SLATERS CHARTERED ACCOUNTANTS

162A London Road
Chesterton
Newcastle Under Lyme
Staffordshire,ST5 7JB
Tel: 01782 566101 Fax: 01782 566090

Income Tax Allowance

Income Tax Allowances 2006/07 (£) 2007/08 (£)
Personal Allowance    
Personal allowance for people aged 65-74    
Personal allowance for people aged 75 and over    
Income limit for age-related allowances    
Married couple's allowance for people born before 6 April 1935    
Married couple's allowance - aged 75 or more    
Minimum amount of married couple's allowance    
Blind person's allowance    

Pre-owned Assets

Back in December 2003 the government announced its intention to legislate against what it saw as inheritance tax (IHT) avoidance.

New measures effective from 6 April 2005 introduce an annual income tax charge in circumstances where an individual has been able to remove an asset from their estate for IHT purposes but still continues to be able to enjoy the use of it or to benefit from it. These new rules come as the Inland Revenue’s response to the successful use of IHT saving schemes particularly in relation to the family home. The new rules apply to land, chattels and certain interests in trusts.

The annual income tax charge is based on the value of the benefit from using the asset, ie its rental value. Logically there will be a deduction for any rent actually paid and a de minimis threshold of £5,000. Other exclusions cover situations where:

the asset still counts as part of the taxpayer’s estate for IHT purposes or

the asset was sold at an arm’s length price, paid in cash.

In addition individuals who have already entered into a scheme now caught by the new rules can elect to avoid the income tax charge and accept instead that the asset is still in their estate for IHT purposes.

Action Point

Despite the fact that the new regime is only effective from 6 April 2005, it can apply to arrangements that may have been put in place at any time since March 1986. Existing schemes need to be reviewed to see if the new charge will apply.

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