Podcast Summary
Discover hidden talent on LinkedIn and Tax Changes: Small businesses can find top talent on LinkedIn, where 70% of users don't visit other job sites. Inheritance tax limit effectively doubled to £600,000 for spouses, and Blue Nile offers a $50 discount on engagement rings online.
LinkedIn is a valuable resource for small business owners looking to hire professionals, even those who aren't actively seeking new opportunities. With over 70% of LinkedIn users not visiting other leading job sites, it's the go-to place to find top talent. Meanwhile, in the world of finance, the recent pre-budget report brought changes to inheritance tax and capital gains tax. Patricia Mok, private client services director at Deloitte, explains that while the chancellor didn't technically double the inheritance tax allowance, spouses can now claim both their own and their deceased spouse's unused allowance, effectively doubling the limit to £600,000. For those considering a significant purchase, such as an engagement ring, Blue Nile offers the convenience of designing and buying online with a $50 discount using the promo code 'listen'. As for the impact of the budget on capital gains tax and offshore bonds, stay tuned for more insights from John Whiting of PwC and John McLeod of Investors Chronicle. Remember, you can send in your financial questions to ask.ftyourmoney@ft.com.
New inheritance rules for unused nil rate band: Surviving spouses can now claim unused nil rate band from deceased spouse, potentially doubling tax-free inheritance to £600,000. Applies to most individuals with family homes, but planning may be needed for those with trusts or multiple marriages.
The new inheritance rules allow the unused nil rate band of the first spouse to be transferred to the surviving spouse, potentially doubling the tax-free inheritance amount to £600,000. This benefit is mainly for individuals whose assets primarily consist of a family home and have not previously undertaken planning to leave the nil rate band to children. Those who have already set up nil rate band trusts in their wills have options to keep them in place, rewrite their wills, or unwind the trust after death. The transferability of unused nil rate bands also applies to widows whose spouses died on or after October 9, 2018. The unused proportion of the nil rate band from the previous spouse's death will be transferred, not the exact amount. Lastly, this rule does not apply if you have been married multiple times, and marrying for the nil rate bands is not an option. It's crucial to carefully review your estate planning in light of these changes.
UK introduces simplified capital gains tax rate from April 2023: From April 2023, the UK simplifies capital gains tax with a flat rate of 18%, benefiting many individuals but increasing tax bills for some groups.
Starting from April 2023, the UK tax system will introduce a new flat rate of 18% for capital gains tax, replacing the previous complex system with tapered relief. This simplification will benefit many individuals, particularly those with second homes or buy-to-lets, as well as those with general shares, who might have previously paid a higher rate. However, some groups, such as small business owners and entrepreneurs, will face higher capital gains tax bills due to the elimination of the 10% rate. It's essential to consider individual circumstances and consult a tax professional to understand the potential impact on personal tax situations. Additionally, it's important to note that there are no tax incentives for getting married multiple times to claim extra nil rate bands, as there is a capping mechanism in place.
Impact of Tax Changes on Business Asset Disposals: Business owners may sell assets before April 2023 to avoid increased tax rates, particularly affecting AIM companies' shareholders. New tax system may deter risk-taking and discourage business growth.
The upcoming change in tax treatment for business asset disposals could lead to some forced sales before April 2023 to avoid the increased tax rate. This could particularly affect shareholders in AIM companies, who have seen a higher risk profile traditionally incentivized by lower tax rates. However, the new flat rate tax may discourage taking risks and building businesses, potentially leading entrepreneurs to consider alternative locations. The changes were intended to target private equity, but the broad application may unintendedly impact various taxpayers. It's crucial for individuals to assess their situation and consider the potential consequences between now and April 2023. The new tax system may deter risk-taking and could potentially discourage business growth in some cases.
Capital gains tax change impacts investment bonds: High-rate taxpayers may reconsider investment bonds due to reduced tax savings from capital gains tax reduction
The recent change in capital gains tax regime is causing significant rethinking among investors, particularly those in business circles. The shift from a complex tax system to a simpler one has caught many off guard, leading to a need for extensive planning. Investment bonds, which have been popular due to their tax advantages, may have lost some of their appeal with the reduction of capital gains tax to 18%. These bonds, which are single premium life insurance contracts that house investment funds, have been popular due to their tax-efficient structure. High-rate taxpayers who suspect they may become basic rate taxpayers in the future can benefit from the tax savings within the bond. However, the tax laws dictate that the remaining 20% tax liability only becomes due upon surrender or maturity of the bond. This potential saving could be significantly more than 20% for high-rate taxpayers. With the reduction in capital gains tax, this tax advantage may not be as significant, making investment bonds less attractive for some investors.
Investment bonds vs Collective Investments: Tax Efficiency: For higher rate taxpayers, collective investments offer simpler tax rules and potentially lower tax liabilities compared to investment bonds.
For higher rate taxpayers, collective investments like unit trusts may now be more tax efficient than investment bonds. The gains made within investment bonds could be up to 40% taxable offshore or 20% taxable onshore, whereas the flat gain on a collective investment is only 18% regardless of the tax bracket. Additionally, investors can take 5% tax-free or tax-deferred income from investment bonds, but under the new CD2 rules, they can effectively draw £9,200 tax-free from a collective investment. With the simplicity of the CD2 rules compared to the complex rules regarding investment bonds, the appeal of investment bonds for both growth and income seekers may lessen.
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