Taking the trouble out of Tax

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Is the new £5k nil-rate tax band for everyone? 

Simple answer – No. But read on because it might be for you.

If you have earnings of more than £15600, then forget it. BUT… if you are income poor, with substantial non-dividend investments, or a small company owner, you can take advantage of this exemption. It is available for non-dividend savings income. This of course will mostly be interest. Who has that amount of interest when rates are so low? I do not think this is going to cost the chancellor a great deal!

However, if you are a small company owner, taking a low salary, with a substantial loan to your company, this could be to your advantage. If you are taking , say, £7500 salary, you could take market -value interest on your loan, up to £8100, and have no tax. Dividends do not count as income for this purpose, so take them up to the basic rate limit.

There are other considerations. The company would need to complete a CT61 on payment of the interest, but the gross interest is allowable against profits.

Next year, from April 16 2016, George has set an investment income allowance for everyone, except wealthy 45% payers. It is £1000 for a basic rate payer, and £500 for a 40% earner.

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