It can take a while to sift out the key points from the Annual Statement and Budget. We hope you will find this summary useful. As ever, if you have any questions, or would like to book an appointment with Rob, please do get in touch.
Personal allowance rates
The government proposes to increase the personal allowance to £12,500 by the end of the current parliament. The personal allowance in 2016/17 is £11,000. This will increase to £11,500 for 2017/18, rather than the £11,200 previously announced.
There are also proposals to increase the higher rate tax threshold to £50,000 by the end of the current parliament and The Chancellor has confirmed the threshold at which people pay 40% income tax will rise from its current level of £42,385 to £45,000 in April 2017.
Capital gains tax
From 6 April 2016 the 18% rate of CGT will be reduced to 10% and the 28% rate to 20% for chargeable gains (with certain exceptions).
The 18% and 28% rates will continue to apply to chargeable gains arising on the disposal of residential properties that do not qualify for private residence relief.
The rate of CT is currently 20%. It will be reduced to 19% in 2017 and to 17% in 2020. The 17% rate from 1 April 2020 is a further 1% reduction from the previously announced 18%.
National minimum wage & the National living wage
The NMW will increase from October 2016 as follows:
- The rate for 21 to 24 year olds from £6.70 to £6.95 per hour;
- The rate for 18 to 20 year olds from £5.30 to £5.55 per hour;
- The rate for 16 to 17 year olds from £3.87 to £4.00 per hour;
- The rate for apprentices from £3.30 to £3.40 per hour.
From April 2016, the National Living Wage comes into effect. All workers aged 25 and over are legally entitled to at least £7.20 per hour, unless they are in the first year of their apprenticeship.
From April 2017 the NMW and NLW changes will be aligned so that both rates are amended in April each year.
The new ISA is a Lifetime ISA for those aged under 40 in which people can save up to £4,000 per year and receive a bonus from the government of £1 for every £4 saved up to the age of 50. This is equivalent to giving basic rate tax relief on savings for retirement but unlike a pension scheme the funds could be withdrawn early.
From April 2016, individuals will have a new dividend tax allowance of £5,000.
Dividend income over this amount will then be taxed at 7.5% in the basic rate band, 32.5% in the higher rate tax band, and 38.1% in the additional rate band.
Property tax changes
From April 2017, there will be a restriction on interest in respect of let domestic property.
This will be phased in so that by 2020, interest will not be an allowable expense in computing the profits of the business.
This will have a major impact on owners of let property in their interest charge is significant the relation to their rental income.