone Needs to Know about Tax gives them the background and foundational knowledge they need to be a well-informed taxpayer.What Everyone Needs to Know about Tax will be published on 23rd March 2017 and will be available wherever books and ebooks are sold.
JAMES HANNAM, PHD, has spent twenty years advising clients on every aspect of the UK tax regime while working for firms including EY, Freshfields, and KPMG.

The Business of Books: The Taxman Cometh… Or Does He?

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the-business-of-books-interviewswithjanecableJane Cable on taxing income from writing

The first royalty cheque, the first receipts from Amazon – those are exciting moments for any writer. But in the slightly bewildered ‘wow – someone’s paid to read my book’ moment, whether you need to pay tax on the income is the furthest thing from your mind.

First let me say that taxation – any form of taxation – is a minefield. The volume of legislation is massive and while HMRC guidance is helpful and now provided in reasonably understandable lay terms, it is still easy to fall foul of the rules – or at very least not take full advantage of them. If you even think you might need professional advice then talk to an accountant – preferably a qualified one. Most offer free initial meetings and if you can’t find one by recommendation then the ICAEW’s Business Advice Service is a good place to start: http://www.businessadviceservice.com/

Assuming you haven’t set up a company for your writing business then your earnings from the business of books will be classed as self employment. This means that you won’t be taxed on your income, but on your profit. In broad terms, many costs which relate solely to your writing will be allowable for tax, including book production, marketing, attending conferences and agents’ fees. The list is not exhaustive but a good first question to ask yourself is ‘did I do that only for my writing business and was it necessary to do it?’ If the answer is yes, then you are more than half way there but the reality is that a good accountant will be able to maximise what you claim because they will know the laws inside out.

For the tax year just started, things will be quite a lot simpler for the majority of writers who have self employed earnings of under £1,000 per annum. Here I am talking about gross income, before any expenses. This is because the government has introduced a new limit below which HMRC doesn’t even need to know about it. The exception to this is if you already complete a tax return but even then the rules are relatively simple and you can read more about them here: https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income

The Business of Books- The Taxman Cometh… Or Does He?

Of course another issue is whether you are trading or not with your writing, or if it’s just a hobby. Working out when a writer crosses the line is a matter of judgment – and case law – and everyone’s circumstances will be different. The key ingredient is whether you are doing it with a view to making a profit (one day, if not now) but once you actually start selling books, then you probably are.

There is a good chance you might be trading before that day, but this is where the waters become unbelievable muddy. Why would it matter, you may ask yourself, because if I don’t have any income then I’m not making taxable profits. The answer is that you might be making a taxable loss which can be used to reduce the tax on your other income. And this is where professional advice is essential because it’s also where HMRC can become mighty interested and in 2015 they won a landmark case where a tax tribunal decided that someone who had a full time job but poured money into a hobby they loved was not trading so couldn’t claim tax relief. Even though they made a little income from it. Even though they had a professionally designed website. It struck me at the time that the circumstances were pretty similar to most authors when they set out in their writing careers.

The new £1,000 tax free allowance will undoubtedly make things easier for those setting up many businesses, including writing, which can only be a good thing. But remember it’s only half the story. And never, ever, mess with the Inland Revenue!

Please note that this article only points out general rules and should not be used as a substitute for professional advice.

 

 

The Prime Minister Who Dodged Tax

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primeministerwho dodgedtaxI know what you are thinking. It’s Dave, right? Well, no. There is no evidence Prime Minster David Cameron has avoided tax. Not so one of his predecessors. In fact, one of the most well thought of Prime Ministers earned a fortune and used his power to dodge tax.

Winston Churchill made a substantial amount of money but he conspired with the chairman of the Inland Revenue to cut his tax bill. The Inland Revenue have two thick files on Churchill, but no one found out about his tax dodging when Churchill was alive. In fact, the only newspaper I have read about it in is the amazing Sunday Times. In an article written by David Lough, author of No More Champagne: Churchill And His Money.

