November 2016

tax tips & finance e-newsletter

In this issue

In this issue, we look at the view that pension reforms could push house prices up in the long term and the view of UK businesses on exports.

‘Your money’ reviews the penalties of late submission of Tax Returns and payment of tax. Finally in our ‘Retirement planning, wills and inheritance tax’ section we take a quick look at care home fees.

Pension reforms could cost £5 billion

The pension reforms introduced by George Osborne could cost £5 billion and push house prices up in the long term, according to the Office for Budget Responsibility (OBR).

The report examined the projected economic effects of a range of the ex-chancellor's reforms, including the pension freedoms and savings products such as the Help to Buy ISA.

The effect these reforms could collectively have on the public finances are:

  • The initial effect will be positive with a peak gain of £2.3 billion in 2018/19;
  • The effect turns negative in 2021/22;
  • The net cost continues to rise, eventually reaching £5 billion in 2034/35.

Expressed as a share of GDP, the net costs in 2034/35 represent 0.1% of GDP. If that rate of growth were to continue at a steady pace, the OBR estimates the cost would be 3.7% of GDP to public sector net debt over 50 years.

 

Effect on house prices

One of the main effects highlighted in the report is the impact on the housing market. The OBR estimates that the measures will lead to increased demand which in turn will put upward pressure on prices.

Key estimates:

  • Pension flexibility and restrictions to the annual and lifetime allowances may divert money into housing, which, given a relatively fixed supply, would lead to higher prices;
  • The Lifetime ISA and Help to Buy ISA are estimated to add 0.3% to house prices by 2020/21.

Businesses lack export ambition

Most businesses don’t currently export and don’t intend to start, according to research by the Institute of Chartered Accountants in England and Wales (ICAEW).

69% of businesses have never traded overseas and have no plans to do so in the future despite high-profile government campaigns.

Starting exporting

There are a number of procedures to follow if you export overseas. The rules differ depending on where in the world you want to export to.

For example, sales of goods and services to EU countries are free of export duty and customs checks.

If you are exporting outside of the EU, you may need to pay taxes and customs duties depending on the country.

Similarly, VAT rules will vary according to where you are exporting.

It is also possible to use a freight forwarder or commercial agent to act on your behalf if you don’t want to deal with export procedures yourself.

We can advise on export duties and VAT when trading overseas.

MONEY FACTS

Current bank rate:

0.25%

Current inflation: 

1.0%

Your Money

31 January 2017 is the date on which all 2016 Tax Returns must be submitted to HMRC and your 2015/16 tax liability must all be paid by this date.

We would urge all readers to ensure that their Accountant has all the necessary information to assist in the completion of their Personal Tax Return and review their finances to ensure there are sufficient funds available to pay any liabilities due by 31 January 2017.

The penalties for missing this deadline are:

Late filing of Tax ReturnLate payment of tax duePenalty

Miss filing deadline

 

£100

 

30 days late

5% of tax due

3 months late

 

Daily penalty £10 per day for up to 90 days (max £900)

6 months late

5% of tax due or £300, if greater

6 months late

5% of tax outstanding at that date

12 months late 

5% or £300 if greater, unless the taxpayer is held to be deliberately withholding information that would enable HMRC to assess the tax due.

12 months late

5% of tax outstanding at that date

Retirement Planning, Wills & Inheritance Tax

Whilst a large number of individuals remain outside of a care home throughout their life when advising clients in planning for retirement one area which needs to be considered is the possibility of financing care home fees. In this section we take a quick look at when assistance with Care Home fees can be obtained.

The general rule is that when an individual has capital above the upper limit, no financial assistance is provided by the Government if they move into residential care.

The capital limits are shown here:

 

Upper Limit

Lower Limit

England & N. Ireland

£23,250

£14,250

Wales

£24,000

No lower limit

Scotland

£26,250

£16,250

One very useful point to remember is that your own home is excluded from the above calculation if it is occupied by one of the following individuals:

  • Your partner, former partner or civil partner, except where you are estranged;
  • A lone parent who is your estranged or divorced partner;
  • A relative of yours or member of your family who is:
  • aged 60 or over or;
  • a child or yours aged under 18 or;
  • incapacitated.

For more details concerning paying for permanent residential care we would suggest a good source of information is the AgeUK website:

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