- Income Tax
- Tax Credits
- Capital Gains Tax (CGT)
- Inheritance Tax (IHT)
- Property Tax Stamp Duty Land Tax (SDLT)
1 Income Tax Personal allowance and Tax bands
No change was announced to the levels of Personal Allowances and tax bands that will apply from 2016/17.
It had previously been announced that the personal allowance for 2016/17 will be £11,000 and the higher rate tax threshold will be £43,000.
For people who have adjusted net income of more than £100,000, the personal allowance will be reduced. If income is at £122,000 the Personal Allowance will be completely lost.
For your information the government has previously announced that it intends to raise the personal allowance to £12,500 and the higher rate tax threshold to £50,000 by 2020.
Personal savings allowance
From 6 April 2015, a new allowance, the personal savings allowance, will be introduced. This will be £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. No allowance will be available for additional rate taxpayers. Savings income that falls within the personal savings allowance will be tax free.
Savings income includes bank/building society investment, distributions from corporate bond collectives and chargeable event gains from offshore bonds. For 2016/17 the zero rate savings income band will remain at £5,000 meaning that up to £6,000 of savings income for a basic rate taxpayer will be tax free if other income doesn’t exceed £11,000.
There is still some uncertainty as how the personal savings allowance will operate in conjunction with the personal allowance. More detail will be available when we have the Finance Bill in 2 weeks’ time.
A dividend allowance of £5,000 will also be introduced in 2016/17. Dividends of up to £5,000 will be tax free. Dividends as an example are the income generated from Stocks and Share type investments.
2 Tax credits – Some changes were also announced on tax credits.
From 6 April 2016: – The rate at which a claimant’s award is reduced as each £1 of their income exceeds the income threshold, (known as the taper rate), will remain at 41% of gross income.
The level of income at which a claimant’s tax credit award begins to be tapered away, (known as the income threshold), will remain at £6,420 per year Claimants earning below £6,420 will retain their maximum award.
Consequently the income threshold for child tax credit-only claimants will remain at £16,105 in 2016-17. As announced at Summer Budget 2015, the income rise disregard in tax credits will reduce from £5,000 to £2,500. This is the amount by which a claimant’s income can increase in-year compared to their previous year’s income before their award is adjusted.
3 Capital Gains Tax (CGT) CGT annual exemption
The annual CGT exemption for 2016/2017 is yet to be announced but likely to remain at £11,100 if increased in line with the Consumer Price Index.
CGT payment window From April 2019, a payment on account of any CGT due on the disposal of residential property will be required to be made within 30 days of the completion of the disposal. Currently capital gains tax is usually paid within 10 and 22 months of a disposal being made. This change will not affect gains on properties which are not liable for CGT due to the private residence relief. The government will publish draft legislation for consultation in 2016.
4 Inheritance Tax (IHT)
There were very few announcements in the Autumn Statement in relation to IHT, but at least one very welcome.
Deeds of variation The March 2015 Budget announced a review of the use of deeds of variation which took place in the autumn.
The welcome news today is that the government will not introduce any new restrictions on how deeds of variation can be used for tax purposes although they have said they will continue to monitor their use.
Exemption for compensation and ex-gratia payments to victims of persecution during the World War II era
The government will legislate Extra Statutory Concession F20, which gives an inheritance tax exemption in respect of certain compensation and ex-gratia payments for World War II claims. The legislation will include payments made under a recently created compensation scheme known as the Child Survivor Fund. The legislation will be included in the Finance Bill 2016 and will apply to deaths on or after 1 January 2015.
There were no major surprises in the Autumn Statement for pensions. The Chancellor has however made a few changes that are more of a tidying up exercise in the aftermath of the rushed implementation of pension flexibility. The new announcements are:
Basic State Pension – will be increased under the triple lock guarantee to £119.30 a week from April 2016. The maximum Single Tier state pension that will apply for those with a State Pension Age on or after 6th April 2016 will be £155.65 a week, slightly more than previously announced £151 a week.
Automatic Enrolment – pension contribution increases were originally scheduled for 1st October 2017 (on which date the contributions increase for employers to a minimum of 2% and 3% for employees) and 1st October 2018 (the contributions were set to increase to 3% for employers and 5% for employees).
The effective dates of the increases have now been delayed by six months so that they are aligned with the tax year. The October 2017 increases will take effect from April 2018 and the October 2018 increases will take effect from April 2019.
Pensions and Inheritance Tax
The government will introduce backdated legislation within the Finance Bill 2016 to ensure that an inheritance tax charge (under the “omission to exercise a right” provisions) will not apply where a pension scheme member dies with undrawn funds that had been designated to drawdown. The change is backdated to apply to all deaths on or after 2011.
6 Individual Savings Accounts (ISAs)
The 2016/17 annual subscription limit for the ISA will remain at £15,240. The Junior ISA and Child Trust Fund limit will be retained at £4,080.
7 Property Tax Stamp Duty Land Tax (SDLT)
Higher rates of SDLT are to be charged on purchases of additional residential properties (above £40,000), such as buy to let properties and second homes, from 1 April 2016. The higher rates will be 3% greater than the current SDLT rates. The higher rates will not apply to purchases of caravans, mobile homes or houseboats. The government will consult on the policy detail, including on whether an exemption for corporates and funds owning more than 15 residential properties is appropriate.
To remind you, the current SDLT rates and thresholds are as follows:
• Property purchase price up to £125,000: 0%,
• Next £125,000 (the portion from £125,001 to £250,000): 2%,
• Next £675,000 (the portion from £250,001 to £925,000): 5%,
• Next £575,000 (the portion from £925,001 to £1,500,000): 10%
• The remaining amount (the portion above £1.5 million): 12%.
Changes to filing and payment processes
The government will consult in 2016 on changes to the SDLT filing and payment process, including a reduction in the filing and payment window from 30 days to 14 days. These changes will come into effect in 2017 to 2018.
In addition, from April 2019, a payment on account of any CGT due on the disposal of residential property will be required to be made within 30 days of the completion of the disposal. The government will publish draft legislation for consultation in 2016.
Some of the announcements made in respect of Childcare in this year’s Autumn Statement. The main points are as follows:
• Doubling free childcare entitlement from 15 hours to 30 hours a week for working families of 3 and 4 year-olds, worth up to £5,000 per child per year from September 2017 – in addition eligibility has been extended to cases where a parent, or their partner, is in work and the other parent is disabled or a carer or where one of them is taking time away from work on paid sickness or parental leave.
• Introducing tax-free childcare from early 2017 by providing up to £2,000 a year per child to help working parents with their childcare costs.
• The government will lower the upper income limit per parent from £150,000 to £100,000 and increase the minimum income level per parent from the equivalent of 8 hours to 16 hours at the national living wage.
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