Key Updates 2017/2018

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  • The personal allowance increases for 2017/18 to £11,500
  • The basic rate limit is now £33,500
  • The higher rate limit is now £45,000
  • The national living wage for over 25’s has increased as of 6th April 2017 to £7.50 per hour.
  • The wear and tear allowance for clients who have rental properties will completely come to an end from the 6th April 2017.
  • There are a lot of changes in 2017/2018 regarding working in the public sector and IR35 rules. Please contact us to discuss if you believe this may affect you.
  • A reminder that all directors of limited companies need to be completing a personal tax return. Please get in contact with us if you believe that you have not completed one.
  • All companies running a payroll need to be aware of their auto enrolment responsibilities and staging dates. We can assist you with this so please get in touch if you need assistance.
  • The new dividend tax rules continue into 2017/18. The first £5,000 dividends received will be tax free and all subsequent dividends are taxed at the relevant dividend tax rates.

Budget 2015 – Main Points Explained

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We have picked out some important points from the budget that has just been announced that may be of relevance to you or your business. If you have any questions regarding any of these please do not hesitate to give us a call.

Dividend Tax rules change

April 2016 – The way in which dividends are taxed is set to change. The first £5,000 dividends received are tax free.
After the first £5,000 received a tax is paid on the dividend received.

Rates of tax are:
7.5% for basic rate band
32.5% for 40 % band 38.1% for the 45% band

Tax changes to previous dividend set up:

Up to £5000 £50001 up to 20% tax band 40% tax band 45% tax band
Effective divided rate now 0% 0% 25% 30.56%
Rate after April 2016 0% 7.5% 32.5% 38.1%

Corporation Tax changes

This will reduce to:
19% in 2017
18% in 2018

Employment Allowance

April 2016 – To be increased to £3,000 April 2016, however it is being completely taken away for all companies who only have 1 employee who is also a directors of that company.

Pension Contributions

April 2016 – Currently you can contribute up to £40,000 per year tax free, however for high earners of over £150,000 this will be reduced by £1 for every £2 earned until it reaches £10,000.

Rent a room scheme

April 2016 – to be raised to £7,500 from £4250 in April 2016

Rental Property 10% wear and tear allowance

April 2016 – The government is changing the 10% wear and tear scheme that can currently be claimed for property improvement even if none have been made, for one in which landlords can only claim for the expenses incurred.

Mortgage interest relief

Currently landlords of buy to let properties can claim tax relief on monthly mortgage interest payments and this can be claimed at the higher rate of tax that is paid – i.e. up to 45%

This is being reduced so only a 20% relief can be claimed on the mortgage interest expense. It is being phased in over a 4 year period starting April 2017.

Inheritance tax (IHT)

IHT threshold has been increased from £325,000 to £500,000 per person to include an additional £175,000 tax free band for your main residence. Therefore if a property of up to £1 million is jointly owned it is able to be left to dependant’s tax free.
This is being staged in from April 2017 at which the new tax free ‘main residence’ band will be set at £100,000 and increase by £25,000 per year until it reaches the full £175,000 in 2020.

Child Tax Credits

April 2017 – The tax credits will only apply to the first 2 children. It only applies for the first 2 children for those born after 2017.

April 2016 – The level at which a household tax credits are withdrawn for every pound earned will be reduced from £6420 to £3850
Anyone from the 9th July 2015 who downsizes their property will still be able to pass
the same value of their estate on tax-free to their dependants as had they kept the
pricier property.

Non Domicile Status

Now anyone who has lived in the UK 15/20 years will not be able to class themselves as non- domicile. Also if you were born to UK domicile parents you will not be able to be non-domicile if you live in the UK at all. This means that income will be subject to UK tax regime. Also any property held in offshore accounts or companies would be subject to UK tax rules.