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.

New Tax Year – New Rules!

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So, the 6th of April brings in the new tax year with new rules, but what are the changes?

  • Personal Allowance – increases to £11,000.
  • Personal Savings Allowance – if you are in the 20% band for income tax, you will pay no tax on the first £1,000 of interest you get from savings. If you are a 40% taxpayer, you are allowed to earn £500 of interest tax-free ,rather than £1,000.
  • ISA limits
    • ISA – £15,240
    • Junior Isa limit- £4,080
    • Child trust fund limit- £4,080
  • National living wage – 25 and overs are now entitled to a minimum pay of £7.20 per hour.
  • Dividend Allowance – The first £5,000 you receive in dividends is tax free. Above £5,000, basic-rate taxpayers will pay 7.5% tax, higher-rate taxpayers 32.5%, and additional rate taxpayers 38.1%.
  • Employment Allowance – The new amount of £3,000 can be reclaimed against employers NI.
  • Tax on Loans to Directors -The 25% tax charge on loans to directors, etc. increases to 32.5%.
  • Capital Gains Tax – The higher rate of capital gains tax is reducing from 28% to 20% and the basic rate from 18% to 10%. However, the new rates will not apply to residential property that does not qualify for private residence relief.
  • Vat Registration – The thresholds increase to £83,000 for registration and £81,000 for deregistration.
  • Landlords and Second-home Owners – Will have to pay an extra 3% in stamp duty for second properties bought after 1 April 2016. This is on top of the normal rates (0% on the first £125,000; 2% for £125,001 to 250,000; 5% for £250,001 to £925,000; 10% for £925,001 to £1.5m, and 12% above £1.5m).

If you have any questions regarding the changes, please do not hesitate to contact us.

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

Image courtesy of gubgib at FreeDigitalPhotos.net

New Pension Rules – The Downside

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New pension rules came into effect on 6 April 2015 which have brought many welcome changes. But what about the changes which are not so good? Careful consideration needs to be made with regard to how the changes may affect you.

The most significant change is probably the removal of pension funds from Inheritance Tax. This, together with the ease with which tax relief can be lost, means that individuals will need to seek financial advice.

So what are the pitfalls?

Certain events, including a payment from a flexi access draw-down, will trigger the “money purchase annual allowance rules”. Triggering these rules will reduce the annual allowance on which pension tax relief can be claimed from £40,000 to £10,000 and will also result in the loss of any unused relief from earlier years. Clearly, if you intend to make pension contributions in excess of £10,000 in future years, you will need to take financial advice before making any alterations to your existing pension provisions.

From the age of 55, you used to be able to take 25% of your fund tax-free but under the new rules you are able to draw the whole of the remaining fund in one lump. This will be taxed as income and could push you into the higher rate tax bracket or even worse push your income to such a level that the personal allowance is no longer due. Careful consideration needs to be given to when and how much income is withdrawn at any one time in order to minimise the amount of tax due.

If you spend all your pension savings in the early years, you could run out of money long before you anticipated. This could also be the case if the fund does not perform as well as expected. Again financial advice needs to be taken before any decisions are made.

Please contact Green & Co for further information.

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

Image courtesy of Steafpong at FreeDigitalPhotos.net

For Richer or Poorer – The New Marriage Allowance

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Married couples and civil partnerships can now register their interest in the new Marriage Allowance which comes into effect from 6 April 2015. This is separate from the existing Married Couples Allowance which is already available to the over 80’s.

The allowance means that an individual whose total income is below the tax threshold (i.e. £10,600 for 2015/2016) can transfer up to £1,060 of their personal allowances to their spouse or civil partner, saving a possible £212 in tax over the year.

The rules state that the spouse or civil partner receiving the extra allowance must not already be paying higher rate tax, and both parties must have been born after 6 April 1935. The transfer of allowance will be operated through the recipient’s tax code.

The move is intended to support the Government’s belief in traditional family values and an acknowledgement of the role marriage can play in their restoration. Whilst the allowance is not available to unmarried couples (regardless of how long they have been co-habiting), it remains to be seen whether we will witness a rush to the altar to take advantage of the new tax break.

You can register your interest at gov.uk/marriage allowance or contact us for more information.

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

Photo credit: freedigitalphotos.net

Nick Park analyses the Budget on BBC Radio Wales

To find out what other announcements were made in  the Chancellor’s Budget, read our Budget Summary.

Budget 2015 and 2015/16 Tax Tables

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Our updated Tax Tables are available here – find out what the new rates mean for you.

If would like to  read our summary of the 2015 Budget, then please follow this link: Budget Summary 2015

The main issues include:

Farmers averaging – Farmers will be able to average their profits over five years instead of just two from April 2016.

Employer’s national insurance allowance – The employer’s national insurance allowance of £2,000 has been extended to 2015/16. Make sure you claim this on your payroll.

Help to Buy ISA – A new Help to Buy ISA will be introduced with the government providing a £50 bonus for every £200 of monthly savings up to a maximum of £3,000 on £12,000 of savings. The aim is to start the scheme from Autumn 2015.

Deeds of variation – The government will review the use of deeds of variation for inheritance tax planning.

For more tips, refer to the ‘think ahead’ boxes of our guide.

Please contact us if you need more information on these changes, or any other matter.