Author Archive: Muhammad Zia

How to prevent 40 per cent of your property portfolio being lost to Inheritance Tax

Successful property investors might find themselves in a situation where the value of their properties is increasing, their mortgages are being paid off and their personal wealth is consistently growing.

This might all sound like a perfect position to be in, but it hides significant consequences for your portfolio if you wish to pass it down to the next generation.

A capital wealth over £325,000 is subject to a 40 per cent Inheritance Tax (IHT) upon death. This means that the beneficiaries of those who have property portfolios over this threshold face the prospect of losing almost half of the property and personal wealth that was intended to be passed down.

Assuming you want to pass down as much of your wealth as possible, it might be time to start looking into alternative solutions for the future of your property portfolio.

Which taxes do you have to pay?

An estate valued over £325,000 is liable for IHT. However, there are some further reliefs that can help property owners.

For example, the Residence Nil-Rate Band (RNRB), which is currently set at £175,000, is a further relief from IHT.

This means that, in practice, your estate will not be charged IHT until it reaches half a million pounds in value, as long as your main residence is worth at least £175,000.

Contact Rotherham Taylor’s tax experts for more information on your tax requirements.

Passing your portfolio to your spouse

If you pass your estate, including your property portfolio, to your spouse, there will be no IHT due on death.

When passing your entire estate to your spouse you do not use your nil rate bands and the allowance can be passed to your spouse to be used on their death. When they die, therefore, they will be able to pass on up to £1 million before IHT comes into effect.

If you don’t leave all your estate to your spouse and use some of your nil rate bands then only the remainder will be available for use on your spouse’s death.

Gifting your portfolio

Giving your property portfolio away as a gift, whilst alive, means that, whilst you may avoid IHT in some cases where the gift is made seven or more years prior to death, you will usually have to pay Capital Gains Tax (CGT).

This is HMRC’s way of preventing sudden gifting of property, just before the death of the owner, as a way of avoiding tax.

Whilst no one can predict the date of their own death, if you wish to transfer the ownership of one or more of your properties it is best to have a tax-efficient strategy to do this.

Getting early advice from one of our chartered accountants can help prevent a significant IHT bill in future.

At Rotherham Taylor our accountants are experts at answering probate, Inheritance Tax and estate related queries. Get in touch today or click here to view our probate services.

Three tips for managing maternity and paternity pay for small businesses

As experts in the field of accountancy, we understand the unique challenges business owners face when it comes to payroll.

We’ve put together three essential tips to help you manage maternity and paternity pay, ensuring legal compliance and employee satisfaction.

  • Understand the statutory requirements: In the UK, employees are entitled to Statutory Maternity Pay (SMP) or Statutory Paternity Pay (SPP).As an employer, it’s crucial to understand your obligations. The former is usually paid for up to 39 weeks, and the latter for one or two weeks.

    Familiarise yourself with the eligibility criteria and payment rates and keep up to date.

  • Maintain accurate records: Maintain clear records of when maternity or paternity leave begins and ends, and the amounts paid.Proper documentation will not only help in providing transparency but will also make it easier to handle any future enquiries or inspections by HM Revenue & Customs (HMRC).
  • Offer support and communication: Maternity and paternity leave are significant life events for your employees.Open communication and support can create a positive experience for both parties. Clearly outline your company’s policies and be available to answer any queries your employees may have.

Managing maternity and paternity pay doesn’t have to be a complicated process. By understanding the statutory requirements, maintaining accurate records, and offering robust support, you can ensure a smooth experience for both you and your employees.

If you need assistance in navigating these waters, our dedicated team of professionals is here to help.

Contact us today to discover how we can assist you with this important aspect of your business.

Could you enjoy a slice of the £1.6bn creative industry tax reliefs?

If your company is involved in the creative industry, then it could be eligible for significant tax relief from the Government.

These tax reliefs support the Government’s objective of becoming the technological centre of Europe by promoting growth in the digital, creative, and other high-technology areas.

Your business can claim creative industry tax relief if it falls into the following categories:

  • It is liable to Corporation Tax.
  • It is directly involved in the decision-making, production, and development (from start to finish) of:
    • Films
    • High-end, animated and children’s television
    • Video games
    • Theatrical productions and orchestral concerts
    • Museum and gallery exhibitions

Sometimes the resulting production may need to pass a cultural test, qualifying it for a British Film Institute (BFI) certification, to claim tax relief.

Businesses involved in the production of live-action film, television and video games are entitled to up to 20 per cent of the core production cost back as Corporate Tax relief.

Theatre and orchestra productions, museums and galleries are entitled to up to 25 per cent of the core production costs of the piece.

Productions of animation and animated film can also claim up to 25 per cent as a tax rebate against the expenses of pre-production, principal photography, and post-production of an animated project.

If you are unsure if your business qualifies for creative industry tax relief, get in touch with our expert accountants today.

Chief UK economist warns of period of stagnation – How will this affect your SME?

Stagnation is a prolonged period of little or no growth in the economy and it can have a serious impact on your business.

Whilst talking to The Guardian, Samuel Tombs, a leading UK economist, claimed that stagnation will cause “businesses to cut employment and investment, and trigger a sharp decline in residential investment.”

He added: “GDP will fall one per cent this year”, which, whilst not sounding significant, is a major blow to enterprising businesses.

Here’s an overview of what stagnation means for your business and how to navigate these times of economic uncertainty.

Diminished revenue growth

During times of economic stagnation, consumer spending often slows down. This can lead to reduced sales and revenue growth for small businesses.

Companies in discretionary spending sectors like leisure and retail are often the hardest hit because these tend to be areas in which consumers start to save money during periods of economic difficulty.

However, the effects can be felt across various industries and every business should be prepared to face difficulties.

You may need to focus on cutting costs and increasing profits through offers or adjustments to pricing strategies. In times like these, an accountant can help you make sense of the steps your business needs to take.

Cash flow challenges

Stagnation may lead to increased payment delays from customers, impacting your cash flow. Effective cash flow management becomes essential during these times as regular monitoring and robust credit control procedures can help maintain liquidity.

Ensuring your customers pay on time and forecasting your cash flow correctly can greatly increase your chances of avoiding cash-related crises. Don’t forget, cash flow issues are one of the most common factors in business insolvencies.

Having a sound financial plan and discussing these issues with your accountant can help to maintain resilience during cash flow instability.

Difficulty in accessing finance

Banks and other financial institutions may become more risk-averse during periods of stagnation, making it harder for businesses to access necessary funding or receive loans.

Exploring alternative financing options like crowdfunding or grants may become essential to secure investment into the business.

In addition, your savings and collateral can make a big difference when banks are unable to lend you money so exploring your surpluses and the value of existing assets is critical to understanding your position.

Potential opportunities

Despite the challenges, stagnation can also present opportunities. Businesses that can adapt, innovate, and find new markets or diversify their services may find ways to thrive in an economic downturn.

Stagnation is a complex issue that requires strategic planning and expert guidance to navigate successfully.

By understanding the potential impacts on your business, and with a proactive approach to management and innovation, you can mitigate risks and even find new avenues for growth.

Our team is here to assist you in developing strategies to survive and thrive during periods of stagnation. If you would like to receive expert advice tailored to your business needs, contact us today.