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Tax credits have often had a bad press, but with a bit of planning and help from Dodd & Co, people with income as high as £50,000 could qualify for £545 child tax credits per year. Your income could be as high as £80,000 and provided you paid for childcare, you could qualify for some tax credits.
If you need a little help with your cashflow read on to find out if you could benefit from making a tax credits claim. It could be worth hundreds or even thousands of pounds to you!
The interaction of tax credits and capital allowances can give surprising results. Consider the following example:
A business with a year end of 5 April 2010 buys a new van for £20,000. The owner of the business has two children and normally has income in the region of £30,000. In 2009/10, as a result of buying the new van he will see the following tax savings:-
Income tax - £20,000 at 28%, tax saving - £5,600
Tax Credits income reduced by £20,000 – additional tax credits due of £7,800 in 2009/10
But the 2010/11 tax credits will also increase by £7,800
Total saving =£21,200!
So to summarise, the van cost £20,000 but the total income tax relief and tax credits more than pay for this. If you are still interested please read on!
Tax credits are payments from the government. If you can answer ‘yes’ to either of the following questions you could be eligible to receive some tax credits:
- Are you responsible for at least one child or young person who normally lives with you? If so, you could qualify for child tax credit.
- Are you aged over 25 and working at least 30 hours per week? If you earn low wages, you may qualify for working tax credit.
A claim for tax credits can be made at any time and if you are eligible payments will be backdated for three months so the sooner you apply the sooner you will receive your payments.
You may think that your income has been too high in the past for you to be eligible. However, due to the interaction with the current capital allowances regime as shown above you may now qualify even if you haven’t in the past. It is possible to make a protective tax credits claim if you believe that your income has dropped so that payments will be backdated to the start of the tax year rather than waiting until your financial accounts are prepared to apply.
This new regime for capital allowances began in April 2008. The current Annual Investment Allowance (AIA) enables businesses to claim the full cost of most new capital assets against their profits. Businesses can spend a maximum of £50,000 per annum to qualify for full tax relief in the year of expenditure.
Please contact Rachel Lamb if you would like any further information or you would like to know how this could benefit you.
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