HMRC take action on ‘hybrid’ Buy-To-Let schemes

HMRC take action on ‘hybrid’ Buy-To-Let schemes

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There has been some interesting developments on 4th October 2023 regarding tax efficient savings for Buy-To-Let property investors from HMRC perspective after some highly reputable tax saving firms using schemes that we have known, and explained to our clients for quite sometime, to not be as tax efficient as they have been marketing.

“HMRC’s view is that this scheme does not work. People who use these arrangements may have to pay more than the tax they tried to avoid as well as paying interest, penalties and high fees for using such schemes.”

Please click this link to read the full HMRC views on ‘hybrid schemes’ and if you have been affected by this then please contact us immediately to start rectifying any mistakes with HMRC before they contact you.

https://www.gov.uk/guidance/property-business-arrangements-involving-hybrid-partnerships-spotlight-63?fbclid=IwAR2JjK3m0oeryvGRpAHTmZKOaOvVTeIMbeWjZ5AD46kxhsfbbMIudO3vQEw

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Capital Gains Tax £2bn rise to £16.7bn

Capital Gains Tax £2bn rise to £16.7bn

Capital Gains Tax (CGT) in the UK has risen by over £2bn to a record £16.7bn for 2021-2022 with 394,000 taxpayers contributing to this with the total amount of taxpayers rising by 20%. This liability was claimed on £92.4 billion of gains

In 2020-2021 the CGT liability was £14.3bn, a 15% increase from 2021-22, and the record rise is thought to be due to an increase in the number of taxpayers, gains, and tax in residential property disposals. 49% of gains and 51% of tax liability were accounted for in London and the South East during the 2021-2022 period.

There are significant increases over the last 2 years as the 2019-2020 tax year shows CGT taxpayers disposed of 2 million assets totaling £198.4bn and gains of £80.7 bn calculating CGT at £10bn. From 2019 to 2022 there is a massive 60% surge in CGT.

Business Asset Disposal Relief (BADR) accounted for 7% of CGT from CGT disposals from taxpayers that qualify for BADR. 47,000 taxpayers claimed BADR on £12.6bn of gains resulting in a tax charge of £1.2bn over the 2021-2022 tax year according to HMRC. When the Finance Act 2020 was updated, Entrepreneurs’ Relief (ER) was renamed BADR which reduces the rate of capital gains tax (CGT) on disposals of certain business assets from 20% to 10%.

Most CGT comes from the small number of taxpayers who make the largest gains. In the 2021 to 2022 tax year, 45% of CGT came from those who made gains of £5 million or more. This group represents less than 1% of CGT taxpayers each year.

If you have any CGT Issues or any other specialist tax issues and need to speak with a Chartered Tax Advisor then please contact Tax Advisory UK where we can assist you.

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Inheritance tax freeze could push 10,000 families over the IHT threshold

Inheritance tax freeze could push 10,000 families over the IHT threshold

The Chancellor of the Exchequer, Jeremy Hunt, could extend the inheritance tax Nil Rate Band freeze from 2025-26 to 2027-28 in the Autumn statement on November 17th.  

Hunt is planning to raise £54 billion through tax rises and feels that the extended IHT threshold freeze could contribute to around £500 million for the treasury from grieving families.

Along with the recent inflation increase, by keeping the tax-free thresholds at the same levels, the tax being paid on possible inheritance tax, income tax, capital gains tax and pensions could generate billions of pounds. 

Rishi Sunak originally froze the £325,000 IHT threshold when he was Chancellor until 2026.  An estimated 10,000 families could be pushed over the IHT threshold essentially contributing to the UK’s most hated tax.

As it stands, if your combined estate of properties, investments and shares total £1 million, you can subtract the £325,000 IHT threshold leaving £675,000 which can be taxed at 40%.  The tax needing to be paid would be £270,000, leaving your family with £405,000 and the £325,000 exemption rate.  The total of your estate that your family would inherit upon your passing would be £730,000. 

For more information on Inheritance Tax please click here and please contact Tax Advisory UK to discuss your IHT planning immediately.

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