Welcome to BPU's 2019 Autumn Newsletter
Martin Knight - BPU Director
HMRC Property News – Important Tax Changes and Reliefs
HMRC have made a concerted effort to reduce the benefits of owning let properties over the last few years and further changes are to be introduced from April 2020.
As the current owner of a let property or a prospective investor we have summarised these changes below. April 2020 is fast approaching and so you may want to consider whether any changes to your let property portfolio would be advantageous before the new tax rules are implemented.
Principal Private Residence Relief ("PPR")
PPR provides an exemption from capital gains tax when a property has been your only or main residence. Currently, where PPR is available, the rules provide an exemption from capital gains tax for the final eighteen months of ownership of a property regardless of whether the property is occupied during that eighteen month period.
From 6 April 2020 the capital gains tax exemption for the final eighteen months of ownership will be shortened so that it can only be available for the final nine months of ownership. This reduction could result in a substantial increase in capital gains tax for a former main residence.
Where a property has at some time been a main residence and so PPR is available, a further allowance is available to reduce any capital gains tax that has arisen whilst the property has been let to third parties. Whilst the rules are complex, it is possible to claim Letting Relief of up to £40,000. Under the current rules, there is no requirement for a property owner to occupy the property at the time it is let for the relief to be available.
From 6 April 2020, Letting Relief will only be available when the property is let whilst the owner occupies the property. This change will mean that the scope of Letting Relief will be substantially reduced and very rarely be available from April 2020.
Where the maximum Letting Relief is currently available but would be withdrawn from April 2020, this could increase the capital gains tax payable on the disposal of a property by £11,200. If you are considering the sale of a property that has at some time been your Main Residence, you should consider the impact of the above changes upon the capital gains tax charge that could arise.
Capital Gains Tax Payment
Whilst the changes noted above may have an impact upon the tax liability arising upon the sale of a residential property, the due date for the payment of capital gains tax payable upon the sale of a residential property will also change from 6 April 2020.
Currently, capital gains tax liabilities are payable on the 31 January following the end of the tax year in which the relevant asset has been sold.
From 6 April 2020, an estimated capital gains tax liability will have to be paid within 30 days of completion of a residential property disposal. A provisional capital gains tax computation will also have to be submitted to HMRC.
As is currently the case, a final capital gains tax calculation will need to be recorded within the self assessment Tax Return and any adjustment to the estimated tax payment will be made accordingly.
Higher Rate Tax Relief for Mortgage Interest
Rules were introduced a few years ago to ensure that higher rate tax relief is unavailable for interest paid upon mortgages for residential lettings. This restriction was to be phased in over a period of four years and commenced in 2017-18.
From the 6 April 2020 the phased restriction will end and higher rate tax relief for mortgage interest will be completely unavailable.
We would be happy to discuss all of the above in detail and confirm how these changes will be relevant to your personal circumstances. Please contact:
Martin Knight, Director
NEXT TAX DEADLINE
Don't forget to file your self assessment tax return online by the 31st January 2020.
Need help with this get in touch.
BPU Staff News
BPU Welcomes New Graduates
BPU has welcomed two new graduates to the team as part of the firm’s ongoing support of young people wanting to train in the industry. BPU continues to invest in its graduates under its graduate recruitment scheme. The firm assists recruits to study and qualify as Chartered accountants while they work.
Sarah Pocock (L) and Lily Cope
with Director Andrew Miller
The training programme has been running for over 10 years and BPU has continued to make a significant investment in it, as ex-graduates have worked their way up to the top level.
Director Andrew Miller of BPU Accountants said: “We are delighted to welcome Sarah and Lily to the firm. As one of the few independent Chartered accountancy firms left in south Wales, we are proud to continue to offer this type of training programme, one that I did myself 15 years ago.”
“We have strong links with local Universities and other establishments which means we can attract the very brightest and best new trainees who prefer to gain experience here working with local and varied businesses.”
“Taking on new graduates every year shows our commitment to building a solid team; through investing in our people we continue to help develop the accountants of the future enabling us to help clients with emerging accountancy and tax changes to ensure they operate as financially efficiently as possible.”
Sarah Pocock, from Cwmbran, studied Accounting and Finance at Swansea University.
Speaking about her appointment, trainee accountant Sarah Pocock, 21 said: “BPU attracted me as it was a growing business that provided many services including accountancy, this meant it was a perfect opportunity to start working in the accounting field with a chance to learn other fields."
Lily Cope, 22, from Cardiff, went to Oxford Brookes University and studied Accounting and Finance.
Lily added: “I am very proud to have joined a leading firm straight out of university, BPU want you to learn quickly and develop the skills early on which you require to be a great accountant. I have already start preparing sets of accounts which I am really enjoying.”
BPU in Top 5% of of Fundraisers on JustGiving!
Following the success of BPUs 14 runners who recently completed the 10K our JustGiving page was one of the most successful in September. Out of 7,1411 fundraisers, BPU were in the top 5%! Well done team!
