Senior executives who drive luxury company cars face a new income tax charge from April 6, which could see some pay as much as 182% more.
Drivers are being urged to switch to a more efficient car as soon as possible to beat the rules.
Meanwhile, pension providers and accountants are reporting a rush of people making arrangements ahead of changes to the pensions rules and a possible review of inheritance tax (IHT).
Company cars
HM Revenue & Customs is scrapping the maximum list price of £80,000 used to calculate tax on luxury company cars, such as Ferraris, Lamborghinis, Bentleys, and top-end Mercedes and BMWs.
Under the current system, income tax and national insurance contributions (Nics) are restricted by this cap, resulting in maximum income tax of £14,000 a year and Nics of £3,584.
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According to figures from accountancy firm Baker Tilly, the change would mean an executive who drives a Ferrari 612, which has a list price of £222,000, would now pay income tax of almost £39,000, and their employer would face a bill for Class 1A Nics of more than £10,000 — a total tax cost in 2011-12 of almost £50,000, up 182% on this year’s figure.
Those buying second-hand cars will have to be particularly wary as HMRC charges car benefits on the list price of the car — the amount the vehicle would cost if new.
Gifts
Accountants are preparing for an onslaught of clients wanting to make gifts to relatives to avoid inheritance tax (IHT), after the Office of Tax Simplification recommended an overhaul of the rules two weeks ago.
Liz Brierley, partner at accountancy firm Saffery Champness, said: “The review is likely to mean taxpayers lose the valuable exemption for transfers of assets to the next generation tax-free, provided the donor survives for the seven years following the gift. My advice is, if you are thinking of making gifts anyway, then get on and do them.”
Pensions
The annual allowance for pension contributions falls from £255,000 to £50,000 in April. AJ Bell, the Sipp provider, is reporting a 25% spike in pension contributions of more than £30,000 in the past four weeks, compared with the same period in 2010. Meanwhile, Sipp provider Hargreaves Lansdown is expecting a surge in contributions after April once those currently caught out by anti-forestalling rules, which restrict their contributions to just £20,000 for this year and last, top up using the new carry-forward rules applicable from April.
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These allow you to make use of any unused pension allowance for the three previous tax years, starting from 2008-09, for next year.