2017 Budget Review

Following on from the Chancellor’s first and last Spring Budget, we are pleased to provide you with our summary of the key announcements, along with our tax tables for the 2017/18 tax year:

Budget Summary

Tax Data
The main changes include:

  • The tax-free dividend allowance will be reduced from £5,000 to £2,000 from April 2018.
  • Class 4 national insurance contributions for self-employed workers will increase to 10% in April 2018 and rise again, to 11%, from April 2019.
  • Unincorporated businesses and landlords with a turnover below the VAT threshold will have until April 2019 before they are required to implement ‘Making Tax Digital’.

Among the key changes to note for this year are:

  • The Chancellor confirmed that corporation tax will be cut to a rate of 19% from April 2017 and it will be further reduced to 17% in 2020.
  • The personal allowance will rise to £11,500 in April 2017 and to £12,500 by 2020 and the higher rate income threshold will rise to £45,000, although special rules will apply in Scotland.
  • Individual landlords’ tax relief for finance costs will be restricted to basic rate tax – to be phased in over four years from April 2017.

More information on the Budget is available on our website or if you would like to speak to one of our team please contact us.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Year End Tax Planning

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The end of the tax year is fast approaching, but there is still time before 5 April to save tax for 2016-17. Below are some points you may wish to consider.

MAXIMISE CAPITAL ALLOWANCES

Businesses may be able to write off the cost of capital assets by making the most of capital allowances. The Annual Investment Allowance allows businesses to claim a deduction of up to £200,000 of the year’s investment in plant and machinery (with the exception of cars). Most business structures can make use of the AIA.

UTILISE YOUR FULL ISA ALLOWANCE

Individuals may invest up to £15,240 for the current tax year. A saver may only pay into a maximum of one cash ISA, one stocks and shares ISA and one innovative finance ISA per year. Savers have until 5 April 2017 to make full use of their 2016-17 ISA investment allowance. ISAs can offer a very useful tax-free way to save.

TAX EFFICIENT RETIREMENT PLAN

Pension contributions have to be paid by 5 April 2017 for them to be relieved against 2016-17 income. Annual contributions cannot exceed the greater of £3,600 (gross) or the amount of your UK relevant earnings eligible for tax relief. However, the contributions are subject to the annual allowance, currently £40,000. This is further reduced for those with net income of over £110,000 and adjusted annual income (i.e. your income plus both your own and your employer’s pension contributions) over £150,000. For every £2 of adjusted income over this figure, a person’s annual allowance is reduced by £1 (down to a minimum of £10,000).

For further information please contact our tax team here at Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

 

Help To Buy ISAs

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A new ISA for first time buyers will offer a government bonus when investors use their savings to purchase their first home. For every £200 that a first time buyer saves, there will be a £50 bonus payment up to a maximum of £3,000 on £12,000 of savings. The bonus will be available for purchases of homes of up to £450,000 in London and up to £250,000 elsewhere.

The bonus will only apply for home purchase. Savers will have access to their own money and will be able to withdraw funds from their account if they need them for any other purpose. The maximum initial deposit will be £1,000 and the maximum monthly saving thereafter will be £200.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Image courtesy of ambro at FreeDigitalPhotos.net

New Tax Allowance for Savings Income

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From 6 April 2016 a 0% rate will apply to savings income of up to £1,000 and, in line with this, from the same date, banks and building societies will no longer deduct tax from the interest they pay to depositors who hold Non-ISA accounts.

The introduction of the new Personal Savings Allowance (PSA) will mean that basic rate taxpayers can receive up to £1,000 interest on their savings before tax is due, and higher rate tax payers can receive up to £500. The new rate will not apply to additional rate taxpayers.

For savings income received in excess of the PSA, HMRC will include taxable savings income in the PAYE code and collect the tax through either the PAYE system or self-assessment.

HMRC have also published a consultation document which invites discussion on the deduction of income tax from other savings income. This consultation closes 18 September 2015.

For more information please contact Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

0% Starting Tax Rate Consideration

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As of the 6 April 2015, the starting rate of tax on savings income has been reduced to 0%, and the starting rate band has increased from £2,880 to £5,000. The starting rate is available to people whose gross non-savings salary is less than their personal allowance plus the starting rate band. Therefore, for 2015/16 the total would be £15,600 which is the personal allowance of £10,600 + £5,000 starting rate band. This means if your total gross income is not more than £15,600, you will not have to pay tax on your savings income.

The form you would need to complete, to make the banks aware, is the reformed R85 form. This can be found on HMRC website here.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Image courtesy of FreeDigitalPhotos.net