The first Budget after a general election is traditionally the time for introducing unpopular measures. The Chancellor is not constrained by a coalition partner and has nearly five years until the next election. Mr Osborne’s stated aim is to move the UK from a low wage, high tax, high welfare economy to a higher wage, lower tax and lower welfare economy.
Some of the key tax points of the Budget are:
Income tax – personal allowances and basic rate band
The personal allowance for 2016/17 will increase from £10,600 to £11,000 allowing you to earn £400 more before paying any PAYE on your salary. Similarly, the new higher rate tax threshold will rise from £42,385 to £43,000 before falling into the 40 percent tax band. An increase of £615, meaning so long as your gross earnings do not exceed £43,000 you will not be subject to any additional tax liability.
From 6 April 2016 the 10% dividend tax credit will be abolished and there will be a new dividend tax allowance of £5,000 a year. New rates of tax on dividend income will apply
above the allowance at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers. The effect is to increase the rate of tax on dividends
above the new allowance by 7.5%.
Anybody who has been resident in the UK for more than 15 of the past 20 tax years will be deemed to be domiciled in the UK for all tax purposes including inheritance tax. This
will apply from April 2017 and a technical consultation will be published later this year. From 6 April 2017, individuals who are born in the UK to parents who are domiciled here
will no longer be able to claim non-domicile status while they are resident in the UK. There will be no introduction of a minimum claim period for the remittance basis charge as
a result of other reforms to the taxation of non-UK domiciled individuals. The government had previously proposed that non-domiciled individuals would have to claim the remittance
basis for at least three years.
Annual pension contributions limit for top rate taxpayers
From April 2016, people earning over £150,000 will have the amount of relief claimable tapered from a 2014/15 £40,000 threshold to as low as £10,000.
Tax relief for landlords capped
Landlords offsetting tax on profits by using Interest paid on mortgages limited to basic rate relief only. This will be phased in by 2020. Wear and Tear Allowance to also be limited to replacement of furnishings from April 2016. From April 2016, the Rent-a-Room relief will be increased from £4,250 to £7,500 a year.
Corporation tax rates
The corporation tax rate will be reduced from 20% to 19% in financial year 2017 and to 18% in 2020.
From April 2016 the government will increase the annual NIC Employment Allowance from £2,000 to £3,000. Where the director of a company is the sole employee the company will not be able to claim the allowance from April 2016. However, by employee an additional employee would allow claiming this allowance.
Self Employed national insurance contributions
The government will consult in autumn 2015 on abolishing class 2 NICs and reforming class 4 NICs.
Travel and Subsistence
A consultation is to be arranged, outlining a potential framework for new rules for the tax treatment of travel and subsistence expenses.
The budget information released yesterday is yet to be set in stone, QAccounting will provide a more rigid idea of any potential changes and how these will affect you in due course. With this in mind, please remember that no changes will be made until April next year at the earliest with some changes not being implemented until 2017/18, (decrease in Corporation tax rate for example).
Self Assessment – Q & A
Self-assessments. We have all heard of them, you maybe even know what they are. However, here at QAccounting some of our most frequently asked questions are about self-assessments. So below we have outline some of the most common questions we get asked, and the answers we get so tired of giving… just kidding.
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