You will pay Scottish Income Tax if you live in Scotland, Income Tax if you live in England or Northern Ireland and the Welsh Income Tax if you live in Wales.

At present, the only regional variations under the control of the Scottish or Welsh governments are the rates of Income Tax charged.

For 2019-20, the rates set by the Welsh Government are the same as those in England and Northern Ireland. Scottish Income Tax rates have more bands and the higher and top rate are 1% higher than the rest of the UK.

These differences do open up planning opportunities if you live and work in the border areas between England and Scotland.

As you pay tax at Scottish or other UK rates based on where you live, you could choose to live in England and work in Scotland if you pay tax at the higher rates. Obviously, there are many other factors that you will want to consider when choosing where you set up home, but if the regional Income Tax rate differentials start to widen, the ability to reduce your Income Tax burden may become more of a deciding issue.

On the face of it, this sounds implausible. How can you change your will if you have died?

In reality, as long as any beneficiaries left worse off after any change, agree, you can change a person’s will after their death.

Any change must be completed within two years of the death.

The circumstances that such a change can be agreed are to:

• Reduce the amount of Capital Gains Tax or Inheritance Tax payable,
• Provide for someone who was left out of the will,
• Move the deceased’s assets into a trust,
• Clear up any uncertainty over the will.

Executors will need to make a variation to the will to accomplish the above, this will involve:

• Preparing a variation document that satisfies certain legal requirements, and
• If there is more Inheritance Tax to pay, a copy of the variation must be sent to HMRC within six months of making it. This condition does not apply if the variation does not change the amount of Inheritance Tax payable.

This ability to change a will after death can often resolve family disputes if the affected beneficiaries agree. However, the process is best managed by a professional advisor to ensure that all the formalities are dealt with correctly.

The expenses you claim against your property income will need to follow the usual HMRC ruling that the costs must be incurred wholly and exclusively for the purpose of renting out the property.

An example set out on the Gov.uk website illustrates the point:

If you buy a new vacuum cleaner for your own home, and also use it to clean your rental property between tenants, you can’t claim the cost of the vacuum cleaner as an expense against your rental income.

However, you could claim the cost of any cleaning products you bought specifically for cleaning the rental property.

Where costs are incurred partly for your rental business and partly for some other purpose you may be able to claim a proportion of that cost if that part can be separately identified as being incurred wholly and exclusively for the purposes of the property rental business.

Expenses you can and can’t claim are summarised below.

Expenses you can claim include:

• Mortgage interest – a proportion of this cost is now limited to basic rate Income Tax relief,
• General maintenance and repairs to the property, but not improvements (such as replacing a laminate kitchen worktop with a granite worktop)
• Water rates, council tax, gas and electricity
• Insurance, such as landlords’ policies for buildings, contents and public liability
• Costs of services, including the wages of gardeners and cleaners
• Letting agent fees and management fees
• Legal fees for lets of a year or less, or for renewing a lease for less than 50 years
• Accountant’s fees
• Rents (if you’re sub-letting), ground rents and service charges
• Direct costs such as phone calls, stationery and advertising for new tenants
• Vehicle running costs (only the proportion used for your rental business) including mileage rate deductions for business motoring costs

Expenses you can’t claim a deduction for include:

• The full amount of your mortgage payment – only the interest element of your mortgage payment can be offset against your income,
• Private telephone calls – you can only claim for the cost of calls relating to your property rental business,
• Clothing – for example if you bought a suit to wear to a meeting relating to your property rental business, you can’t claim for the cost as wearing the suit is partly for your rental business and partly to keep you warm – no identifiable part is for your property rental business,
• Personal expenses – you can’t claim for any expense that was not incurred solely for your property rental business.

Unless you opt to register, or use, one of the available VAT special schemes, you are likely paying VAT to HMRC once a quarter based on the difference between the VAT added to your sales invoices less any VAT included in business purchases and expenses (including certain acquisitions of assets).

There is a problem with this option if you give credit to your customers – allow them to pay for any goods or services provided at some future date – and the amount owed by customers is more than the amount you owe to suppliers.

In this situation, you could be paying VAT added to your sales invoices, to HMRC, before you have received the cash from your customers.

Clearly this will have a negative impact on your cash flow.

To remedy this situation all you need to do is adopt the VAT Cash Accounting Scheme. Once adopted, your VAT returns will be based on the amount received from customers, less amounts paid to suppliers, rather than the invoiced amounts.

Not all businesses can use the scheme. To register, you must obviously be registered for VAT and your estimated taxable turnover will need to be under £1.35m in the next twelve month period.

And you will have to leave the Cash Accounting Scheme if your turnover rises to £1.6m or more.

Depending on the difference between your debtors (money due from customers) and monies owed to suppliers there is usually an initial boost to your cash flow in the first return you submit to HMRC.

If you are using the standard VAT scheme and would like to see if there would be an advantage in switching to the Cash Accounting Scheme, please call. We can take a look at your financial position in some detail and quantify the cash flow benefits. It really makes no sense to be paying out VAT to HMRC if the funds to pay this are still in your customers bank accounts.

If you die without stating your wishes, the law will determine how your assets are distributed amongst your family. The rules that govern the process are set out in the intestacy rules. And there are regional differences.

Consider a parent whose personal assets amount to more than £1m.

In England and Wales

The husband, wife or civil partner keeps all the assets (including property), up to £250,000, and all the personal possessions, whatever their value. The remainder of the estate will be shared as follows:

• the husband, wife or civil partner gets an absolute interest in half of the remainder
• the other half is then divided equally between the surviving children.

If a son or daughter (or other child where the deceased had a parental role) has already died, their children will inherit in their place.

In Scotland

The husband, wife or civil partner gets the house up to a value of £473,000. They also get a lump sum of £473,000 if the house is worth more and may have to sell off the property.

They also get:

• furniture and moveable household goods up to the value of £29,000
• up to £50,000 in cash
• a third of the rest of the estate.

The children will get two-thirds of the rest of the estate.

If a son or daughter has already died, their children (the grandchildren of the deceased) will inherit in their place.

In Northern Ireland

The husband, wife or civil partner keeps all the assets (including property), up to £250,000, and all the personal possessions, whatever their value.

The husband, wife or civil partner must survive the deceased by at least 28 days to inherit.

They also get one third of the rest of the estate.

The remaining two-thirds are shared between their children.

If a son or daughter has already died, their children (the grandchildren of the deceased) will inherit in their place.

Make a will

As you can see, if the wishes of the deceased are going to conflict with these outcomes, there is only one course of action that will remedy the situation: make a will.