Taper Relief doesn’t work in the way many people think it does.

“If I gift this £200,000 rental property to my daughter and die 3 to 7 years from today, I’ll get Taper Relief right? Say I die 6 to 7 years after, the value of the gift is reduced by 80%, to £40,000?” A client asked me yesterday. The answer is no.

Taper Relief reduces the tax payable on a gift – if it is chargeable – not the value of the gift itself. In my example above, the gift would simply reduce the value of the Nil Rate Band on death by £200,000, to £125,000. No Taper Relief available.

For tax to be payable on a Potentially Exempt Transfer, the value of gifts generally needs to be over the Nil Rate Band of £325,000. That means that Taper Relief is much more likely to be found on an exam paper than in the wild.

So how does it work? Let’s say a client gifts £500,000 to their child, then dies within 6 – 7 years*. The Taper Relief calculation is as follows:

£500,000 [gift] – £325,000 [Nil Rate Band] = £175,000 chargeable on death

Inheritance tax is £175,000 x 40% = £70,000

Taper Relief [this applies to the tax, not the gift] £70,000 x 80% = £56,000

IHT payable on the gift = £70,000 – £56,000 = £14,000.

Note also that the £14,000 here is paid by the recipient of the gift, not the estate*

Soon you will have to publicly file your company’s Profit and Loss account with Companies House. That means your competitors, family, nosey neighbours etc will be able to see how much profit your company made to the pound. At the moment they can only see a balance sheet, which doesn’t give that much away.

What if you want the tax benefits of a company, but don’t want anyone seeing your figures?*

That’s where an underutilised structure might come in – the unlimited company. An unlimited company retains the tax benefits of a company, but has similar publicly available information to a sole trade – so basically nothing. Unlike a sole trade, it retains the ability to enter contracts in its own name, and also outlives the owner.

Of key importance is that it is unlimited liability – so this only works commercially in certain situations. If the company becomes insolvent, the creditors can take all the assets of the shareholder.

Take the famous author Ian McEwan. He’s owned a company since 2010 – so you might want to have a nosy to see how much cash he has in it from his book sales. Take a look at Companies House** – you’ll see this is an unlimited company so there’s almost no publicly available information – not even a balance sheet.

*Admittedly, with the increase in CT rates, reduction in NIC alongside increased dividend tax rates and reduced dividend allowance, there are few tax benefits to companies nowadays.

** https://find-and-update.company-information.service.gov.uk/company/07473219/filing-history

There is no materiality in tax. HMRC boldly states “Materiality is an accounting concept. It is not a tax concept”*.

So if you’ve accidentally left £100 of income off your tax return, should you tell your accountant to amend? Not necessarily.

The Professional Conduct in Relation to Taxation (PCRT) states “As a general principle all known errors should be corrected. In the opinion of the professional bodies it is reasonable for a member to take no steps to advise HMRC of isolated errors where the tax effect is no more than minimal, say up to £200, as these will probably cost HMRC and the client more to process than they are worth to the Exchequer.”

The PCRT sets out the guidelines for members of all the reputable professional bodies when doing tax work. Notably, HMRC recently endorsed the PCRT**

I will add this doesn’t mean you can deliberately understate your tax liability by £200 each year!

https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim31047

https://www.gov.uk/government/publications/hmrc-the-standard-for-agents/the-hmrc-standard-for-agents

Thinking of gifting property to a your children? There might be more tax implications than you think, including Capital Gains, Stamp Duty and Inheritance Tax.

I was featured in today’s Financial Times answering a query on the matter – see link below

https://www.ft.com/content/972eb2c0-648d-45d7-bbf9-13bad443562e

If you are renovating your house, make sure to keep all invoices and receipts. It might reduce your tax bill in future!

Normally when you sell your main residence it doesn’t matter what you spent on improving it as the gain is exempt under Private Residence Relief (which is horribly named – it’s an exemption not a relief – but that’s a separate issue).

