I’m keeping this simple, and relevant to my client base – small limited companies, partnerships and sole traders. Here’s a list of changes to be aware of, starting this tax year:
- 1. Personal Allowance: Increases to £11,000 so nil tax to pay on the first £11,000 of total earnings unless you earn more than £100,000 when the allowance starts to drop.
- 2. National Living Wage: Employees aged 25 and over must now be paid a minimum wage of £7.20 per hour.
- 3. Dividends: The first £5000 is tax free. What is deducted after that depends on your tax rate band.
- 4. Savings Interest and the Personal Savings Allowance: Savings interest will now be paid gross, and for basic rate tax payers, the first £1000 stays tax free. For tax payers within the higher rate tax band, the tax free amount is £500. If you earn over £150,000, presumably, you don’t need an extra lift as this allowance will not apply.
- 5. Transferable Marriage (and Civil Partners) Allowance: Increases to £1,100 from £1,060. Both partners must be within the basic rate band.
- 6. Directors’ Loan Accounts: Only relevant to limited companies – the tax charge on outstanding loans to directors who are also shareholders increases to 32.5% for loans, advances and arrangements made on or after 6 April 2016.
- 7. Pensions: The lifetime limit has dropped to £1m and the implication of this is that amounts over this limit will incur a 55% tax charge when eventually withdrawn.
- 8. Employment Allowance: Increases to £3000.
- 9. VAT Thresholds: The registration limit increases to £83,000 and the deregistration limit is now £81,000.
- 10. Landlords’ Expenses: The Wear and Tear option is gone. Replacement expenses will now be the norm across the board.
- 11. Tax Credits: If your annual income rises by £2500 or more, your tax credit will be affected. The disregarded amount used to be £5000.
- 12. Live-in Landlords and Lodgers: People renting out a furnished room in their home won’t pay tax on the first £7,500 they earn; up from £4,250 last year
So, there you have it. If more details are required on any the above, the HMRC website has comprehensive information, otherwise, speak to your accountant or get in touch via firstname.lastname@example.org – only an email away.