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PERSONAL

PERSONAL ALLOWANCE INCREASE

The income tax personal allowance will increase from £10,600 in 2015/16 to £11,000 in 2016/17. It will further increase to £11,200 from 2017/18.

PERSONAL ALLOWANCE INDEXATION CHANGE

The government will legislate to ensure that once the personal allowance reaches its target of £12,500 it will be uprated in line with the national minimum wage (NMW).

The aim of the proposal is to ensure that any person on the NMW working 30 hours per week or less is unlikely to pay income tax. A review into aligning the NMW timeline with the tax year was also announced.

HIGHER RATE THRESHOLD INCREASE

The higher rate threshold will increase from £42,385 in 2015/16 to £43,000 in 2016/17. It will increase to £43,600 in 2017/18.There will be a corresponding increase in the national insurance contributions upper earnings limit to ensure it remains aligned with the higher rate threshold.

HIGHER RATE THRESHOLD  
2015/16 £42,385
2016/17 £43,000
2017/18 £43,600

 

TAX ON DIVIDENDS

The government has introduced major changes to the taxation of company dividends. This is likely to increase the taxation liability of many director/ shareholders of limited companies.

The dividend tax credit will be abolished and replaced with a new dividend tax allowance of £5,000 per year from April 2016.

New rates of tax on dividend income above the allowance will be introduced, which will be 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.

The announcements were not accompanied by any detail so the impact of this change will become clearer as further documents are made available.

RESTRICTING FINANCE COST RELIEF FOR LANDLORDS

The government will restrict the relief on inance costs, including mortgage interest payments, available to individual landlords of residential property to the basic rate of tax. The restriction will be phased in over a 4 year period, starting from April 2017.

INCREASE IN RENT-A-ROOM RELIEF

The level of rent-a-room relief will increase from £4,250 to £7,500 from April 2016 to help the growing numbers of individuals renting out their spare rooms.

WEAR AND TEAR ALLOWANCE CHANGES

The government will replace the existing wear and tear allowance with a new relief that will allow all residential landlords to deduct the actual cost of replacing furnishings from April 2016. Capital allowances will continue to apply to landlords of furnished holiday lets. A technical consultation will be published on the new relief before the summer.

ABOLISHING NON-DOMICILE STATUS FOR LONG-TERM RESIDENTS

Legislation will be introduced from April 2017 to ensure that anybody resident in the UK for more than 15 of the past 20 years will be deemed to be domiciled in the UK for tax purposes.

NON-DOMICILE STATUS FOR UK BORN INDIVIDUALS

From April 2017, any individual who is born in the UK to parents who are domiciled here will not be eligible to claim non domicile status while they are resident in the UK.

AMENDMENT TO VENTURE CAPITAL SCHEMES

Subject to state aid approval, new measures were introduced to amend enterprise investment scheme (EIS) and venture capital trust (VCT) rules. Some of the measures include:

  • a new cap on the total investments a company may raise under EIS, VCT or other risk inance investments of £12 million or £20 million for knowledge intensive companies
  • preventing companies from using EIS or VCT investments to acquire a business and a requirement that investors are independent from the company at the time of the irst share issue.

These measures will take effect from royal assent to the Summer Finance Bill 2015.

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