Make Do & Mend?

Make Do & Mend?

Hot on the heels of Transport for the North’s Strategic Transport plan published in January which announced such marquee long term projects such as Northern Powerhouse Rail including an exciting brand-new line linking Leeds, Bradford and Manchester, Network Rail released their five-year strategy on February 9th.

Focussing on the period from 2019-2024, this heady talk of pioneering new lines in the Pennines made way for more modest, but possibly more vital upgrades to existing routes.

£18.5billion has been budgeted for the operation and maintenance side of Network Rail with the replacement and renewal of ageing infrastructure and signalling systems receiving a similar amount.

New projects are allocated £10.1bn, but it is likely this will be spent on upgrading the existing routes between Manchester and Leeds, rather than creating a new route. Network Rail’s vision for the plan is to create a more reliable, more cost-efficient railway with increased capacity, with an envisaged 350,000 more services per year running on the UK’s tracks.

Technology changes are in the pipeline too with the advent of the digital railway, and a revolution in railway signalling and train control.

Sheffield City Region is set to benefit too with overdue improvements to the Hope Valley line linking Sheffield with Manchester being given the go-ahead by Chris Grayling, Secretary of State for Transport.

Paul Wormald, Partner at Hawsons Chartered Accountants commented: “The release of Network Rail’s strategy could be seen as putting cold water on the ambitious long-term projects outlined by Transport for the North, but both visions are valid and necessary. The need for faster links and better connectivity between all parts of Yorkshire and Lancashire are necessary for future economic growth and prosperity along each of the Trans-Pennine corridors. Whilst Transport for the North’s vision sets out the long-term goals, Network Rail’s five-year strategy sets out how some of those goals can be achieved in the foreseeable future.

After much necessary investment in rail infrastructure in the North-West, it is also nice to see this drifting eastward into the Yorkshire and Humber region. For those businesses involved in the supply chain for this sector, these plans help them formulate their own strategies in terms of recruitment, tendering, resource planning, cash flow forecasting, and capital expenditure plans. The move away from conventional train control to the digital railway should also create opportunities for innovations in the sector which may enable business to benefit from Research & Development tax credits.”

Paul Wormald

Partner, Doncaster

01302 367 262

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Canny romantics: The tax benefits of getting married

Canny romantics: The tax benefits of getting married

Canny romantics: The tax benefits of getting married

Considering popping the question on Valentine’s Day?  Here we look at some of the tax breaks married couples can benefit from and how it can pay to get hitched.

1. The Marriage Allowance

The Marriage Allowance can enable eligible married couples and civil partners to save up to £230 of tax a year.  And despite being introduced almost three years ago, many eligible couples are still missing out on this tax break.

The relief is designed to benefit couples where one spouse has insufficient income to make full use of their tax-free personal allowance (£11,500 for 2017/18).  Where the couple meet the qualifying conditions, the spouse with the unused personal allowance can elect to transfer 10% (£1,150) of the allowance to their partner, offering a tax saving of up to £230 for 2017/18.

It is also currently possible to backdate the claim to 6 April 2015 (the date the allowance was introduced), to obtain an additional tax saving of up to £432.

The transfer can only be made if the spouse who receives the transferred allowance is a basic rate taxpayer, meaning that for 2017/18 they would normally need to have an income of no more than £45,000 (or £43,000 if you are in Scotland).

2. Inheritance Tax

If you are married or in a civil partnership, then anything you leave to your partner is generally free of inheritance tax (IHT).  Whereas bequests to others (and lifetime gifts made within seven years of death) attract IHT if the value of your estate exceeds the nil rate band (NRB) which is currently set at £325,000.

If your spouse or civil partner passes away you can also inherit their unused NRB (known as the transferable nil rate band), potentially allowing you to pass on up to £650,000 of assets to the next generation without incurring IHT.

In addition, the residence nil rate band (RNRB) was introduced in April 2017, starting at £100,000 per person and set to increase to £175,000 by April 2020.  Like with the NRB, if the conditions are satisfied it should be possible for any unused RNRB to be transferred to the deceased’s spouse or civil partner’s estate.

3. Pay less Capital Gains Tax

If an individual sells an asset (such as property or shares), they will pay capital gains tax (CGT) on any gain in excess of the annual exemption, which is currently set at £11,300 (2017/18).  However, as both spouses have their own CGT exemption, with careful planning assets can be transferred so that effectively a couple can realise gains of £22,600 before CGT is payable.

Usually when an asset is transferred from one owner to another this can potentially trigger a CGT liability; however this does not apply when switching ownership between spouses.

By transferring assets between spouses, it can be possible to make use of a spouse’s lower tax rate or unused annual exemption.  It is important that tax advice is sought prior to any asset transfer or sale as there are pitfalls to avoid and there may be reporting requirements. To be effective for tax, the transfer to your spouse or partner must be a genuine outright gift.

4. Reduce Income Tax

If one spouse pays a lower rate of tax than the other, then assets can be switched so they are owned by the lower earning spouse.  Similarly, having your spouse as a shareholder or director in a limited company can help with tax planning – allowing you to maximise your available allowances and potentially pay tax at lower rates.

There are of course risks in giving assets away to unmarried partner – if you later split, they will legally own these assets and can walk away with them.  In addition, there is anti-avoidance legislation that states that if you give assets away you can’t derive any benefit from them, but this does not apply to married couples.

5. Pensions

For married couples and civil partners who hold a final salary scheme, the surviving spouse will typically receive survivor benefits based on the final salary pension that has been built up by their partner, however this does not necessarily apply to couples living together.  Each scheme sets its own rules and the wording of the particular scheme needs to be looked at.  Some schemes stipulate that it can only be paid to someone who is financially dependent, whereas others will allow you to nominate a partner.

With regards to money purchase schemes, these are much more flexible, but do require you to complete an expression of wishes form to ensure that the nominated beneficiary receives the the benefits in the event of death.

Ultimately, the decision about where the benefits are paid rests with the Pension Trustees.

If you would like further information on any of these areas outlined above, please do not hesitate to contact us.

 

 

Craig Walker is a senior tax manager at the firm. He advises on all matters tax related, both corporate and personal, including income, capital gains and inheritance. For more details and advice, please contact Craig on [email protected] or 0114 266 7141.