Income tax
- The personal allowance will increase to £11,500 and the basic rate band to £33,500 from 6 April 2017.
- From April 2018 the annual dividend allowance will be reduced from £5,000 to £2,000.
- The capital gains tax annual exemption will increase to £11,300 in 2017/18.
- The Government plans to consult on the redesigning of rent-a-room relief with a view to ensuring its suitability for longer-term lettings.
- The Government is looking into tackling the current inconsistency in the taxation treatments of certain benefits in kind and will publish a number of consultations, in particular relating to accommodation benefits and employee expenses, as well as exempt benefits and the valuation methodology of benefits in kind.
National Insurance contributions
- Class 2 NIC are to be abolished from April 2018.
- The Class 4 NIC main rate will increase from 9% to 10% (from April 2018) and to 11% (from April 2019).
Savings
- The ISA allowance will increase to £20,000 from April 2017.
- The Lifetime ISA (LISA) will be introduced from April 2017 and should be available to those between 18 and 40 years of age. Up to £4,000 per year may be deposited into the ISA with a 25% bonus paid by the Government. This enables tax free savings of up to £5,000 per year. The ISA can be invested in either in cash or stocks and shares and the Government will pay the bonus until the individual is 50 years old and the savings can be taken out at 60 for retirement purposes or to purchase a first home worth up to £450,000.
- A new NS&I Investment Bond is to be offered to those aged 16 or over and this will be available from April 2017 with an interest rate of 2.2% per annum over a three year term. The minimum investment will be £100 and the maximum investment will be £3,000.
Tax administration
- Making Tax Digital will not come into effect until April 2019 for unincorporated businesses and landlords with turnover not exceeding the VAT threshold.
- The cash basis threshold will be increased to £150,000 (with an exit threshold of £300,000) and the cash basis will become available to unincorporated landlords. In addition, the regulations around capital and revenue expenditure will be simplified for businesses adopting the cash basis.
Tax avoidance
- The Government plans to introduce a charge of 25% which will be applied to transfers of pension funds to a QROPS (Qualifying recognised overseas pension scheme). This measure will apply only to those transfers whose main purpose is the avoidance of tax and will not apply to people who genuinely need to transfer their pension abroad.
- A new penalty will be introduced targeting tax avoidance enablers, i.e. individuals who enable other people or businesses to use a tax avoidance scheme, if the scheme becomes defeated by HMRC. In addition, the defence of having relied on non-independent advice as taking “reasonable care” will no longer be available when considering penalties for persons or businesses which use tax avoidance schemes.
The information in this article is believed to be factually correct at the time of writing and publication, but is not intended to constitute advice. No liability is accepted for any loss howsoever arising as a result of the contents of this article. Specific advice should be sought before entering into, or refraining from entering into any transaction.