You only have to read Churchill’s archive to find out that Churchill was not as patriotic as one would think. He was happy to pay tax for the first 40 years of his life, even supporting Lloyd George’s introduction of a super-tax. But as soon as he was rich enough to be affected by it he seemed to change his mind.

When Churchill was Chancellor of the Exchequer in 1924 he owed £400,000 in todays money but could not pay. He personally called on the Inland Revenue Chairman Richard Hopkins who sorted the issue out for him. Hopkins went off and found out that if Churchill retired as an author on the last day of the tax year, fees paid the following year could be treated as capital receipts not income. Capital receipts were not taxed. Churchill did so.

This was not the last time he called Hopkins to his office and Churchill resumed writing. He dodged much more tax and the Inland Revenue barely put up a fight. In 1945 he made £6 million from selling film rights to his books, all of which went untaxed. The IRS would not have any of it however, and Churchill’s executors had to settle with the American tax authorities after his death.

What do you think? Did you know that Churchill dodged tax?

An Independent Scotland – The Implications For Savers And Investors

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·         Cost of financial services will increase, leading to poorer returns for all

·         Diverging tax and regulatory systems will create complexity for all

·         Better state pensions for Scots

·         Potential investment and savings arbitrage opportunities in the longer term

Following the publication of the Scottish Nationalist manifesto for separation between England and Scotland yesterday http://www.scotreferendum.com/reports/scotlands-future-your-guide-to-an-independent-scotland/ , here are a few thoughts on what it might mean for savers and investors.

Duplicate institutions, duplicate systems, more complexity

Tom McPhail, Head of PeScottish flag, scottish independencensions Research ‘As well as the obvious costs of all these duplicate institutions, there is the un-quantified and potentially far greater cost of having to do everything twice. Every bank, insurance company, financial adviser and investment manager North and South of the border will have to invest huge sums of money in running duplicate systems and training their employees to deal with two different regimes; to take just one simple example, if a customer wants to know what rate of pension tax relief they are entitled to, the answer will depend on whether they live in Carlisle or up the road in Dumfries.’

‘This all has a cost to investors North and South of the border; in simple terms a Yes vote would mean poorer returns in the future on ISAs and Pensions due to higher administration costs.’

An independent Scotland would look to create its own financial institutions. It is hard to say exactly what they would all cost; they would be smaller than their English counterparts but equally they would suffer many of the same fixed costs. Here are some of the duplicates the manifesto looks to create, together with the current cost of their UK versions:

·         Financial Conduct Authority £432 million

·         Pensions Regulator £49 million

·         NEST pension scheme £240 million

·         Pension Protection Fund £35 million

Better state pensions for Scots

Scots are being promised a state pension £1.10 higher than the planned new single tier state pension from 2016. Based on current average pension benefits and costs, we estimate this would cost an additional £52 million a year to deliver.

It is also being proposed that the planned increase to the state pension age to 67 could be delayed North of the border. Under UK legislation it is planned to increase from 66 to 67 between 2026 and 2028. Based on previous research from the NIESR and the PPI, we estimate that this could cost the new Scottish government £1 billion.

Potential investment and savings arbitrage opportunities in the longer term

Danny Cox, Head of Financial Planning ‘For now, investors should carry on making as much use of their tax exempt investment allowances as they can; it has been confirmed that existing arrangements would be honoured North of the border in the future. A change to tax rules in the future could open up the possibility for investors to capitalise on preferential investment terms in one jurisdiction compared to the other, or perhaps seeing people move to benefit from preferential inheritance tax rules.’

A vote for separation might unsettle the markets but we don’t expect to see any significant volatility

A fully independent Scottish government would have complete freedom to vary income, capital gains and corporation tax rates. In the longer term we could see companies relocating North or South, and people changing residence to take advantage of preferential personal taxation opportunities. Estate agents, tax advisers and lawyers should all prosper in this new regime.