But if you decide to buy another house and keep your original residence as a rental you will be partially taxable on the gain when you sell your original residence. From this gain, you can deduct capital improvements – e.g new kitchens, renovations, extensions etc.

Simple example – you bought a house for £300k in 2005, lived in it until 2015 but kept it as a rental, then sold it in 2025 for £500k.

Broadly half of the £200k gain would be taxable and half exempt, giving tax payable of about £100k x 24% = £24k.*

But let’s say when you moved in you spent £50k improving the house. In this case, the gain would be £200k – £50k = £150k. Half of this would be taxable, giving tax payable of about £75k x 24% = £18k.

The issue a lot of clients have is that they cannot remember or evidence how much they spent (say) 20 years ago on a renovation, and further they would not be able to prove it in the event of a HMRC enquiry.

Digitalisation of invoices/receipts etc is a good idea in these circumstances.

In 2017, the Loan Charge was brought in to stop people using ‘disguised remuneration schemes’. This was retrospective legislation and caused a huge amount of distress on individuals affected, many of which were unaware they were in loan schemes. A total of 10 suicides have been linked to the Loan Charge.

Has it stopped the disguised remuneration industry? No.

HMRC today published a list of tax avoidance scheme providers, many of which use loan schemes, with 167(!) providers on it.

https://www.gov.uk/government/publications/named-tax-avoidance-schemes-promoters-enablers-and-suppliers/current-list-of-named-tax-avoidance-schemes-promoters-enablers-and-suppliers#rainbowpay-ltd

I was recently given a bill at a London restaurant with a 15%(!) service charge.

Why have increasing services charges become so widespread? As with everything in life, there’s a tax angle:

1. Tips can generally be paid to employees without Employers’ or Employees’ National Insurance. This makes them a tax efficient way to pay staff.
2. Technically a voluntary payment, VAT is not payable on the service charge unlike the rest of the meal so the restaurant doesn’t need to pay 20% of it to HMRC.

Gary Stevenson is everywhere at the moment. But how much does he actually know about tax?

In the interview with Bartlett, Gary was told the Duke of Westminster pays 6% principal charges on his trust assets (0.6% a year). Gary then stated he was paying tax at 100x the rate of Duke of Westminster because he paid income tax at 60%.*

Except that’s not true. A principal charge on a trust is an entirely separate tax to income tax and can’t be compared. It’s quite fundamental.

It’s like me complaining I pay tax at twice the rate of another person because I pay income tax at 40% and they bought a can of coke paying just 20% VAT.

See 36:30 at here https://youtu.be/4yohVh4qcas?si=v7kgSXTMQ80KXZVp –

When would you need to argue to HMRC you don’t provide ’emotional support and companionship’ to your partner?

For tax residency, we sometimes have to consider whether two people are “living together as a married couple”. Whether they meet this definition can change a person from tax resident to non-resident, with potentially millions of pounds of tax at stake.

There is no statutory definition of the above. HMRC says they consider this “a stable partnership, not just based on economic dependency but also on emotional support and companionship”.*

HMRC go onto to say they look at signposts such as**:

– Living in the same house
– The stability of the relationship (does the relationship has a volatile history?)
– Financial support (how is the household income shared or used?)
– Public acknowledgement (do family and friends regard them as a couple?)
– Sexual relations (HMRC state “where there has never been a sexual relationship between the parties, strong alternative grounds are needed to reach the conclusion that the relationship is akin to husband and wife”)

So next time you hear your neighbours arguing, remember they might be doing it for tax purposes.

https://www.gov.uk/hmrc-internal-manuals/tax-credits-technical-manual/tctm09330

https://www.gov.uk/hmrc-internal-manuals/tax-credits-technical-manual/tctm09340

1000 likes, 29k impressions… but complete rubbish.

Capital Gains are taxed at 24%. The 10% Capital Gains Tax rate no longer exists (and only ever related to disposals meeting certain specific conditions).

Dividends are taxed at up to 39.35% – and that’s after c. 25% corporation tax paid by the company.