Thank you to all of our clients, colleagues, friends and associates for their donations and support helping us raise an amazing £1,842 for Kidney Wales Foundation.
The team has already started training for next year.......
Spooktacular Bake Off for Breast Cancer Now
Well done to the BPU team for a fantastic Halloween bake off in October. The BPU chefs dusted down their aprons and made homemade cakes, quiches, sausages rolls, and pakoras. The team raised £86 for Breast Cancer Now.
Breast Cancer Now has a Welsh office in Cardiff. They provide support services all over the country, and work with volunteers and fundraisers locally. Together, they are making a difference for people affected by breast cancer and we are proud to support such a worthwhile cause.
For further information visit: www.breastcancernow.org
Inheritance Tax Claims Double Due to Fall in House Prices
New data obtained from HMRC has revealed the number of people successfully reclaiming inheritance tax (IHT) has more than doubled in the last two years.
The reason for this increase is due to falling house prices seeing more than 4,500 people reclaiming IHT during the 2018/19 financial year. This is compared to 2,000 and 3,000 people who were repaid IHT each year between April 2010 and April 2017 because they sold a property for less that it was valued.
Inheritance tax is charged on the value of assets at death and must be paid before the estate can be handed over to the family. Beneficiaries should take advice to ensure they are not missing out on potential IHT or rebate claims as if executors sell a property for a lower value within four years of the death, they can reclaim the tax paid on the loss.
People should also be aware that if a property falls in value they will need to claim a rebate themselves and this will not be given automatically.
Research published recently by the Institute for Fiscal Studies (IFS) and the National Centre for Social Research (NCSR) suggested that just 45% of individuals seeking to make a financial gift are aware of the inheritance tax (IHT) rules and exemptions. Read our full article on IHT and the rules here.
Scam Victims Losing Pension Pots in 24 Hours
The dangers of pension scams are currently being highlighted by a high-profile media campaign. Adverts, both on television and online, warn pension savers not to let a scammer 'enjoy their retirement'. The perils of cashing in a pension pot without the proper advice and protection under the freedoms introduced in 2015 are spelt out by the ads.
So, it is vital that pension savers are educated to spot a potential scam and avoid it. Access to regulated, impartial advice is a crucial part of helping people make wise decisions with their retirement savings.
The Pensions Regulator (TPR) and the Financial Conduct Authority (FCA) have joined forces to highlight the scale of pensions scamming. In a joint report from the two organisations, the FCA suggested that it could take up to 22 years for a saver to build a pension pot of £82,000 – the average amount individuals lost to pension scams in 2018.
But despite this, many savers could be at risk of falling for scammers' tactics, as research reveals that almost a quarter of people surveyed admitted to taking 24 hours or less to decide on a pension offer.
Worryingly, overconfidence could also lead to savers missing the signs of a scam. Two-thirds of savers say they are confident enough to make an independent decision about their pension. The same proportion would trust someone offering pensions advice out of the blue – one of the main warning signs of a scam.
Recognising scam warning signs
It is vital that pension savers are aware of the common tactics used by scammers, so they can spot the warning signs.
Pension scam artists are often articulate and financially knowledgeable. They can often point to credible websites, testimonials and materials that are hard to distinguish from the real thing. They will design attractive offers to persuade the transfer of a pension pot, or the release of funds from it. It is then invested in unusual and high-risk investments like overseas property, renewable energy bonds, forestry, storage units, or is simply stolen outright.
Scam tactics include:
- contact out of the blue
- promises of high and/or guaranteed returns
- free pension reviews
- access to a pension before age 55 – with no mention of potential tax liabilities
- complicated investment structures, or unusual, high-risk investments
- high-pressure sales tactics, or pressure to act quickly.
Protecting your pension
Although a ban on cold calling in the UK, including emails and texts, was introduced at the beginning of 2019, the problem continues. Cold calls are a major red flag for scams and unsolicited offers should be ignored or rejected. Cold callers will often offer a free pension review. Professional advice on pensions is not free – a free offer out of the blue is probably a scam.
It is crucial that pension savers know who they are dealing with so checking the FCA Register is imperative. Dealing with an authorised firm gives access to the Financial Ombudsman Service or the Financial Services Compensation Scheme (FSCS), which can hold firms to account and give financial protection.
A common scam is to pretend to be a genuine FCA-authorised firm (called a 'clone firm'). The contact details on the FCA Register should always be used, not the details the firm gives out.
Pension savers should never allow themselves to be rushed or pressured into making a decision. They should not be afraid to miss out on an 'amazing deal' because of artificial deadlines, and if promised returns sound too good to be true, they probably are.
Impartial information, financial guidance and advice are all key to making a good decision before changing pension arrangements.
Looking for advice
Those opting for the services of a financial adviser must be sure to use one that is regulated by the FCA.
For further information or advice on any of the above contact our in-house financial adviser Ian Sinclair email: firstname.lastname@example.org
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