Big changes in personal tax (2016 Budget)
The Chancellor delivered surprises across the board in his 2016 Budget. But it’s the personal tax changes that caught the eye. How might these affect you?
Business or personal tax. It would have been good to see more in the Budget to help companies with their tax, but these would count for little if directors and shareholders were then clobbered by the Taxman on the profits they take out. That’s why the personal tax breaks proposed in the Budget are good news for those in business too.
Tax allowances. The personal tax-free allowance rose by £400 to £11,000 per annum on 6 April 2016 and will reach £11,500 on 6 April 2017. That’s an increase over two years of more than twice the rate of inflation.
Income tax rates. There’s further good news for higher and additional rate taxpayers as the basic rate band will rise from £32,000 to £33,500 on 6 April 2017. This will mean that for 2017/18 you’ll be taxed at 20% (or less in the case of dividend and savings income) on the first £45,000 of income whether it comes from employment or you extract it from your company.
New tax allowances. The Chancellor announced two brand new tax allowances, which apply for 2017/18 onwards. These will be available against income from micro-businesses and certain types of property rental. Each allowance is £1,000.
Examples. The first new allowance will apply to profits made from ad hoc transactions such as the selling of items on eBay with the intention of making a profit. It can also be claimed as a deduction from business profits instead of actual costs. The other new allowance seems to be similar, but applicable to property rental income. We’ll let you have more information on these when they’re announced.
Tax on gains slashed. Capital gains tax rates are cut from 28% to 20% where higher rate or additional tax on your income applies, and 18% to 10% where basic rate income tax applies. This was enough of a surprise, but even more so was that these took effect on 6 April 2016.
To find out more call BHUK Team on 01708706142 for a chat or book a non-obligatory meeting to see how we can assist with your self-assessment tax.
