Scrutton Bland Private Client Newsletter

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ADVISER YOUR

Protect your assets and grow your wealth

Contents 3 Welcome to our

10 Cryptotax Decrypted

latest newsletter, covering the key tax and insurance issues facing individuals

12 Is this the best time to sell my second home?

4 End of Tax Year

14 Tax Rules on Divorce

Planning Checklist (2021/22)

6 Relight my fire 8 All change for

Financial Planning

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Welcome to our latest newsletter, covering the key tax and insurance issues facing individuals.

At Scrutton Bland, our private client service is here to help you make tax-efficient decisions, protect your assets and grow your wealth by joining up the conversations you have with your professional advisers, so that we can all work collaboratively to achieve the best outcome for you. T he upheavals and stresses caused by the pandemic have affected most of us in one way or another, but we have taken care to maintain the high level of service to our clients and have been delighted to expand our Private Client Tax team with the arrival of Simon Hurren, who joins us as a Director with the remit of looking after the tax needs of our private clients. This newsletter contains a variety of timely and useful articles aimed at delivering a mix of professional advice from across all our financial disciplines. We have included a useful checklist of tax deadlines to be aware of, to ensure that

Jason Fayers

Our specialist advice is tailored to each of our clients to make sure we only offer solutions that hold real benefit for you. We provide a holistic view of your finances to ensure that each decision works in harmony with your entire suite of financial services. If you have any questions or would like to talk to one of the Private Client team please don’t hesitate to get in touch.

you make the most of your allowances and tax reliefs. There is also a useful look at the tax rules on divorce – a subject which is rarely covered but becomes very important to clients in that situation. Cryptocurrencies have had a huge amount of coverage in the media, but they remain an unregulated and very risky choice, and we look at the dangers of choosing this form of investment, not least the tax implications when you come to sell them. In this issue, we’ve also included an informative and detailed piece of things to bear in mind if you are thinking about selling your second home.

My best wishes to you and your families for 2022.

We continue to work closely alongside the Financial Planning team, who are now part of Emery (IFA) Ltd, and include an article from the team about the the changes that have occurred, along with more information about how they can help you going forward.

Jason Fayers Managing Partner

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End of Tax Year Planning Checklist (2021/22) With the end of the tax year approaching, many people including entrepreneurs, high-net-worth individuals, retirement planners and retirees will be thinking about getting their finances in check. The last year has certainly provided plenty of challenges, and although your finances may not have been at the forefront of your mind, it’s still worth taking some time to consider the tax planning opportunities that are available.

With that in mind, this checklist covers everything you need to consider before 6 April 2022 to put you and your family in the best possible position.

Key tax planning areas to consider As well as optimising your tax planning for the current year (2021/22), it’s also important to take the time now to think about strategies to minimise tax for the year ahead (2022/23). Tax planning strategies usually are most effective when implemented before the tax year begins. The following are the key areas to consider. Income tax Personal income of between £100,001 and £125,140 is taxed at an effective rate of 60% due to the loss of the personal allowance, while income over £150,000 is taxed at 45%. Child Benefit is tapered for incomes between £50-60k so for a taxpayer with two children who receives Child Benefit of £1,827.80 per year (2021/22 rates), the effective rate of tax is 58.3% in this income bracket, while for those with three children who receive Child Benefit of £2,555.80, the effective rate of tax is a whopping 65.6% for income between £50-60k. You should consider steps to reduce your taxable income to below these levels if you can, in order to avoid the higher rate of tax. Increasing your pension contributions might be an effective way to do that. Alternatively, you could consider:

Capital Gains Tax Most individuals have a Capital Gains Tax allowance of £12,300 for the 2021/22 tax year. Any assets that are sold at a loss can reduce gains for the year or be carried forward and set against future capital gains. Importantly, any of the annual exemption not used cannot be carried forward and will be lost. Assets can be transferred between spouses and civil partners tax efficiently to ensure both exemptions are used fully. You can also choose to defer the Capital Gains Tax payment for a year by making a disposal after 5 April 2022. Alternatively, you can use two annual exemptions in succession making one disposal before 6 April 2022 and one just after. Gift Allowances Individuals have an annual tax-free gift allowance of £3,000. This can be carried on for one year but will be lost if it remains unused after that. If you have an annual exemption that you’ve carried forward from last year, it must be used before 6 April 2022. Individuals can also make as many gifts of up to £250 per recipient as they like per tax year, free from Inheritance Tax (IHT). However, that only applies if the recipient has not received any part of your £3,000 IHT-free gift allowance.

Other steps you can take to reduce your income tax liability include:

• Ensuring married couples / civil

partners both have sufficient income to use their full personal allowance: £12,570 in 2021/22, or claim the Marriage Allowance where it is not possible to redistribute income. The result will be tax relief of up to £252 for the current year. No tax is payable on transfers between married couples or civil partners, unless you are formally separated, in which case specialist advice is required. Replace investments that provide taxable income and gains with tax-free investments such as ISAs or investment bonds that allow valuable tax deferment.

