Financial Matters

With David Frederick FCCA | Marcus Bishop Associates | marcus-bishop.com

Tax Spring Clean

As we are fast approaching the end of the 2020-21 tax year it is time to focus on some spring cleaning of our tax affairs. For some this may be addressing the mountain of tax planning things we’ve been intending to do since the fiscal year started. Perhaps the increasing anxiety and fear of a radical overhaul of many areas of taxation pending the Chancellor’s forthcoming Budget on 3rd March may or may not be the stimulus for action. Nevertheless four key areas for reflection are discussed below.

ISA

An easy win for savers even at historic low interest rates is to make use of this year’s £20,000 ISA allowance, before 5 April 2021. Unused allowances cannot be transferred forward or backward. It is a standard use it or lose it. Minors or those saving on behalf of minors have a threshold of £9,000 for 2020-21. Taxpayers under 40 years old can still contribute £4,000 of their of their £20,000 ISA allowance into a lifetime ISA which receives an annual government bonus of up to £1,000 a year. This affords savers the option to use the lifetime ISA to buy a first home or fund retirement. Savers should note that penalties for withdrawals from their lifetime ISA were put on hold in 2020-21. Meanwhile savers currently utilising the help-tobuy ISAs can continue to save a maximum of £200 a month towards obtaining a mortgage for the first home purchase.

Pensions

The maximum annual pension contribution is £40,000. This is subject to a tapered reduction where taxpayers have a threshold income over £200,000 and an adjusted income over £240,000. Threshold income is all UK earnings and not solely employment income. However it is net of all pension contributions paid personally to any UK registered pension schemes. Unused pension allowances from previous years can be carried forward for a maximum of three years. Taxpayers should also be aware that if in 2020-21 their pension savings exceeds their lifetime allowance of £1,073,100, they may be liable to income tax on when drawing pension benefits.

IHT Gifts

The inheritance tax (IHT) threshold remains unchanged at £325,000 with any excess being subject to 40% inheritance tax. However, some estates will qualify for an additional residence nil-rate band of £175,000, if the family home, or share of the family home, is left to the children or grandchildren. This will provide a threshold of £500,000. However, even this higher threshold is easily surpassed by many home owners within Dulwich. With this in mind, taxpayers with estates that will be subject to IHT, may want to consider whether their will is up to date. In addition, consider making use of their annual £3,000 gift exemption. Furthermore, taxpayers in this category should consider having an annual financial health check to ascertain whether they have surplus assets that they can give away and potentially reduce the value of their estate that is chargeable to inheritance tax.

CGT

Capital gains tax is the tax of most consternation for the upcoming budget with rumours of rates hitting 40% or 50%. In advance of any changes which will take effect from 6th April 2021 at the earliest taxpayers can still use their 2020-21 annual exemption of £12,300. Civil partners and married couples can also take advantage of spousal transfer at nil rate, before a disposal. An additional area of focus applies to VAT registered businesses. From 1st April 2021, VATregistered businesses with a taxable turnover above the VAT threshold (£85,000) are required to comply with the Making Tax Digital rules. In short, they must keep digital records and use compatible software to submit their VAT returns.

SE22 Councillors

Councillor James.McAsh | James.McAsh@southwark.gov.uk | @mcash

For the past six months, my email inbox has hosted portals to two parallel universes. In the first, East Dulwich is fast becoming a tranquil oasis. Thanks to the “low traffic neighbourhood” on the streets around a carrot and a stick: the quieter streets are safer and more pleasant for pedestrians and cyclists, whereas car journeys become longer without the cut-throughs. Of course, human beings are unpredictable

Melbourne Grove, the air is cleaner and local residents enjoy more space to walk and cycle safely. The other universe is not so pleasant.

Drivers are plagued by endless congestion on the main roads, with vehicles spitting fumes into the already over-polluted air. Which universe is real? They are probably both a distortion of reality, with the truth lying somewhere between. But without a shared understanding of the facts, it is impossible to assess the new traffic schemes. We have a plan to address this. The council is finalising its monitoring and evaluation plan, due to be published this month.

It has two stages. First we will make small

“tweaks” to the interventions, addressing any obvious issues. Then, once we have the bestpossible version of the schemes, we will evaluate their effects. We will carefully scrutinise how the project fares against our shared priorities: improving air quality, encouraging active travel and reducing traffic. This will incorporate both objective evidence and community opinion. The final decision to retain or remove the interventions will be taken in the summer. We will look at all changes in the Dulwich area together. What do I think? I’m yet to decide what should happen to our local schemes - I want to be guided by the data. But while I am agnostic on the specifics, I am devout on the principle: we need to reduce car-use. It’s hard to overstate the damage cars do.

Motor traffic is the main source of poor air quality and one of the largest contributors to climate change. Road collisions cause injuries and deaths every year. Research shows that those living on streets with heavy traffic have, on average, fewer friends. Cars are useful but they cannot be allowed to dominate. How can we reduce motor traffic? We might start with road capacity. If car journeys become less convenient then some drivers will choose not to make them, leaving space for those who have no choice. Low traffic neighbourhoods offer so these schemes don’t always work as planned. Drivers might respond to restrictions in one of two ways. They could abandon the car journey entirely: opting to walk, cycle, take public transport, or combine multiple journeys into one. This is called “traffic evaporation”: the traffic vanishes. Alternatively, they may choose to take the longer route anyway. This effectively moves traffic from one set of streets to another: “traffic displacement”. The balance between evaporation and displacement will vary in each scheme. If effective, there will be more evaporation; if ineffective, just displacement. Overall, we know traffic evaporation is key to tackling the problems of car-use. But we do not yet know if our local schemes deliver it. We need solid data on which we can make our decisions. The measure of success should be whether traffic drops overall, not whether it is moved about. I look forward to finding out for sure.