Profit From Your Home
Contrary to popular belief, the profit you make when you sell your home, or a former home, is not automatically exempt from Capital Gains Tax (CGT).
 
This tax exemption only applies to gains that relate to periods in which you lived in the property as your main home. However, it can be extended to certain periods when you were not living in that property.
 
For example, the last 18 months of ownership are exempt from tax, which is extended to 36 months where the owner or their spouse is disabled or moves into residential care. The 18-month exemption is due to be cut to nine months for sales made after 5 April 2020, but the 36-month exemption will remain in place.
 
Where you have let your former home at any time, even before you moved into the property, up to £40,000 of the gain can be exempt from CGT for each owner. This ‘lettings relief’ is due to be restricted for sales from 6 April 2020, so that it will only apply where the owner was in occupation at the same time as the tenant. The change will mean that nearly all periods of letting in the past will no longer qualify for the tax exemption.
 
Talk to us if you are planning to sell your home in 2020, as there are a number of tax reliefs which could affect the tax you pay.
 
ACTION POINT: Consider selling before 6 April 2020 to take advantage of the current tax reliefs.
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Give and Save
Giving to charity under Gift Aid can result in a win/win for both the donor and the charity.
 
Making a Gift Aid donation will reduce your tax bill for the year in which the donation is made if your total income is above the 40% threshold (£50,000 for 2019/20). Taxpayers resident in Scotland can save tax with Gift Aid donations if their total income, including earnings, is above the 21% threshold (£24,945 for 2019/20). Alternatively, you can shift the tax benefit of some or all of that gift back one year by telling HMRC on your tax return. This can be useful if your marginal tax rate was higher last year than in the current tax year.
 
To carry back the Gift Aid donation it must be made before you file your tax return for the earlier tax year. Say you make a Gift Aid donation of £2,000 on 21 December 2020. If you submit your 2019/20 tax return after that date (it’s due by 31 January 2021) you can include a claim in that return to carry back up to £2,000 of the donation you made on 21 December 2020, which will reduce your 2019/20 tax liability.
 
Gift Aid can reduce your income used to calculate the clawback of Child Benefit (income over £50,000) and the reduction in Personal Allowance (income over £100,000). It can also increase your higher rate or additional rate threshold, which determine whether you receive a Personal Savings Allowance of £1,000, £500 or nil.
 
To make a valid Gift Aid donation, you must declare that you will pay sufficient tax to cover 25% of the value of your gift in the year the gift is made. If you give £800 under Gift Aid, you must pay Income Tax and/or Capital Gains Tax of at least £200.

ACTION POINT: Do you want to make charitable donations before you complete your next income tax return?
 
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Money for Miles
If you use your own car for a business journey, perhaps to travel to a customer, you can claim mileage expenses for that journey. Many employers pay the full tax-free amount of 45p per mile, which drops to 25p for miles in excess of 10,000 in one tax year.
 
If your employer doesn’t pay the full rate, you can claim tax relief on the shortfall, either on your tax return or on form P87. You need to submit your claim within four years of the end of the tax year in which you made the business journey. Claims for 2015/16 must reach the tax office by 5 April 2020.
 
Once HMRC has accepted your mileage claim for one tax year, subsequent claims for up to £1,000 per year can be made by phoning the tax office on 0300 200 3300.
 
ACTION POINT: Are you due a tax refund for business journeys?

 
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Selling Your Business
If you are wondering whether, or when, you should sell your business, a sensible first step is to form an outline plan for its disposal.
 
The sale of a successful trading company will generate a Capital Gain. This would normally be taxed at 20% after deduction of your annual exemption (£12,000 for 2019/20).
 
Entrepreneurs’ Relief can reduce your tax rate to 10% on a gain of up to £10m, but this relief is under threat from a pre-election promise to review and reform it. If you want to be sure of benefiting from this relief, take advice and be prepared to act quickly.
 
To be eligible to use Entrepreneurs’ Relief you must meet these conditions for at least 24 months ending with the date of the sale:

• be an employee, director or company secretary of the company or of another company in the same trading group
• hold at least 5% of the ordinary share capital of the company
• hold at least 5% of the voting rights of the company
• be entitled to at least 5% of the distributable profits available to the equity holders
• be entitled to at least 5% of the profits and assets available for distribution to equity holders on the winding up or
• be entitled to receive at least 5% of the total proceeds on the sale of the entire company
 
If you plan to sell your company and carry on the business on a smaller scale as an individual or partnership, or start up the same business again within two years, you can be caught by anti-avoidance legislation which will tax the gain as income.  
 
ACTION POINT: If you are planning to sell your company, discuss your plans with us without delay.
 
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Get in touch - If you'd like to find out more about how we can help you and your business pay less tax, generate more profits and create long-term wealth for you and your family, please get in touch now