• Redistribute investment capital between spouses / civil partners to reduce the tax incurred on income

and capital gains. No tax is payable on transfers between married couples and civil partners.

• Transferring an income-generating asset to a spouse with lower income

• Deferring income to a later tax year

• Making Gift Aid payments

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Annual allowance for pension contributions

Tax-efficient investments Income tax relief is available to reduce your tax liability on the following investments: Venture Capital Trusts (VCTs) - Investments of up to £200,000 per year qualify for income tax relief at 30%. There’s no capital gains tax payable on any profit made when selling the investment and dividends are received tax-free. Enterprise Investment Scheme (EIS) - Annual investments of up to £1 million in qualifying companies attract income tax relief at 30% (or up to £2 million if at least £1 million is invested in knowledge intensive companies). If the investment is held for over three years then any capital gain is free from CGT. Seed Enterprise Investment Scheme (SEIS) - Investments of up to £100,000 per tax year can be made in start-up companies that qualify for the SEIS. Income tax relief is available at 50%. No CGT is payable on disposal if the investment is held for more than three years. Both EIS and SEIS investments can be carried back to obtain income tax relief available but not used in the 2019/20 tax year.

Electric cars If you are thinking of switching to an electric car for business use, the tax benefits are well worth exploring and include enhanced capital allowances, lower benefits in kind (determined by the vehicle’s CO2 emissions and fuel type) and £0 road tax for 100% electric vehicles until at least 2025. You will be able to benefit from capital allowances, car benefits in kind (determined by the vehicle’s CO2 emissions and fuel type) and zero tax on fuel benefits in kind. Gift Aid Tick the box to say you are a UK resident and taxpayer when making Gift Aid payments and you’ll receive 20% or 25% of the donation as a reduction in your tax liability. To make the most of Gift Aid, the person with the highest tax rate in your family should ideally make the payment. Your financial future is in safe hands At Scrutton Bland, ensuring that our clients and their families get the best outcome from their efforts is part of the process of providing clear and effective independent financial advice to help you maximise your wealth and make informed tax planning decisions. Whether you are a business owner or private individual, making informed decisions and utilising the allowances available to you can make a dramatic difference to your wealth in the long- term. With tax and financial planning experts waiting to work together on your behalf, the first step on this long-term relationship is to get in touch to arrange a free, confidential consultation at a time that works for you.

Investments in your pension are free from income tax and capital gains tax, but there is a limit to the amount you can pay in. The current standard tax-free pension allowance is £40,000 or 100% of earned income, whichever is higher. The carryforward rules allow you to make use of any annual allowances that were not used during the last three years. That makes 5 April 2022 the last opportunity to use unused allowances from 2018/19. If your adjusted income ie your taxable income plus employer pension contributions, is over £240,000, your annual tax-free pension allowance falls away by £1 for every £2 of income. There is a minimum tax-free pension allowance of £4,000 for those with adjusted income of more than £312,000. You can also pay up to £3,600 into a pension pot for your spouse, a civil partner or a child and benefit from basic rate tax relief on the contributions.

Savings and investments

• Ensure the savings income for both individuals in a married couple or civil partnership is sufficient to use their full £500 or £1,000 personal savings allowance and £2,000 dividend allowance. • Shareholding directors of private companies can pay themselves up to £2,000 of dividend income for 2021/22 tax-free. • If interest on investments or savings is due to be paid just after 5 April 2022, closing the account before the end of the tax year can bring the interest forward. That will allow you to use up any surplus personal savings allowance you have for the current tax year.

Additional tax planning areas to consider

While the points we’ve covered are likely to be relevant to most people, there are also some specific tax planning areas that may apply to others: Trading and property allowances Two £1,000 tax-free allowances are available, one for income from property and the other from trading and miscellaneous income. They can reduce your tax liability if you generate a modest income, for example, by renting out a room on Airbnb or selling items on eBay or Amazon. Employment If you have had to work from home due to Covid-19, you can claim tax relief worth up to £125 for the additional household expenses incurred such as heating and business calls. Tax relief can also be claimed on your usual business expenditure such as professional subscriptions and business miles travelled in your own vehicle.

ISA allowances You should increase your savings if

necessary to make the most of the £20,000 tax-free ISA allowance per person. Married couples can invest £40,000 over the year with no capital gains tax or income tax to pay. Any unused allowance cannot be carried forward.

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Relight my fire As the chilly winter nights continue, many people welcome the chance to get a real fire burning in their homes. The sight, smell and warmth of logs crackling in the hearth appeals to our most primeval instincts, but there are risks associated with having a real fire, and your insurer will need to know that you have your chimney swept on a regular basis.