Free Shipping From US When Online Shopping? Yes Please | Shopping News

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summer clothesOnline shopping is great, in fact the only bad thing about it- apart from the destruction to your bank account- is the absurd rise in postage costs. So when we came across the news that American Express are offering card holders free postage from the US we got quite excited. Sorry bank account, it is too good to resist.

Throughout June, American Express Cardmembers in the U.K. can enjoy free shipping and a hassle-free experience when shopping online at top U.S. stores and brands with a simple promotional code.

American Express has partnered with Borderfree to launch the U.S. Summer Sales campaign, which runs until 30 June, and is valid when using any American Express Card on orders of more than £70. British Cardmembers can take advantage of the offer by entering the promotional code AMEXBF when paying with their American Express Card.

The campaign includes a wide range of top U.S. brands, such as Bloomingdales, Neiman Marcus and Aeropostale. A full list of merchants can be found at the campaign website www.port51.com/amex .

In addition to free shipping, Cardmembers can browse online in local currencies, and see all taxes and duties up front at checkout. Shoppers will receive their merchandise within 10 business days and incur no additional fees upon receipt.

The promotion is valid when shopping online with an American Express Card, and when shipping to international destinations outside of the U.S.

Last minute ISA Ideas for 2012/13 Tax year

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·         ISA ideas for different types of investors

·         14% of all HL ISAs opened in the last week of the tax year

·         HL Opening Times

 

Adrian Lowcock, senior investment manager at Hargreaves Lansdown offers his ISA ideas as this year’s deadline approaches:

 

“In the last two tax years 14% of all new ISAs opened on the Hargreaves Lansdown Vantage platform were opened in the last week.  Make sure you take out your ISA as once the tax year ends you have lost that allowance. To take out an ISA all you need is your national insurance number, debit card and cleared funds in the bank.”

 

Income investor

 

Invesco Perpetual Distribution – This fund aims to provide a regular stable income this fund invests in a mix of bonds and income-producing equities. Approximately two-thirds is invested in corporate bonds with the remainder invested in equities. Income is its primary aim and it makes payments to investors monthly.

 

Defensive investor

 

Newton Real Return – This fund is for investors who may need access to some of their capital in the medium term (but still in at least 5 years’ time). It therefore tries to offer some sheltering of capital and aims for more modest growth. The manager invests in a variety of assets and uses sophisticated techniques to try to profit from assets which fall in value.

 

Medium Risk investor

 

Troy Trojan – This fund is defensively managed and provides the potential to achieve a reasonable level of return over the medium term with a little less volatility than the very long-term, more aggressive portfolios.

 

Long-Term investor

 

CF JM Finn Global Opportunities – This suggestion is for investors with a long time horizon.  Therefore the focus is on more risky areas with greater potential to build wealth over the long term.

 

Junior ISA / Investing for Children

 

Lindsell Train Global Equity – The managers invest in global equities and have a long term buy and hold approach. This compliments those investing for children who often have very long-term goals in mind.

 

 

Hargreaves Lansdown end of tax year opening hours

 

Monday 25 – Thursday 28 March                               8am – 7pm

Easter Bank Holiday weekend every day               9am – 6pm

Tuesday 2 April                                                                 8am – 8pm

Wednesday 3 April                                                          8am – 8pm

Thursday 4 April                                                                8am – 8pm

Friday 5 April                                                                      8am – Midnight

 

ISA deadlines

 

Stocks & Shares ISA

 

Online                   Friday 5th April – 23:45                                    www.hl.co.uk/ISA

Telephone          Friday 5th April – 23:55                                    0117 900 9000

Postal                    Friday 5th April

 

Bed & ISA

 

Funds on Vantage                           Wednesday 3rd April – 17:00

Shares on Vantage                          Friday 5th April – 12:00

Funds/ shares certificated           Wednesday 3rd April

ISA Contribution limits

 

