Newsletter November 2019
Taxing aspects of electric cars for your business
This article does not cover the risks of owning an electric car, depreciation rates etc. Instead it discusses the tax implications if you buy an electric car for business purposes.
As electric cars have zero carbon emissions for tax purposes it should be possible to claim what is called a “first year allowance” when the car is purchased from new. Effectively, this means that you can write-off up to 100% of the cost of the car against your business profits in the year that you buy the vehicle.
This allowance is only available for new vehicle purchases. If you buy a used electric car for business, you can only claim a “main rate” writing down allowance of 18%.
Additionally, self-employed traders will need to reduce their claim for either of these allowances if there is any private use of the vehicle.
When the car is sold, if you have claimed the 100% first year allowance then all of the proceeds of sale will be taxable as a balancing charge. The balancing charge will be reduced if there is any private use.
If you have the use of an electric company car, it will still attract a car benefit charge for the driver and a National Insurance charge for the employer, albeit at the lowest rates.
The ability to be able to write-off the cost of a car in the year of purchase is appealing as this boosts the initial cash-flow benefits of going-electric.
Gifts and Inheritance Tax (IHT)
When you make a gift to third parties you are potentially transferring part of your estate and a life-time charge to IHT may be applied.
However, in most cases you will not need to open your cheque book as there are a number of exemptions that may cover your intended gifts.
The current gift exemptions are reproduced below.
You can give away £3,000 worth of gifts each tax year (6 April to 5 April) without them being added to the value of your estate. This is known as your ‘annual exemption’.
You can carry any unused annual exemption forward to the next year - but only for one year.
Each tax year, you can also give away:
- wedding or civil ceremony gifts of up to £1,000 per person (£2,500 for a grandchild or great-grandchild, £5,000 for a child)
- normal gifts out of your income, for example Christmas or birthday presents - you must be able to maintain your standard of living after making the gift
- payments to help with another person’s living costs, such as an elderly relative or a child under 18
- gifts to charities and political parties
You can use more than one of these exemptions on the same person - for example, you could give your grandchild gifts for her birthday and wedding in the same tax year.
You can give as many gifts of up to £250 per person as you want during the tax year as long as you have not used another exemption on the same person.
Even if your gift is not excluded by these exemptions any tax payable can be deferred under the “potentially exempt transfer” or PETs. Essentially, as long as the person making the gift lives seven years after making the gift, no IHT is payable. A sliding scale applies if the donor dies during this seven year period.
Working after State Pension age
It is fine to keep working past your State Retirement Age unless your employment is subject to retirement at a compulsory retirement age. If your employer does this, they must give a good reason, for example: the job requires certain physical abilities (e.g. in the construction industry) or the job has an age limit set by law (e.g. the fire service).
To be clear, a forced retirement age of 65 no longer exists.
You can also ask your employer if you can work more flexibly or work part-time. They have the right to reject your request.
You can claim your State pension while you are working, as long as you’ve reached the State Pension age. You can also work if you are claiming a personal or workplace pension. However, check with your pension provider or employer if you have a workplace pension as reducing your working hours could affect how much pension you will receive. You should also check to see what happens to your workplace pension if you continue working beyond the age when you can take it.
If you delay (defer) taking your State Pension, you will get larger weekly payments when you do start taking your pension.
As a general rule, if you sell shares for more than you paid for them, any profit you make will be chargeable to Capital Gains Tax (CGT).
Shares and investments you may need to pay tax on include:
- shares that are not in an ISA or PEP
- units in a unit trust
- certain bonds (not including Premium Bonds and Qualifying Corporate Bonds).
CGT will not usually be payable if you give shares as a gift to your husband, wife, civil partner or a charity.
You also do not pay Capital Gains Tax when you dispose of:
- shares you’ve put into an ISA or PEP
- shares in employer Share Incentive Plans (SIPs)
- UK government gilts (including Premium Bonds)
- Qualifying Corporate Bonds
- employee shareholder shares - depending on when you got them
The amount of CGT payable will depend on your other earnings in the tax year. You may also be able to claim other reliefs if you are selling shares in a business that you control.
Tax Diary November/December 2019
1 November 2019 - Due date for Corporation Tax due for the year ended 31 January 2019.
19 November 2019 - PAYE and NIC deductions due for the month ended 5 November 2019. (If you pay your tax electronically the due date is 22 November 2019.)
19 November 2019 - Filing deadline for the CIS300 monthly return for the month ended 5 November 2019.
19 November 2019 - CIS tax deducted for the month ended 5 November 2019 is payable by today.
1 December 2019 - Due date for Corporation Tax due for the year ended 28 February 2019.
19 December 2019 - PAYE and NIC deductions due for the month ended 5 December 2019. (If you pay your tax electronically the due date is 22 December 2019)
19 December 2019 - Filing deadline for the CIS300 monthly return for the month ended 5 December 2019.
19 December 2019 - CIS tax deducted for the month ended 5 December 2019 is payable by today.
30 December 2019 - Deadline for filing 2018-19 self-assessment tax returns online to include a claim for under payments to be collected via tax code in 2020-21.