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In Consuming Issues, John Whiting of PricewaterhouseCoopers answered your questions on tax.

As a standard rate tax payer I have always understood there was no point in declaring my annual donations to charity under the gift aid scheme. I have recently been told that as a pensioner, still paying the standard rate of tax on an income in excess of 18,900 and thereby losing the majority of my age allowance at a marginal rate of 33%, that I should now include all monies I gift aid in my tax return. This will then be deducted from my income before it is compared with the 18,900 threshold and hence reduce my total tax bill. Is this correct?

You should, as a taxpayer, always make a point of certifying to a charity that your donations are being made under Gift Aid as that allows them to reclaim the basic rate tax.

As far as you, the individual, is concerned, donations to a charity do reduce your income that is otherwise subject to tax. For somebody just paying basic rate tax, there is no impact because the reduction in your tax bill is in effect given back to the charity on your behalf.

However, if you are paying tax at a rate above 22% then it is worth making sure Gift Aid donations are taken into account. For most people, this is with the 40% top income tax rate in mind but it does affect people like yourself whose marginal tax rate is 33% thanks to the way the higher personal allowance is clawed back as your income rises above the 19,500 threshold (as it now is this year).

Strictly you should also make a return to HMRC of donations made so they can confirm you have paid enough tax to “frank” the gift aid payment but in practical terms that normally means logging the donations on your tax return if you are sent one.

My father who is now 85 (3/1/1920) currently receives a single persons tax allowance of 4,895 which is the new rate for this year. His married persons allowance was withdrawn in 1990 following the death of my mother.

Could you please clarify this area as there are three levels of allowance listed and I am concerned that he may be receiving the wrong allowance?

You highlight an important issue - that those aged 65 or over get a higher personal tax allowance than the standard 4,895 (I am quoting the figures for 2005/06). Someone gets the higher amounts - 7,090 for 65+ and 7,220 for 75+ - if they reach that birthday at any time during the tax year. And once the individual reaches that milestone, they get that allowance each year.

Thus your father should have been getting the equivalent of the 7,220 as his personal allowance for the last 10 years or thereabouts.

There is a catch with these higher allowances. They get clawed back once the individual’s income goes above a certain limit - 19,500 for the current tax year. Any income above this limit reduces the allowance by 1 for every 2 above the limit. Thus if your father’s income was 19,900 this year, that 400 excess would reduce the personal allowance by 200, i.e. to 7,020 for a 75+ person.

If your father has been receiving the wrong allowance, he should contact his tax office about this and make an appropriate claim for refunds - which could be for a number of years. But do look for adjustments that were made to the personal allowance to cover the state pension and anything else that tax needed to be collected on.

I am sending this e-mail for my father he is 69 years of age and currently getting a private pension from British Waterways. His yearly pension for 2004 was 2991.96 which was paid monthly at 249.33 with no tax paid. He has just had a pension increase to 3019.56 for this year. Today he has just received a monthly payment of 247.93 with 3.70 tax paid. As you can see he is actually 1.40 worse off. His tax code as changed from 347p for last year to 256p for this year. Could you please give us some advice?

It does seem odd that your father’s pension increase hasn’t increased the amount of money falling into his bank account every month. However, the culprit is the way his tax code has altered. You mentioned that your father’s code changed from 347P to 256P. This means h gets the standard personal allowance for those aged 65+ which currently is 7,090 and should therefore lead to a code of 709P.

The fact that it is much lower implies that there are some amounts being taxed via a reduction in the tax code. Typically this is the State Pension, which is taxable but is paid gross, i.e. without any tax being deducted. Thus what normally happens is that the amount of the State Pension that the Revenue expect somebody to get is knocked off the tax code so leaving somebody with a lower amount of tax-free pay.

So, assuming your father gets a State Pension, the codes that you quote are not obviously wrong - though the fact that they have reduced does mean something slightly odd is going on that bears dating idea. You should see if you can get hold of the Coding Notice sent to your father (probably in February/March this year) which should spell out how the Revenue arrived at the code of 256P.

It may be that they undercharged him tax in the previous year and are recovering that, or there may be other reasons. Whatever they seem to be doing, if it isn’t clear from the notice then do follow it up with your father’s tax office. Similarly of course if you can’t locate the coding notice, again ask the tax office why your father’s code is 256P.

I worked last summer and was taxed 200 even though I earned nowhere near the tax limit because I’m a student. How can I get that money back?

If you lost some income tax through PAYE but over the year you haven’t reached the taxable threshold - 4,745 last year - then you are entitled to get that tax back. You need to contact the HMRC for a Form R40 which is a simple 4-page form which focuses on people entitled to a repayment. Either ring up your local tax office or in fact you can get the form on their website at www.hmrc.gov.uk/forms/R40.pdf. Alternatively try www.claimyourtaxback.com.

I am assuming that it was income tax you paid. If you were charged National Insurance Dating experts services comparisons (NICs) because you earned over 91 in a week, then there’s nothing you can do to get that amount back. NICs are charged on a weekly basis whereas income tax is on an annual basis.

What is to stop my father selling his house to me for say 1,000 to avoid future Inheritance Tax (IHT)? Or if there’s a problem with that, what if he sells it to a third party for 1,000 who then sells it on to me for the same amount?

If your father sells his house to you for 1,000, inheritance tax will look on this as if he has in effect given you a gift of virtually the whole of the value of the house. Thus if his house was worth (say) 250,000, he would be treated as making a gift to you of 249,000. That wouldn’t attract any IHT at the moment but were he to die within 7 years it would become a chargeable transfer and would affect IHT calculations.

