Capital Gains Tax Reduced
A slightly surprise move by the Chancellor and opposite to many predictions, the rates of Capital Gains Tax were reduced from 18% to 10% for basic rate taxpayers, and from 28% to 20% for higher rate taxpayers, with effect from 6th April 2016.
However, gains made on residential property (and certain gains within the financial services industry) will still be chargeable at the original rates of 18% or 28%. So unless disposing of shares, or other valuable personal possessions, you may not benefit from the lower headline grabbing rates!
All individuals will still be eligible to make tax-free gains of up to £11,100 in the year to 5th April 2017. Gains on main residences remaining exempt from Capital Gains Tax.
Business owners, and now investors holding new shares in unlisted limited companies for at least 3 years, will still qualify for Entrepreneur’s Relief on any gains resulting from a sale of their business provided that it is structured correctly.
If you are considering selling your business in the next 5 years, you should start to consider how to maximise the value to any potential buyers, possibly by making the business less dependent on you. To find out how we can help you maximise your future sale, contact one of our Partners or Principal Advisers.
SDLT increase for Additional Residential Properties
The purchase of any additional residential property in the UK will be subject to an additional 3% Stamp Duty Land Tax where completion takes place after 1st April 2016.
Despite calls otherwise, it is now clear that all additional residential property will be caught however this is purchased (i.e. whether in personal or corporate names), with large scale investors not exempt from the additional charge
In addition, the government still expect to introduce a shorter time period for the payment of SDLT on all property purchases. This will mean that from April 2017, SDLT will be payable within 14 days of completion.
However, one small piece of good news is that for those individuals moving home, where there is a gap between purchases or overlap of ownership, will be allowed 36 months before the higher rate of SDLT will be applied. Where there is an overlap of ownership, sufficient cash-flow will still be required as the higher rate SDLT will need to be paid and then reclaimed on the sale of the original property.
Restricting tax relief for Buy to Let landlords
With effect from April 2016, the 10% wear and tear allowance for landlords who let furnished residential properties will be abolished, with tax relief only allowable on expenses actually incurred for the maintenance of the property, including replacement furnishings.
With effect from April 2017, landlords of residential property will also be restricted on the amount of tax relief that can be claimed on mortgage interest. If rental profits, along with any other income, is sufficient to push the landlord into the higher rate of tax, only basic rate relief will be applicable on any costs of finance.
If you are a landlord or in the property industry and wish to find out how these changes could affect you, contact Janice Offer who will be able to provide you with options on how to mitigate any additional tax.
Alternatively, why not come along to our ‘Calling All Landlords!’ seminar? You can book your place here.
Additional rate taxpayers – reduced tax relief on pension contributions
From April 2016, individuals with ‘adjusted’ incomes (including employer’s pension contributions) of over £150,000 will lose part of their Annual Allowance for pension contributions.
This will mean that for every £2 of income (and employer’s pension contributions) over £150,000, £1 of the Annual Allowance will be lost down to a minimum of £10,000.
If you are planning a significant pension contribution in the next few months, you may wish to consider bringing this forward so that you are not affected by the new rules.
For all other individuals, the amount that can be set aside into a pension with full tax relief remains at £40,000 per annum. However, if the Annual Allowances for the previous three tax years have not been used in full, the contribution may be topped up by this shortfall.
Careful planning on the timing of pension contributions can ensure that you benefit from the optimal tax relief possible, so why not ask one of our Partners or Principal Advisers for an introduction to an A4G approved Independent Financial Adviser.
Introducing the Lifetime ISA
Available from April 2017 for adults under the age of 40, individuals will now be able to contribute up to £4,000 per annum to a Lifetime ISA up to the age of 50, receiving a 25% bonus from the government.
These funds, including the bonus, may be used to purchase a first home (after 12 months of account opening), or withdrawn from the age of 60 as part of retirement funding – perhaps alongside more traditional pensions.
As with all ISA’s, no tax will be payable on withdrawal, although if funds are withdrawn for reasons other than above, a charge of 5% will be levied and the government bonus will be lost.
However, the government will shortly consult on whether to allow some form of flexibility on temporary withdrawals without charge or loss of bonus, similar to some forms of US retirement plans.
The overall annual ISA subscription limit will also increase to £20,000 from 6th April 2017.
Extension of free Childcare
From September 2017, parents of 3-4 year olds will be able to access free childcare for 30 hours per week. This will be available to all parents working at least 16 hours per week who earn less than £100,000 per annum.
This will be combined with the ‘tax-free childcare’ system that is due to be introduced from early 2017, with this system then providing 20% effective tax relief on the first £6,000 of childcare costs (per child).
However, the childcare vouchers scheme will continue for new entrants until April 2018 allowing basic rate taxpayers to claim up to £55 per week (per parent) for regulated childcare for children up to 15 years old. Higher and additional rate taxpayers can claim £28/week and £25/week respectively.
Childcare vouchers are available tax-free from employers (including owner-managers themselves). If you would like to find out more, speak to your Principal Adviser.
For anyone who dabbles in a very small business, or who perhaps lets their property out for a couple of weeks a year through a website such as AirBnB, welcome news came in the form that two new £1,000 allowances will be introduced from April 2017.
Individuals with property income or trading income below this limit will no longer need to declare this income or pay tax on that income. Individuals with income above these levels could opt to use the allowance as an alternative to working out their exact expenses.
Thames Estuary 2050 Growth Commission
The Budget announced that as part of the long term economic development plan for the Thames Estuary area comprising North Kent, South Essex and East London, a report will be provided in time for the 2017 Autumn Statement.
Chaired by Lord Heseltine, the Commission will be tasked with developing the plans to support areas of new technology and high productivity in various locations across the region.
Whilst the ‘big ticket’ infrastructure announcements were mainly aimed at the North of England (with the exception of CrossRail2 in London), the South East is still clearly in the sights for future development.
Duty, VAT and Insurance Premium Tax (IPT) Changes
In line with previous Budgets, the Chancellor froze fuel duty for another year.
In addition, duty has been frozen on beer, spirits and cider, with inflationary rises on duty on wine and other alcohol. Tobacco duty will rise in line with the tobacco duty escalator at 2% above inflation.
The registration and deregistration limits for VAT have increased by £1,000 each to stand at £83,000 and £81,000 respectively from 1st April 2016.
Despite a rise of 3.5% in IPT from 1st November 2015, as announced in the 2015 Summer Budget, a further rise of 0.5%, bringing the rate of 10% overall with effect from 1st October 2016, was deemed necessary to raise further funds to combat winter flooding.