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Wed, 16 Mar 2016

Budget changes

INCOME TAX

  • Personal allowance increased from £10,600 2015/16 to £11,000 2016/17.
  • New trivial income allowance of £1,000 frm 2017/18.
  • Effective rate of tax on diviends:
  2015/16 2016/17  
Basic rate NIL 7.5%  
Higher rate 25% 32.5%  
Additional rate 30.5% 38.1%  
  • Employment allowance increased from £2,000 2015/16 to £3,000 2016/17.
  • Class 2 NIC abolised from April 2018.
  • Introduction of new lifetime ISA from April 2017.
  • From April 2017, individuals with property or trading income below £1,000 will no longer need to declare or pay tax on that income.

 

PENSIONS (from 6th April 2016)

  • Annual allowance remains a maximum of £40,000 BR + HR.
  • Lifetime allowance of £1.25m reduced to £1m.

 

PROPERTY LET

  • Wear and tear allowances abolished from 6th April 2016 - replaced by relief for actual cost of replacement furnishings etc.
  • Interest relief restriction phased in from 6th April 2017 (basic rate relief only by 2020/21).
  • This does not apply to furnished holiday lets or property held by companies.
  • Rent a room reief increased from £4,500 to £7,500 from 6th April 2016.
  • Increases to SDLT for second properties and also a slight change of calculation rules.

 

CAPITAL GAINS TAX (from 6th April 2016)

  • Individuals, Trusts and Personal Representative rates from 18% to 10% if BR and from 28% to 20% if HR. Applies to all assets EXCEPT residential property and carried interest (which remain at 18% / 28%).

 

CORPORATION TAX

  2015/16 2016/17 2017/18 2018/19 2019/20 2020/21  
Main rate 20% 20% 19% 19% 19% 17%  
  • S444 tax (on Directors Overdrawn Loan Accounts) currently stands at 25%. Loans made after 6th April 2016 will rise to 32.5%.
  • Losses incurred after 1st April 2017 will be able to be carried forward and used against profits from other income streams and/or set off against taxable profits in other group companies. Only 50% of profits in excess of £5m can be sheltered by carried forward losses.

 

COMPANY CARS AND VANS (from April 2016)

  • All rates increased by 2% to a maximum of 37%.
  • Electric cars trigger a benefit of 7%.
  • Fuel multiplier rises by £100.
  • Van benefit rises to £3,710 (£1,268 for electric vans).

 

VAT (from 1st January 2016)

  • Registration threshold rises to £83,000.
  • Deregistration threshold rises to £81,000.

 

ATED (Annual Tax on Enveloped Dwellings)

  • Band drops to £500K from 1st April.
  • Deadline for return is 30th April.
  • Note: any new properties bought in the year have a 30 day return filing deadline (in line with Stamp Duty return).
  • New bands (Tax per property):
Up to £500K £0 £0  
£500K to £1M £0 £3,500  
£1M to £2M £7,000 £7,000  
£2M to £5M £23,350 £23,350  
£5M to £10M £54,450 £54,450  
£10M to £20M £109,050 £109,050  
Over 20M £218,200 £218,200  

Note these figures increase by CPI each year.

 

STAMP DUTY LAND TAX

  • The method of calculation has changed to a progressive one so that if you go over a level it is only the amount above the level that suffers that tax, at the following rates:
RESIDENTIAL:      
Up to £125K 0% 0%  
£125K to £250K 2% 2%  
£250K to £500K 3% 5%  
£500K to £925K 4% 5%  
£925K to £1M 4% 10%  
£1M to £1.5M 5% 10%  
£1.5M to £2M 5% 12%  
Over £2M 7% 12%  
Over £2M company purchase 15%    
       
Eg. @ £800K £32K £30K  

Rates also rise by 3% on 1st April for people with more than one property.

 

OTHER CHANGES

  • From 6th April 2018, employers NI will be charged on the excess of termination payments over £30,000.
  • Employers NI is Nil for apprentices under 25.
  • Dispensations removed from 6th April 2016 (no change to travel & subsistence rules for 'normal' employees).

 

N.B. THESE ARE THE MAIN RATES OF TAX AND THERE ARE MANY CIRCUMSTANCES THAT MAY DICTATE CHANGES. FOR A COMPLETE UNDERSTANDING PLEASE CONTACT US WITH FULL DETAILS OF YOUR CIRCUMSTANCES.