Another exciting time in the world of tax!

With the snap election and the dissolution of Parliament, outstanding bills had to be passed or scrapped before Parliament shut up shop and went on the election trail – and this process is called a Wash Up!

The Finance Bill is too important to be scrapped, so to get it passed in a hurry, lots of contentious clauses had to be dropped.

So what didn’t make the grade?

The headline area is Making Tax Digital.  I don’t expect in the long run this will mean we have seen the last of this, and it will almost certainly reappear under the new government, but for now it’s out!   It may not even mean that the timescale for introducing it gets delayed but we will have to wait a bit longer to find out.

Also out are the 2 new allowance I wrote about last week!  The £1,000 allowances for property and rental income that came in in April 17 are out again and have been scrapped!

Better news is the reduction in the dividend allowance from 18/19 from £5,000 to £2,000 has also gone.  This will please a lot of small business owners, but again it could well be reintroduced post election (depending on who gets in of course!)

Other provisions have been scrapped but the above are the most relevant to my clients.

There is a budget already planned for the Autumn and often a mini-budget post an election, so this tax hokey-cokey looks set to continue. Not great when you are trying to plan for your business or your clients!

The new tax year is upon us so what’s new and what do you need to know about for the new tax year?

Personal Allowance
This has increased to £11,000 – this is the amount that you can earn this tax year without paying personal tax.  The next £32,000 of income will be taxed at 20%, and then 40% on earnings up to £150,000.

Personal Savings Allowance
A new savings allowance is introduced in 2016/17.  For basic rate taxpayers the allowance is £1,000 and for higher rate taxpayers £500. This means that no tax will be payable on savings income until the new savings allowance has been used up.

In a further change, banks and building societies will pay interest gross rather than deducting tax as they have done before.

Dividend Allowance
The way dividends are being taxed is changing – and most small limited company owners will be worse off.

The existing notional 10% tax credit on all dividends will be abolished and a £5,000 tax free dividend allowance is being introduced.

Dividends received above £5,000 will be taxed at 7.5% (basic rate), 32.5% (Higher rate) and 38.1% (additional rate), with no tax credit set against it as at present.

Limited company owners will therefore face tax bills on dividends taking from their limited companies – which could easily be avoided in the past.

Increase in the Employment Allowance

The allowance, which most limited company directors would have claimed at least in part in 15/16 is rising from £2,000 per annum to £3,000 per annum.  However it is no longer available to businesses where the director is also the sole employee, and therefore a lot of companies will no longer be able to claim it at all.

Abolition of 10% Wear and Tear Allowance for Landlords

The flat rate 10% allowance for landlords with furnished properties is being abolished, and being replaced with Replacement Furniture relief.

Tax relief will be given against rental income for the cost of replacing domestic items which includes moveable furniture, carpets, curtains, household appliances (fridges, freezers etc) kitchenware and TV’s.
So with lots to changes to be aware of as the new tax year starts, take the time to think about how they affect you and your business, and make sure you are being as tax-efficient as possible.