Forward planning and the reduction in top rate of UK income tax
The 2012 Budget announced that the top rate of income tax is being reduced to 45% from 50% as of 6 April 2013. In light of this, we are advising that some clients may wish to plan to take advantage of the reduction in the tax rate by deferring an income tax charge to the 2013/14 tax year.
Salary and Bonus
It is difficult to defer salary and bonus income due to the rules surrounding the taxation of earnings, namely that earnings are taxable when earned. Some careful planning will need to be done to put together a salary sacrifice scheme or to make changes to the company’s bonus plan in order to achieve deferral.
Shareholders with the power to determine dividend payments should consider deferring the payment of dividends to the 2013/14 tax year. Should cash flow issues arise due to personal circumstances, considerations should be made for making loans from the company which will be repaid by way of a dividend issue in the 2013/14 tax year. Care should be taken in this regard as this may give rise to a benefit-in-kind issue in respect of the loan. Further, it must be ensured that the loan is repaid within nine months of the end of the accounting period as a further charge to tax may arise on the company.
Self-employed individuals should consider accelerating revenue and capital expenditure to the current tax year as this reduces profits chargeable to tax where capital allowances are available.
Exercise of unapproved share options
Employees with unapproved share options should consider delaying the exercise of their options until after 6 April 2013 as the exercise of unapproved share options normally triggers an income tax charge.
Please feel free to contact us should you have any queries or if we can be of assistance.