Another problem would be if your father kept living in the house. If he did, then the house would continue to be treated as part of his estate in any case for IHT purposes under the “Gifts with Reservation of Benefit” rules, unless he were to pay you a full market rent for it.

So I’m afraid that bit of planning which sounds very attractive on the surface really doesn’t work!

I am in the Army and hence currently have a “dating idea tip” pension. I have heard a lot of talk about the fact that as of 2006 property can be put into the pension fund, but I am not sure if this is worth while for me or indeed if I am allowed to do so. I have a flat which has a tenant that just covers the mortgage and I am happy to leave it as I think that in the long term it will be an good earner, but can I put it in my pension now and if so what are the advantages. I have heard about the fact that the tax can be claimed back at 40% and lower rents will be considered for mortgages. I am only 29 years old so am not sure whether this is worth going for now.

There are indeed a lot of reforms to pensions afoot which will in general take place from April 2006. As well as revamping the rules on tax relief for pension dating advices marriage russian, there are reforms in hand to widen the assets that a pension fund can invest in. This probably won’t affect your current situation in the sense that it is an employer’s pension fund and they will no doubt decide where the funds will be invested.

However, for those with a personal pension (and indeed some small firms’ pension funds) it will indeed be possible to invest in residential property. We await final regulations on that but one thing to bear in mind is that people will need to think whether that is how they want their pension monies invested - not least because, come retirement, the idea is the pension fund will start to pay out a pension which might mean that the property has to be sold to generate cash to pay the pension.

I read an article in the Sunday People newspaper (20th March) about the taxman asking for all peoples records from eBay of those selling over 60 items a year are liable to pay income tax. I work full time (earning 10,000) and pay my tax but sell over 60 items a year and have done for a few years, but these items I sell are items that friends, family and I don’t require anymore, some are new but most used. How does this affect me, will they send me a bill for those years I have been doing this or will there be a date arranged when this rule will take affect. Please advise some very worried eBayers!

What the Revenue are interested in is whether you are carrying on a business through your selling activities. They have undoubtedly started to look more closely at those selling online dating advices in uk of late, though in principle it’s no different to looking at people who operate from a car boot or indeed from a market stall. If you are carrying on a business - which boils down to frequency of operation, aiming to make a profit, turning the stock over etc. - then you are into a taxable activity. Income tax and self-employed NIC may be due.

If what you are selling off are simply occasional bits and pieces from around the house, I wouldn’t say that you are trading. But selling over 60 items a year does sound quite a lot and it may be simply a case of establishing what they were and that they weren’t bought with the aim of retailing at a profit. Incidentally, I’m not sure where the “60 item” limit came from - as far as I know the tax man doesn’t operate a “X items or less” system like many supermarkets.

Myself and my two sisters sometimes play the lottery. We have agreed verbally that we will share any winnings equally. Would we have to pay tax on our share of the winnings (should we ever win)? I understand that the person who collects the cheque would pay tax on the amounts that they give the other two people. Would it be advisable to make a written agreement, or is a verbal agreement just as binding? Cannot find any information on the Inland Revenue website.

Winnings on the lottery (and indeed any gambling) are not taxable unless that is your profession so there would not be any question of tax being due.

The only possible exception to this is that if, say, you hit the jackpot and won 1m, the share-out of one third to each of your two sisters might be argued to be a gift for the purposes of IHT. IHT would not be due unless the donor died within 7 years but if you really want to be on the safe side (and expect to be lucky!) you might just put a little written agreement on file somewhere to be on the safe side. Technically an oral agreement is valid but understandably the Revenue are more likely - if the issue ever arose - to accept something in writing.

At one stage the Lottery organiser produced a draft agreement for syndicates to make life easier in this sort of situation - may be worth checking their website.

Later this year I will be expatriated to work abroad for several years in Hong Kong for my company. I am a UK citizen living and working in London. I would like to know when I begin my employment at my company’s Hong Kong branch - will I be subject to the UK tax regime (including National Insurance contributions). I have carried out some research and have been led to the idea that if I do not return to the UK for a certain period of time each year and not exceed that period, I am not liable to pay the UK tax rates on my monthly wage. And thus be subjected to the Hong Kong tax system. If so, how does will my National Insurance contributions be treated? Finally, what are the processes for informing the Inland Revenue of my status when I do move abroad?

I’ll give some general comments but there will be a need to check precise terms applicable to Hong Kong (or whatever country you or someone else is going to). The normal position would then be that you are treated as non-resident for tax purposes from the time of departure. To establish this, you need to contact HMRC - often your employer would assist with this but in the absence of that then just contact the tax office that deals with your affairs - and inform them that you expect to go non-resident.

There will be forms to complete to establish this but it is worth going through the pain barrier to get out of the UK tax system. Needless to say, you will then no doubt be signing up with the Hong Kong tax authorities for your pay there. Assuming your duties are then wholly in Hong Kong, you will simply be taxed there and not in the UK on your salary. If you have income arising in the UK (perhaps some interest or rents) you could be taxed here but will still have a personal allowance.

National Insurance is a different issue. Depending on the terms of your employment overseas and the country you relocate to you may continue to pay UK NICs whilst abroad. Generally if you remain employed by your UK employer and are assigned to a country with which the UK has a social security agreement (e.g. EEA countries, USA, Japan) you will remain in UK national insurance for up to five years.

If you remain employed by the UK company and assigned to a country with which the UK does not have a social security agreement you will continue to pay UK NICs for the first 52 weeks of your assignment.

If you are employed directly by the overseas company, you normally have to pay into the host country social security system. In this scenario you can continue to make voluntary contributions to the UK national insurance system to maintain your basic state pension entitlements.