Anna’s Accountancy Alerts – Week 41 (9th – 15th January 2023)

Anna’s Accountancy Alerts - Week 41 (9th - 15th January 2023)

https://www.ispeech.org

40% Tax Rate

Investec Wealth & Investment estimates nearly a quarter (23%) of full-time workers will be paying 40% tax from April 2023 compared with 19.6% who currently pay it.

The 45% tax rate threshold is also being cut from £150,000 to £125,140, pushing more people into the higher rate tax bracket. In addition to this there will still be those earning between £100,000 and £125,140 who will face an effective tax rate of 60% as they will start to lose personal tax allowances.

Investec says taking financial advice is important – people earning between £100,000 and £125,140 could consider additional pension contributions or charitable donations to offset the impact.

Be tax efficient in the way that you give money to children

Cash is the simplest gift but don’t give too much

While giving and receiving cash does not incur a tax bill, if you die within seven years of making the transfer then inheritance tax (IHT) rules will come into play.

Remember:

Up to £3,000 can be given away every year tax-free. This allowance can be carried forward for one tax year which means up to £6,000 can potentially be gifted.

1. Open a savings account

Setting up a child’s savings account encourages them to save their own money and benefit from the compounding effect of interest payments.
Choosing the right savings account depends on factors such as the child’s age, the interest rate, the type of bank card they want and the minimum amount they can have in the account.
2. Set up a Junior ISA (JISA)
These are tax-free accounts to enable investments or savings to be built up for a child.
Up to £9,000 can be saved into a JISA every tax year – with all returns free from tax.
3. Start a pension
Non-taxpayers, including children, have an annual gross pension allowance of £3,600 with contributions still attracting 20% tax relief. This means a relative could invest up to £2,880 into a Junior Self-Invested Personal Pension (Junior SIPP) which is then topped by up with £720 from the government.
4. For adult children, pick an ISA or Lifetime ISA (LISA)
The gift-giver is able to contribute up to £20,000 per tax year. Adult ISAs, like JISAs, can be invested either in stocks & shares or cash, with any gains or income free from capital gains tax and income tax – but there are no restrictions on when they can accessed.
5. Give premium bonds
Parents and relatives can buy up to £50,000 in premium bonds for a child aged under 16, with all the prizes, including the top award of £1 million each month, totally tax-free.

SMEs and late payments

The government’s payment and cash flow review will scrutinise existing payment practices and the measures in place to make sure small firms are not ripped off by their larger clients.

With over £23.4bn currently owed in late invoice payments, many small businesses continue to spend significant time and resources chasing late payments from the businesses they supply, with some taking several months before paying their suppliers.

At the moment there is no legal obligation to pay small businesses quickly with only a voluntary prompt payment code.

The review will also examine existing government levers, such as the Prompt Payment Code, where businesses voluntarily sign up to commit to paying suppliers promptly.

Despite almost 3,000 companies signing up, poor payment practices still continue, with many payments delayed well beyond the current 60-day target required for 95% of invoices.

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