Practical financial planning and technical updates in relation to coronavirus

Friday 22 May, 2020

If you require financial planning advice, please complete our booking consultation form and your local financial adviser will contact you.  Alternatively, please email enquiries@lonsdaleservices.co.uk or call us on 01727 845500.  Although our independent financial advisers are currently working from home, we operate from offices in St Albans, Harpenden, Ware, Leeds / Bradford, Stafford, Barnet and Ringwood. 

 

Cash Planning 

• Interest rates on savings accounts continue to be cut and after taking into account the impact of inflation, savers are receiving negative real rates of return. 
   

Child Benefit

• The extension to the government's Job Furlough Scheme to the end of October means certain clients can re-apply to HMRC as their income falls below £50,000. The sooner action is taken, the better, as the maximum period for backdating Child Benefit is three months. The deadline for a full 12 months’ payment in the current tax year is 5 July 2020.

 

• This is also one of those situations where it can make sense to make a pre-emptive claim. If at the end of the year adjusted income is over £60,000, there is no loss (tax will match benefit), but if income is lower, then there will be a net benefit.

 

• If you need more information, please contact the HMRC helpline: 0300 200 3100.

 

Inheritance Tax (IHT)

 

Loss Relief

• It is possible to reclaim inheritance tax where shares, or other qualifying investments left on death, are sold by the appropriate person(s), (usually the legal personal representatives, for investments in the free estate, or trustees, for investments in a settlement), within 12 months of death at a lower value than that on death.

 

• The relief must be claimed on Form IHT35, signed by the appropriate persons, within five years of the date of death (i.e. within four years after the end of end of the above 12-month period.) However, it’s possible to claim provisional relief within 12 months of the date of death.
   

Gifting

 

• The gifts are disposals, so can realise a loss for the donor.

 

• If values recover, they do so outside of the estate of the donor. If death occurs within seven years, it is only the value originally gifted that falls back into the IHT calculation.

 

•  It is possible that the tax regime for lifetime gifts will be less advantageous in the future.

 

Normal Expenditure out of Income

 

• This is a valuable exemption, but it is important to record for each tax year the relevant part of the IHT 403 (or suitable spreadsheet) with a list of dates and recipients of gifts. (https://www.gov.uk/government/publications/inheritance-tax-gifts-and-other-transfers-of-value-iht403)

 

• It is important to undertake an annual review of surplus income available, gifting patterns and intentions for any further gifting.

 

• Clients should ensure there is a "letter of intent" or "Gifting Memorandum" saying, for example: "I intend to give between X% and Y% of my annual surplus income to my family"

 

Using Trusts

 

• Trusts can provide a way of controlling gifts by outing in place a third party, the trustees, between the settlor and their beneficiaries to deal with the gifted property in accordance with the terms of the trust that the client creates. 

 

• Trusts can be as rigid or as flexible as the client would like and can offer a range of tax and non-tax benefits (Bare, IIP, Discretionary)

 

Capital Gains Tax Planning

 

• There is an opportunity to realise losses to offset against future gains by selling holdings.

 

• However, care is needed because the capital gains tax (CGT) calculation rules firstly set losses made in a tax year against gains realised in the same tax year.

 

• Only after in-year gains have been matched by in-year losses can any balance of loss remaining be carried forward.

 

• Bed and "Anything". Using the CGT Annual Exemption Amount to snip "gains" into more tax-efficient tax wrappers such as ISAs/SIPPs.

 

• Part disposals within the CGT Annual Exemption Amount allowing tax efficient withdrawals to supplement potentially taxable income.

 

 

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