With effect from April 2017, landlords of residential property will be restricted on the amount of tax relief that can be claimed on mortgage interest.
If rental profits (before deducting mortgage interest), 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 25% of the costs of finance. Full tax relief on finance costs will be gradually phased out over the next 4 years meaning that by April 2020, only basic rate relief will be available on finance costs.
For example, a higher rate paying landlord only breaking even after £10,000 of mortgage interest, will potentially suffer a further £500 tax liability in 2017/18 and up to £2,000 additional liability in 2020/21. Could you afford to cover this shortfall?
If you are a landlord or in the property industry and wish to find out how these changes could affect you, why not come along to one of our ‘Calling All Landlords!’ workshops? You can book your place here.
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 each per annum.
This will be combined with the ‘tax-free childcare’ system that is due to be introduced from April 2017, with this system then providing 20% effective tax relief on the first £10,000 of childcare costs (per child).
However, the potentially more generous 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.
Generally speaking, if you were born outside of the UK and have a non-UK father, you may be aware of the term ‘non-domiciled’.
For many years, this term has been more associated with Inheritance Tax than anything else. However, changes from April 2017 mean that anyone who has been tax resident in the UK for more than 15 years, will be automatically subject to UK tax on their worldwide income and gains, meaning that they are no longer able to pay UK tax based solely on the monies brought into the UK.
If you are caught by the new rules and wish to discuss the effect on your tax position, please contact Janice Offer who will be able to provide you with the advice you need.
As announced in the 2016 Budget, and available from April 2017 for adults under the age of 40, contributions may be made of up to £4,000 per annum to a Lifetime ISA up to the age of 50, receiving a potential 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.
For those of you who are over the age of 55 and in pension drawdown, there was a further restriction announced on the ‘recycling’ of pension funds where funds are drawn down and other funds reinvested in a pension.
From April 2017, the amount that can be reinvested in a pension plan by those already in drawdown will fall from £10,000 per annum currently to £4,000.
This will therefore restrict the amount of ‘double’ tax relief available from this sort of planning, but as with any type of retirement planning, we would suggest speaking with an Independent Financial Adviser to assess your options.
Alongside the increase in the overall annual ISA subscription limit to £20,000 from 6th April 2017, it was confirmed that a new 3 year NS&I Investment Bond with returns of 2.2% will be available for a year from April 2017
A maximum of £3,000 may be invested, although as with any investments, we would always recommend speaking to an Independent Financial Adviser about your options. Contact us in order to speak with one of our own Independent Financial Advisers at A4G Wealth
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 or OneFineStay, two new £1,000 allowances will be available 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.
As announced at the last Autumn Statement, fuel duty has been frozen for another year, although Vehicle Excise Duty (the old ‘tax disc’) will increase by inflation from April 2017 on cars registered before April 2017.
Vehicle Excise Duty for new cars registered on/after 1st April 2017 could be subject to additional charges where they cost more than £40,000 and/or are more polluting overall. If you are looking to buy or lease a new car, you may wish to bring the decision forward, as for the more expensive and high CO2 models you may end up paying an additional £3,550 in duty!
A further 2% increase was announced during the 2016 Autumn Statement in IPT, bringing the rate up to 12% with effect from 1st June 2017, meaning insurance premiums may be increased slightly next year.
If that news drives you to drink or cigarettes – there’s no respite there either. Alcohol duty will increase by inflation, with tobacco duty up by 2% above inflation and a minimum duty charge of £7.35 on a packet of cigarettes….