- From 6 April 2016, personal allowances increased for people born after 5 April 1938 to £11,000 and will rise again to £11,500 from 6 April 2017.
- From 6 April 2016:
- The 10% dividend tax credit is abolished with the result that the cash dividend received will be the gross amount potentially subject to tax.
- A new Dividend Tax allowance charges the first £5,000 of dividends received in a tax year at 0%.
- For dividend above £5,000 new rates of tax on dividend income will be 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional taxpayers.
- From 6 April 2016 additional tax rates are 40% for income between £43,000.00 and £150,000.00 and 45%, beyond this.
- From 6 April 2017, the basic rate limit will increase to £33,500 and the higher rate threshold will therefore rise to £45,000 for those entitled to the full personal allowance.
Pension and Savings
- New 0% starting rate of tax on the first £5,000 of savings income will remain from 6 April 2016, with a tax saving of £500 per year.
- A new Lifetime ISA will be available for adults under the age of 40. Individuals will be able to contribute up to £4,000 per year and receive a 25% bonus from the government. Funds can be used to buy a first home and those wishing to save for their retirement. Funds can be withdrawn from age 60 completely tax-free.
- From 6 April 2016Adult NISA annual investment limit will remain at £15,240 but will increase to £20,000 from April 2017.
- From April 2018, an introduction of a new type of savings account aimed at low income working households in receipt of Universal Credit with minimum weekly household earrings equivalent to 16 Hours at the National Living Wage or those in receipt of Working Tax Credits.
Individuals in low income working households will be able to save up to £50 a month into a Help to Save account and receive a 50% government bonus after two years.
- In early 2017, it was announced the phased rollout of Tax-Free Childcare for children under 12.
- From 6 April 2017 the Pension scheme lifetime allowance will remain at £1 million but will be indexed annually in line with inflation. Unprotected pension pots exceeding £1 million will be subject to a 55% tax rate.
- No change to 40% and 36%death rates or 20% chargeable lifetime transfers rate. Nil rate band of £325,000 remains unchanged.
- As previously announced, legislation will be introduced to extend the IHT residence nil-rate band to cover situations where home-owners downsize or cease to own their home before death.
Capital Gains Tax
- Capital Gains Tax rates slashed from 28% to 20% for top rate taxpayers and from 18% to 10% for basic rate tax payer.
- The 28% & 20% will continue to apply for carried interest and for chargeable gains on residential property that do not qualify for private resident relief.
- The Entrepreneurs’ Relief remains at 10% with a lifetime limit of £10 million for each individual.
- Entrepreneurs’ relief (ER) extension for long-term external investors, giving them a 10% CGT rate on unlisted companies
Business tax (Self-employed, LLP, Partnerships and Companies)
Effective from 1 April 2016 for companies and 6 April 2016 for unincorporated businesses
- From 1st January 2016 the Annual Investment Allowancewill be permanently set at a new level of £200,000.
- From April 2016 the wear and tear allowance is being reformed and Landlords will be able to deduct the actual costs of replacing furnishing.
- Introduction of a new £1,000 allowance for property income and a new £1,000 allowance for trading income from April 2017.Individuals with less than £1,000 of either source of income will no longer need to declare or pay tax on that income.Those whose property or trading income exceeds the allowance, however, will have the choice of deducting the allowance in calculating their taxable profits or calculating their taxable profit by deducting their expenses in the usual way.
- The current 100% first year allowance on business purchasing low emission cars will be extended to April 2020. A low emission car is one where the CO2 emissions do not exceed 75 gm/km and this threshold will fall to 50 gm/km from April 2018. In addition, the CO2 emission threshold for the main rate of capital allowances for business cars will reduce from 130 gm/km to 110 gm/km from April 2018.
- A new soft drinks industry levy is being introduced from April 2018. The levy will be paid by producers and importers of soft drinks that contain added sugar. An exclusion will apply for small operators and the Government is to consult on the details over the summer.
- Tax relief on the finance costs incurred on residential property will be gradually restricted to basic rate tax relief from 6 April 2017.
- From April 2018, termination payments in excess of the £30,000 exemption will also be subject to employer’s national insurance contributions (NIC). A consultation will also be held on reducing the scope of the £30,000 exemption.
- The government has announced that tax relief available for employer-arranged pension’s advice will increase from £150 to £500 as of April 2017.
- · The Government will introduce the apprenticeship levy in April 2017. It will be set at a rate of 0.5% of an employer’s pay bill and will be payable through PAYE. It will apply to all employers across all sectors. Each employer will receive an allowance of £15,000 to offset against their levy payment, with the result that only employers with total gross employee earnings in excess of £3 million will be subject to the charge.
- · The Government will increase the national insurance contributions (NIC) employment allowance from £2,000 to £3,000 a year from 6th April 2016. It will also be withdrawn from single person companies, such as a personal service company.
- From April 2016, a restriction will apply on tax relief for home to work travel and subsistence where workers are engaged through employment intermediaries such as a personal service company.
- VAT compulsory registration taxable turnover threshold limit has increased from 1 April 2016 £82,000 to £83,000
- VAT compulsory deregistration taxable turnover threshold limit has changed to £81,000
- Class 1, Class 1A and Class 1B rates are unchanged.
- From 6 April 2016 Class2 weekly rate unchanged at £2.80. Exemption limit is still £5,965PA.
- From 6 April 2016Class 2 contributions will no longer be collected via direct debits but will be included in taxpayers’ final Self –Assessment liability together with income tax and Class 4 National Insurance.
- Class 3 voluntary weekly contributions rate remains at £14.10
- Class 4 Contributions – Small earnings exemption increased to £8,060 from £7,956 PA
-9% rate applies on annual profits between £8,060 and £43,000
-2% rates applies on annual profits over £43,000
- From April 2018 National Insurance for the self-employed will be changing with Class 2 contribution abolished and Class 4 contributions reformed although the exact nature of these reforms has yet to be confirmed.
Main Corporation tax rate from 1 April 2016will continue at 20% for companies with profits exceeding £1,500,000. All companies will pay the same tax rate irrespective of the level of their profits. From beginning on 1 April 2017, 2018 & 2019 will reduce to 19% and 17% from 1 April 2020.
Should you require any additional information regarding the above please contact Silver Levene for further advice.
James Batchelor of Silver Levene provided research for this article.
This article is based on current legislation and practice and is for guidance only. Specific professional advice should be taken before acting on matters mentioned here.
Umesh Modi BA ACA, is a Chartered Accountant and Tax Advisor, and a partner at Silver Levene LLP. He can be contacted on 020 7383 3200 or firstname.lastname@example.org