June 2023

The deadline for reporting shares, securities and share options issued to employees for 2022/23 is 6 July 2023. This is the same as the deadline for reporting expenses and benefits provided to employees on form P11d for 2022/23.

Employers must submit their employment related securities annual returns online and attach the appropriate spreadsheet template if they have something to report. HMRC provide templates on their website that may be downloaded in order that the information may be entered and uploaded. Note that there are different templates for each of the four tax-advantaged employee share schemes – Company Share Option Plan (CSOP), Enterprise Management Incentives (EMI), Save and You Earn (SAYE) share options and Share Incentive Plans (SIP). In addition, spreadsheet 42 should be used to report any other employment-related securities (non-tax-advantaged) issued to employees and directors.

Please note that you are required to submit a nil return where there have been no reportable events and this will remain the case until HMRC are notified that the ‘scheme’ is closed.

We can, of course, assist you with the completion of the reporting obligations so please contact us if you believe you need to submit an employment related securities annual return for 2022/23.

The table below sets out the HMRC advisory fuel rates that apply from 1 June 2023. These are published quarterly these days due to the volatility in petrol and diesel prices in recent years. Where the employer provides an employee with a company car there may be an additional benefit in kind on the provision of fuel for private journeys which needs to be reported on form P11d.

This additional benefit is based on a notional list price for the vehicle of £25,300 for 2022/23 which applies irrespective of the original list price of the vehicle normally used to compute the taxable benefit. That figure is then multiplied by the CO2/km percentage for that vehicle.

For example, the Range Rover Evoke S AWD Automatic MHEV has a current list price of £41,245. The CO2 emissions data on the Land Rover website is 168g/km for this vehicle which means that the fuel benefit is 37% multiplied by £25,300 = £9,361.

For a higher rate taxpayer that would result in a tax liability of £3,744. That would be an awful lot of fuel! In addition, the employer would have a Class 1A national insurance liability of £1,360 (14.53% for 2022/23).

Provided private fuel is fully reimbursed, the fuel benefit does not apply. This is an all or nothing benefit and unless there is full reimbursement there is an additional taxable benefit. The deadline for reimbursing private fuel is 6 July 2023 for the 2022/23 tax year.

Like with many other taxes, inheritance tax (IHT) allowances have been frozen until 2028.  This actually means that we are paying more IHT. Data from HMRC has revealed that IHT collected between April 2022 and February 2023 totalled £6.4bn, which is £900m higher than the same period last year.

The rise is mainly due to the frozen tax-free allowance for IHT (also known as the nil-rate band) – coupled with the rocketing rise of house prices.

It is estimated that 10,000 more families could end up paying IHT, while the Treasury could receive nearly £8 billion a year over the next few years.

How can you reduce your inheritance tax bill?

When you die, your estate is valued, and this value is subject to IHT. Generally, any excess over the nil-rate band (currently £325,000) is chargeable to inheritance tax at 40%. But, there are ways to reduce your inheritance tax bill:

Make gifts during your lifetime.

You can gift up to a total of £3,000 to loved ones each year without it becoming liable for IHT. If you did not use the allowance last year, you can combine it with your annual allowance for the following year and pass on £6,000 IHT free (but only for one tax year).

You can gift up to £5,000 to your children for a wedding free of IHT in each tax year; grandchildren can have up to £2,500.

If you die within seven years of making a larger gift, IHT may be payable. If it is, the amount of tax depends on how many years ago the gift was made. For example, if you die three to four years after gifting, the IHT rate on the gift lowers to 32%. If the gift was made six to seven years prior to your death, it falls to 8%.

Gifts to charity are IHT free and if you donate at least 10% of your estate to charity in your Will, you will get a 4% discount on the IHT rate for the rest of your estate, lowering it from 40% to 36%.

Pensions

Your pension, depending on the type of pension plan you hold, if it is kept invested, could be used to pass on wealth IHT free as it is usually excluded from your estate. Nominate beneficiaries for your pension, should you pass away before you receive it, and IHT should not normally be payable.

If you die after the age of 75, your beneficiaries will need to pay income tax on the money they take out.

Investments

Making the right kind of investments might help you avoid IHT. An Individual Savings Account (ISA) cannot help. ISAs are exempt from income tax and capital gains tax, but they form part of your estate for IHT.

There could be other solutions such as with Alternative Investment Market (AIM) holdings as these can qualify for IHT relief if held for more than two years at the date of death.

The companies listed on AIM tend to be smaller and more highly speculative in nature, in part due to AIM’s relaxed regulations and listing requirements. However, investing in AIM companies tend to be high risk investments so you should seek independent financial advice before considering investing in this market, remembering that, when investing, your capital is at risk, and you could lose some or all of your investment.

Setting up a trust

Setting up a trust to hold your assets could keep them out of your estate and out of the taxman’s reach – but the position has become more complicated in recent years, and it might not always be suitable. Trusts may still have their uses, e.g., the trustees can control the assets, rather than them being passed on to beneficiaries right away. This might help if your beneficiaries are not known for financial prudence or are young children. You should seek professional advice before establishing a trust.

Take out an insurance policy.

You can take out a whole of life insurance policy large enough to mitigate some or all of your IHT liability. You may need to regularly review the level of cover if your estate increases in value as the original sum assured may not cover the whole IHT liability. Alternatively, you may choose a plan where the cover increases with inflation. Whichever option is chosen, have it written in trust. Your beneficiaries will not struggle with a huge IHT bill when you die, but while you are alive, you will be paying monthly premiums.

Seek professional advice

Expert advice can be vital to help work out the total value of an estate, calculate how much IHT is likely to be charged, and understand what options are available to manage that tax bill. Advice on writing up a Will to be tax efficient is also essential.

Please talk to us about any tax related questions you may have.