The Importance of Protection

We all hope to live a long and healthy life, but have you stopped to think what if everything did not go to plan?

According to research from Unbiased.co.uk, 30% of UK adults are uninsured in some of the most important aspects of their lives that include income protection, life insurance and critical illness.

The recent case of Fabrice Muamba, a young and fit footballer who collapsed during a match, demonstrates our vulnerability. 

What if you became too ill to work or died?

Who would support your family? Who would pay the school fees and/or help your children through university? Who would pay the mortgage?

If you do not have a family or a mortgage, who would pay the bills and basic living expenses if you could not work?

There are a number of different policies that can help in these situations.

An Income Protection (IP) policy is used to replace earnings lost if you are unable to work because of long-term illness or injury.

A Critical Illness Cover (CIC) policy pays out a lump sum you are diagnosed as having one of the specified critical illnesses.

Instead of a policy that pays out a lump sum on your death, it is possible to have a policy that will pay out a tax-free income over a specific term. Premiums for this type of policy can be very cost effective.

A Whole of Life (WOL) policy will pay out a lump sum to your dependents following your death. This could potentially help pay some or all of an inheritance tax bill.

At Ward Williams Financial Services, we can help you to find the right type and level of protection suitable to your circumstances in order to give you and your family peace of mind.

Please call us on 01932 830664 to find out more or to book an appointment with one of our highly qualified financial planners.

BUDGET 2012 – Granny Tax and Pasties

George Osborne delivered his third budget on 21 March 2012.  The contents of the budget were so well rehearsed by politicians, pundits and papers that the real thing threatened to be an anti-climax.  There were no major surprises but some interesting announcements for businesses and individuals alike and the usual controversial headlines.

Business Highlights

For businesses the focus was on moving towards making the UK a more competitive place to do business.  The main changes included a further 1% cut in corporation tax which means that the large company rate will be 24% from 1 April 2012, falling to 23% in 2012 and 22% in 2014. 

The Chancellor confirmed details of the new ‘Patent Box’ regime which will mean reduced rates of corporation tax on qualifying Patent profits from 1 April 2013 and an eventual rate of 10% by 2018. 
An ‘above the line’ credit for Research and Development will be introduced from April 2013.  Loss-making companies will be able to claim a payable credit.  As previously announced, from 1 April 2012, the rate of R&D tax credits for Small and Medium sized Enterprises will increase from 200% to 225%.

Corporation tax reliefs for the creative sector were announced including the video games, animations and high-end television sector.  These will be introduced from April 2013, subject to EU State aid approval.

Small businesses (with turnover of less than £77,000) will welcome the proposed voluntary cash basis for calculating tax which will be introduced from April 2013, subject to consultation.  There will also be consultation on a simplified expenses system and on proposals to introduce a disincorporation relief.  These measures are all designed to improve the administration of the tax system for small businesses.

Stamp Duty Land Tax and VAT

A new Stamp Duty Land Tax rate of 7% for residential property purchases with a value of £2m was introduced with immediate effect. In addition, a higher rate of 15% will apply to residential properties purchased by companies and certain other ‘non-natural’ persons, subject to exemptions for property developers.

For VAT the main announcement was the launch of a consultation to correct VAT anomalies and close loopholes, including those in relation to the supply of hot take-away food.  The Chancellor’s intention is to ensure that all hot food is taxed at the standard rate of 20%.  Since the Chancellor’s budget speech there have been a number of headlines relating to ‘pasty tax’ and increasing pressure on the Chancellor to reconsider his proposals.

Personal Highlights

On the personal tax side the main headline was the reduction in the tax rate of income tax from 50% to 45% from 6 April 2013.  This follows growing criticism of its effectiveness to raise revenue and suggestions that it is a risk to UK growth.

The announcement of the gradual phasing out of the age-related personal allowance was not well received by the media and tax-payers alike.  Branded by the media as ‘granny-tax’ there will be no increase in the age-related personal allowances from 2013/14 until alignment with the standard personal allowance is achieved.
For 2013/14 the standard personal allowance will rise to £9,205, moving nearer to the Chancellors target of £10,000.  The basic rate band will be reduced from £34,370 to £32,245.  This will mean that the higher rate threshold will reduce from £42,475 to £41,450.

Child benefit will be withdrawn for some taxpayers by an income tax charge with effect from 7 January 2013.  The charge will apply to households (regardless of marital status) where a parent or partner has an ‘adjusted net income’ of over £50,000 a year. 

As well as making several changes to the existing Enterprise Investment Scheme regime, the previously announced Seed EIS (SEIS) was introduced.  The SEIS will give 50% income tax relief for investments in qualifying companies of up to £100,000 and a CGT reinvestment exemption.

The 2012 Budget presents a variety of challenges and opportunities.  For more information and advice on how you will be affected personally please contact Ward Williams at enquiries@wardwilliams.co.uk or on 01932 830664.

SMEs warned of £7 billion tax waste

According to a survey by a consumer advice site, small and medium sized businesses (SMEs) will waste more than £7 billion in unnecessary payments to the taxman this year.

This is because SMEs are not making better use of available tax allowances and business arrangements.

The three main areas where tax reliefs were being wasted were found to be:

1.      Incorporation

The number one area of tax wastage for SMEs is incorporation, which stands at more than £4.22 billion alone. Changing from a sole trader or partnership and becoming a company can save tax and NIC. For instance in tax year 2011/12 the saving on profits of £50,000 is £4,257.

2.      Use of self employed sub-contractors

The survey suggests that £2.05 Billion in tax and National Insurance contributions is overpaid because sub contractors are incorrectly treated as employees

For both 1. and 2. above, advice from a qualified accountant must be obtained to ensure all aspects are considered before a change is made.

3.      Not claiming Research and development allowances.

Total extra tax paid under this heading is estimated to be less than the others mentioned above, but from 1^st April 2012 the relief is set to rise to 225% of relevant spending. (i.e. for a small company at least 45% tax relief). SMEs should carefully review their activities to decide whether their processes and technologies fulfill the relevant criteria. It is shocking to note that, according to the report, only 12% of eligible businesses make use of R & D tax relief.

The report opined that “tax is a vast and complex subject and business owners often simply do not have the time to manage their tax affairs or understand the allowances available to them whilst also running their business day to day.”  It concluded by suggesting  that the use of  a professional adviser, such as an accountant or independent financial adviser could really make a difference to the amount of tax a business paid.

At this time, when bank borrowing is perceived to be difficult, any saving of tax might lead to more growth for the UK’s SMEs.

For further information/advice on this topic please contact Ward Williams: www.wardwilliams.co.uk