                                  2012/13                                2013/14

 

Stocks and Shares ISA                    £11,280                                 £11,520

Junior ISA                                            £3,600                                   £3,720

Tax year end: last minute pension planning tips

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  • Investors are urged not to forget the ‘forgotten’ allowances
  • Falling annual allowance emphasises the importance of making hay while the sun shines
  • 50% tax relief is only available until 5th April
  • Bed and Sipp
Use your earnings related pension contribution allowance. For the past three years, we have seen a steady erosion in pension contribution allowances, with both the annual and lifetime allowances being cut. Both the Liberal Democrats and Labour have threatened to go further and limit the rates of tax relief available on pension contributions. If you have spare capital which you are looking to invest for your retirement, then it makes sense to get on and do it before 6 April.
Tom McPhail, Head of Pensions Research “Pensions are sometimes the forgotten allowance at this time of year when attention tends to be focused on ISAs, but with retirement saving tax breaks coming under increasing pressure from the Chancellor, wise investors will make hay while the sun shines. If you don’t use the allowances now, you may not get the chance next year.”
Non-earner’s pensions
It makes sense to share household retirement savings to take full advantage of the tax free personal allowance in retirement. Non-earners can contribute up to £3,600 a year to a pension and enjoy tax relief on their contributions. With personal allowances set to rise to £9,440 in 2013/14, a couple in retirement could enjoy a household income of nearly £19,000 a year without having to pay any tax – but only if they have shared their pension saving equally between them.
It is also possible to make pension contributions for your children – an effective way to give them a head start on their own retirement saving, as well as reducing a potential inheritance tax bill.
Bed and Sipp
Use existing investments to make a pension contribution. Even if you don’t have cash available to invest in a pension, you can potentially use other investments.
For example: Peter has some shares which he bought 10 years ago for £10,000. Today they are worth £15,000. He sells the shares, realising a gain of £5,000, which falls within his Capital Gains Tax allowance of £10,600. He invests the proceeds in his pension and immediately repurchases the share portfolio within his Sipp. As well as having now sheltered his investment within a pension for tax purposes, he also benefits from immediate tax relief of £3,750 which is added to his pension. If he is a higher rate taxpayer Peter can claim a further £3,750 after the end of the tax year.
Take advantage of the 50% tax rate.
For the (un)lucky few who pay 50% income tax, it makes sense to invest in a pension before the end of the tax year. Any contributions made from 6 April onwards will only be eligible for relief at 45%. If using carry forward as well, this could mean up to an additional £10,000 in tax relief.
Carry forward unused relief to boost contributions. If you have the capital to spare, then provided you also have the earnings to justify the contribution, it is possible to carry forward unused pension tax relief from up to 3 years ago. This means it is possible to make a pension contribution of up to £200,000, which for a 50% tax payer could then result in up to £100,000 of tax relief.
Plan ahead for flexible drawdown.
You’re not allowed to make any pension contributions in the same tax year in which you start flexible drawdown. So anyone planning on using flexible drawdown may want to top up their pension with any final contributions before 6th April – any contributions after that date could mean having to wait up to another 12 months before getting full access to their pension funds.

Forget Starbucks, enjoy unlimited coffee at Hush Holborn

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With reports of a tax scandal at Starbucks, forget drinking coffee that exploits the UK taxpayer and enjoy unlimited, good quality coffee at Hush Holborn.

From today, enjoy quality Italian Roast coffee, free wi-fi and complimentary newspapers, all in the relaxed and intimate surroundings of Hush Holborn. And to show just how dedicated the team at Hush are to ensuring relaxation and comfort, slippers are also available on request.

If you’re feeling peckish, there is also a wide selection of croissants and cooked breakfasts to ensure you start the day on the right foot.

Find Hush at:
95-97 High Holborn
London
WC1V 6LF

www.hush.co.uk