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Taxing Questions 

Most of us risk being taxed on our income, our capital gains and the value of our estate when we die.  

Income Tax 

The income tax Personal Allowance for the year 2013/2014, for people born after 5 April 1948, is £9,440 (2012/2013 - £8,105). If your total income is less than this during the tax year, you have no tax to pay. 
Neither should you have to pay tax on any interest you've earned on your savings. So if you're on a low income then your bank or building society can provide you with Inland Revenue form R85 to apply for your interest to be paid gross. 
For those aged 65 and over (up to and including 2012-2013) and born before 6 April 1948 (from 2013-2014), the income tax Personal Allowance can be reduced below the basic Personal Allowance where the income is above £100,000. 

Tax rates 2013-14: Income Tax Personal Allowances 

2013 / 2014 
2012 / 2013 
Personal Allowance (1) 
Personal Allowance for people born after 5 April 1948 (1) 
Income limit for Personal Allowance 
Personal Allowance for people aged 65-74 
(1) (2) 
Personal Allowance for people born between 6 April 1938 and 5 April 1948 (1) (2) 
Personal Allowance for people aged 75 and over (1) (2) 
Married couple's allowance for people aged 75 and over (2) (3) 
Income limit for age-related allowances 
(1) The Personal Allowance is reduced by £1 for every £2 that an individual's adjusted net income exceeds £100,000. This reduction applies irrespective of age. 
(2) These allowances reduce where the income is above the income limit by £1 for every £2 of income above the limit. The Personal Allowance for people aged 65 and over (up to and including 2012-2013) and born before 6 April 1948 (from 2013-2014) can be reduced below the basic Personal Allowance where the income is above £100,000. 
(3) Tax relief for the Married Couple's Allowance is given at the rate of 10%. 

Tax rates 2013-14: Income Tax Personal Allowances 

2013 / 2014 Band 
2012 / 2013 Band 
Starting rate for savings: 10% (4) 
£0 - £2,790 
£0 - £2,710 
Basic rate: 20% 
£0 - £32,010 
£0 - £34,370 
Higher rate: 40% 
£32,011 - £150,000 
£34,371 - £150,000 
Additional rate: 50% 
Over £150,000 
45% rate from 6 April 2013 
Over £150,000 
4) The 10% Starting rate applies to savings income only. If, after deducting your Personal Allowance from your total income liable to Income Tax, your non-savings income is above this limit, then the 10% Starting rate will not apply. 
The self-employed can claim business expenses against their income. So make sure you include all possible justifiable business expenses on your self-assessment form. This also applies to capital allowances for expenditure on plant and equipment, including computers and tools, for example, used for your business. 
Don't forget pension payments either. You may be able to pay further contributions to your pension, which can soak up some unused tax relief. 
One other point to remember, if one spouse is a tax payer and the other is not or pays tax at a lower rate it is worth considering switching some investments to take advantage of their unused tax allowances. 

Capital Gains Tax 

In the tax year 2013/2014 an individual has a CGT allowance of £10,900 (12/13 £10,600). 
This means that you do not have to pay tax on gains from buying and selling shares or other investments during the tax year up to that amount. Remember also that you do not normally have to pay tax on any gain you make when you sell your main residence. 
If you have used your CGT allowance, don't forget your Individual Savings Account (ISA) allowance. Both a 'Cash ISA' and a 'Stocks and Shares ISA' can shelter capital gains on investments, for example unit trust holdings, worth up to £11,520 (2013/2014) per year. 

Inheritance tax 

Inheritance tax is hanging over more and more of us each year. This is largely due to the rise in residential property values. The current IHT allowance is frozen at £325,000 until 2017/2018. Depending on the value of your house and other assets this may not be that big an allowance. If you die leaving an estate worth more than £325,000 and you have no spouse your estate will come in for IHT at 40% on the balance. 
Even if you do have a spouse to inherit then this only puts off the time when tax will be payable because he or she will also pass away one day. It is worth doing some forward planning with a tax adviser to decide whether it would be appropriate to gift some of your estate, perhaps to children or other relatives, during your lifetime; or possibly redirect assets up to the value of the nil rate band into a trust on death. 
The nil rate band is effectively transferable between husband and wife such that where one spouse has died with a chargeable estate for IHT of less than the nil rate band at the time, the unused proportion will be added to the nil rate band of the surviving spouse on the second death. 
One thing is for sure with all forms of tax; if you do nothing the government will use its considerable powers to make sure a share of your hard earned wealth ends up in their coffers. 
For further information about the 2013 Budget changes please click here. 
Levels, and bases of, and reliefs from taxation are subject to change. 
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