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Year-End Tax Guide 2017/18 | 7
TAX CREDITS
Individuals on low incomes may be eligible to claim tax
credits or the universal credit (existing claimants will move
to universal credit by the end of March 2022).
The calculations for these beneits involve determining
three igures:
•
your maximum beneit
•
your net income
•
your allowance.
The maximum beneit is the amount you would receive if
you had no income at all.
As some income is disregarded, it is possible someone could
receive the maximum beneit even if they had a small income.
Net income is usually earnings after tax, national insurance
and pension contributions.
A notional income may be added if you have capital above a
certain threshold.
The allowances are the maximum amount of income you
may earn and still receive the maximum beneit.
If your income is above this igure, a percentage of the
excess is deducted from the maximum beneit.
PLANNING
Check to see if you qualify for these beneits as they can
sometimes be payable to people with fairly high incomes.
As capital can be treated as income that reduces beneit,
it may be sensible to give away funds or to spend them
upgrading your property (as property value is not regarded
as capital).
However, there are rules to counter blatant examples of
capital reduction.
CORPORATION TAX
The main rate of corporation tax is 19% until 31 March 2020.
Corporation tax self-assessment requires companies to
work out their own tax liability as part of their return and
account for the 'self-assessed' liability to corporation tax.
PLANNING
Taxable proits are typically reduced by employers making
pension contributions. Self-invested personal pensions are
popular with many company owner-directors.
Another tax reduction strategy is to bring qualifying capital
expenditure forward to take advantage of the 100% annual
investment allowance. The allowance is currently available
on qualifying expenditure of up to £200,000.