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Are You Joining the 40% Tax Club This Year?

As from 6th April 2013, we are all now in a new Tax year, the Tax year 2013/14 – But are we all aware of the subtle changes that have been made to the Tax we have to pay? Or has the Chancellor George Osborne come up with the classic Baldrick line from the Black Adder T.V comedy series of “ah, I have a cunning plan”, to get more Tax out of us? Let us see, shall we?

Let’s start with what we can all earn without paying Tax. This figure is now £9,440 for 13/14 Tax year, as represented by the Single Person’s Allowance. Now, I do know someone is paying close attention to this blog, as I have just received an e-mail from Gary from Howden asking “but, I am married, so does that mean I don’t get this Single Person’s Allowance?”.  Err no Gary, everyone is entitled to this Tax free allowance before they have to pay any Tax, married people included.  It is best we put the record straight on this, before the UK divorce rate goes zooming upwards.

Now, as our Business clients at JCL (Jones Cooper Limited) are fully aware, we are always looking at the many different Tax angles to reduce the amount of Tax our Clients have to pay. One of the easiest ways of reducing the Tax burden is to ensure, where possible, that the Single Person’s Allowance (SPA) is always used against the Business profits. This can mean, not just the SPA of the Business owner, but also that of the immediate family – usually wives and possibly children. What most people fail to realise is that as soon as every child is born they too are entitled to the same Single Person’s Allowance as you and I. And to quote the words of the actor Michael Cain “And not many people know that!” – So, armed with this new found knowledge if you run a Business, surely you must consider how you can use any unused part of the Single Person’ s Allowance of wives, girlfriends or husbands, against your Business, and of course any of your children’s unused Single  Person’s Allowance.

This to us at JCL (Jones Cooper Limited), is not rocket science, but just sensible, basic Business Tax Planning. Some of you out there may want to ignore this simple piece of Tax Planning and may be quite happy about joining the 40% Tax Club. If this is the case, then please leave me your details and I will reserve you a place at next year’s ‘Jones Cooper’s Voluntary 40% Tax Club Conference’. The venue for this is usually the telephone box just off Boothferry Road, in Goole, and transport is always laid on for new members. The tandem bike usually picks up on the evening at around 7.30pm. – Yes, you’ve guessed it, this Club doesn’t usually have many new members!

But let’s look at Baldrick’s (sorry George Osborne’s) cunning plan. Simple question, “How can you get more Tax out of people without raising the Tax rate?” A simple answer is to lower the basic rate Tax band figure. And this is exactly what has been done for the Tax year 13/14. To some people this news may not be as dramatic as the news about the Swedish police finding drugs on Justin Bieber’s Tour Bus, or as heart-breaking as the recent announcement of the splitting up of the pop band JLS, but nonetheless these changes in the basic rate bands can be as welcoming as a hearing that Liverpool footballer Louis Suarez has just been invited round to your house for drinks, and “something to eat!”

On the numbers, the basic rate Tax band has been reduced by £2,360 to a figure of £32,010, after Single Personal Allowances (SPA). What this means is that in the last Tax year (12/13), after taking into account the SPA, you could earn up to £42,475 without paying any 40% Tax. Compare this with the new current Tax Year (13/14) figure of £41,450, a net reduction of £1,025. End result is more people are likely to be joining the 40% Tax Club!

But, whilst Baldrick (sorry George Osborne) may have had a cunning plan, we all know Mr Edmund Black Adder usually comes up with an even better cunning plan. Now, I have read the Black Adder scripts, as written by Ben Elton, and I know this better cunning plan is usually called ‘In-Year Tax Planning’. As we are now all aware that based upon our earnings for the Tax year 13/14, more of us could be paying 40% Tax, then surely what we should be doing is to start planning and taking action RIGHT NOW, to keep out of this 40% Tax Club. If you are in Business there is obviously more Tax planning angles available, and this is one of the reasons why it is important to complete the Annual Accounts for your Business as soon as possible after your Year End, so we can help to plan to reduce and minimise your Tax Bills in the future. But also, even employed earners can consider taking ‘In-Year’ planning measures to avoid paying the 40% Tax rate. One measure could be by paying into a personal Pension. We are more than happy to consider all of the options open to you, whether you are in Business or employed.

So, basically what we are saying is that membership of the 40% Tax Club can be purely on a voluntary basis if In-Year Tax Planning Advice is sought. So, if you require any further help or advice on how to keep out of the 40% Tax Club this, then please contact me, and I will be happy to oblige. Otherwise, I will be looking out for you in that telephone box just off Boothferry Road, in a year’s time!

 

Rickey

Rickey Cooper FFA, FMAAT, ATT
JCL (Jones Cooper Limited)

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