Why are coal and log fires such a risk? Burning organic matter like coal and wood causes a build-up of ash and creosote deposits in the chimney. If left untreated these accumulations of soot and tar will constrict the size of the flue, which in turn lowers the draw of the smoke up through the chimney. You may notice your room becoming smokier, the fireplace becoming blackened and furnishings getting grubby as the downdraught smoke tarnishes the objects in the room. The sooty deposits inside the chimney will warm up whenever there is a fire burning, and can eventually ignite, causing flames to appear from the chimney pot. Chimney fires can damage your chimney and crack or break the chimney pots, or in the worst case can spread to engulf other parts of the property and cause more widespread destruction. More serious still is where the flue becomes blocked, so that carbon monoxide fumes from solid fuel fires cannot escape from the chimney and come back into the room. If these fumes are inhaled they can cause serious damage to your health, and can even kill.

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The insurance implications of a real fire Your insurance company will expect you to have your chimney swept regularly. This means at least annually for a coal fire and more frequently for wood burning stoves or bituminous coal. You should also notify your insurance company if you’re installing a real fire for the first time, because you’re adding to the fire risk of your property, which may in turn alter your policy, and you might not be covered for it. You are strongly advised to use a professional chimney sweep. The NACS is the registered professional body for chimney sweeps and will provide you with a sweeping certificate which you will need for your insurance company in the event of a claim.

Scrutton Bland Insurance Brokers Ltd is authorised and regulated by the Financial Conduct Authority

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All change for Financial Planning It’s been a year of change for Scrutton Bland’s Financial Planning Department

(Scrutton Bland Financial Services Limited) as they became part of the Socium Group in September 2021. Matt Merchant, Independent Financial Adviser with the firm looks at how the new structure will work and how the relationships built up by the firm continue to flourish under the new structure.

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What has changed? The honest answer is that for our clients nothing has changed, except for our ownership structure. Our clients continue to deal with their trusted advisers and our wider teams with whom they have built fantastic relationships over the years. Crucially, we retain our independent status, meaning we are not incentivised to choose one solution for a client over another and continue to provide truly independent financial advice to our clients. Is the joined-up approach still in place? We are still based in the same offices as the Scrutton Bland Group and continue to closely work with them to assist both existing and new clients. We were always a separate company structure to the rest of the group for regulatory reasons, so our change of ownership does not affect our ability to work together. A good example of this was late last year when I was contacted by Scrutton Bland’s Corporate Finance department who had been advising the directors of a local publishing firm on the sale of their business. The directors needed professional advice on their pensions as well as the appropriate investment of their sale proceeds, and as I’m a specialist in that area, asking me to talk to them was the logical thing to do. What do you think will change this year? It is still early days under our new ownership and various aspects of the business will be reviewed over the next twelve months or so as we align with the wider Socium Group network. As and when any changes are confirmed these will be communicated to our clients as quickly as we can. One change that we know will happen this year is that the trading name of Scrutton Bland Financial Services Limited is going to change to Amber River. Over the next 12-18 months all existing firms within the Socium Group will take on the new Amber River name and brand identity. The aim is to build a substantial presence across the UK and develop the business further.

Can you summarise the main areas of advice your team provides? Our Independent Financial Advisers continue provide a range of financial advice for individuals, companies, trusts and charities including: Investments – Combining knowledge of investment markets with tax efficiencies of various investment structures allows us to build a portfolio to suit your needs and objectives, as well as reviewing this on an ongoing basis to ensure or improve both tax efficiency and suitability over the years. Pensions – Whether you are building your pension ready to retire, trying to decide whether you can afford to retire or are already in retirement, making sure you have the right pension and underlying investment strategy within it is key, as well as understanding the tax implications and potential longevity of your fund alongside any non-pension assets. Cashflow modelling – A professional adviser can help you understand where you are on your financial journey, and help you to plan ahead, using realistic assumptions and allowing for market events. This may be to help time your retirement, gift surplus funds or simply to help understand your position in a more graphical format. Protecting your wealth for future generations - There are numerous ways our advisers can help with inheritance planning for your estate. These include accessing specialist investment structures that qualify for reliefs or combining our tax expertise with investment planning to help you take advantage of individual tax allowances whilst investing your wealth in order for it to grow. This may also include working with Tax Advisers and Solicitors in order to put in place Trust arrangements to help ensure funds are passed on in a controlled manner. Our specialists in Independent Financial Advice will work with you to deliver a complete plan for your future. Contact Matt at [email protected] or phone 01473 267000. Scrutton Bland Financial Services Limited is authorised and regulated by the Financial Conduct Authority. The FCA registered number is 209451.

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Cryptotax Decrypted

Seemingly unaffected by the pandemic, since March 2020 the value of the Bitcoin has experienced a meteoric rise; this month has seen the value of a single bitcoin reach record levels in excess of $65,000. Since Bitcoin was introduced in 2009, a number of other cryptocurrencies have also emerged such as Ethereum, Litecoin, Cardano and Stellar.

HMRC now has access to cryptoasset >Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16

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