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Tax changes for 2016/17: will you be affected?

 

Tax changes for 2016/17: will you be affected?

The new tax year can be an uncertain time for those that don’t regularly follow the financial news. We’ve had plenty of calls from people concerned about a potential rise in their tax bill, after hearing about new tax rates. Similarly, there are many people who could miss out on opportunities created by new allowances that they simply haven’t heard about.

With this in mind, here’s a list of the major changes that could impact your finances over the coming year.

Income tax

Basic and higher-rate taxpayers will benefit from 2 major income tax changes being introduced in the 2016/17 tax year, a year earlier than originally planned:

·         Personal allowance: This increased from £10,600 to £11,000, before hitting £11,500 in the 2017/18 tax year.

·         Higher rate threshold: This increased from £42,385 to £43,000, taking more people out of the higher rate tax band. It will rise again to £45,000 in April 2017.

Savings

From 6 April, those with annual income between £17,000 and £43,000 will be able to benefit from the new personal savings allowance. This will enable individuals to save up to £1,000 a year tax-free. Higher rate taxpayers will be able to save £500 a year without paying tax.

Property

Landlords may see their tax bills increase because of 2 new measures:

·         Stamp duty: A 3% charge has been introduced on top of the current rates for landlords and buyers of second homes.

·         Wear and tear allowance: The government is only permitting the allowance where landlords are able to provide proof of maintenance costs.

Pensions

The 2016/17 tax year introduced increases to the state pension, while holders of private pensions valued at over £1million may see a rise in their tax bill:

·         The new state pension: This will be introduced for individuals retiring after 6 April 2016 and will pay out a maximum £155.65 a week.

·         Basic state pension: This increased from £115.95 to £119.30 a week.

·         Lifetime allowance: The threshold upon which pensions are taxed has been lowered from £1.25 million to £1 million.

Capital gains tax

Both rates of capital gains tax (CGT) has been cut, as announced in the Chancellor’s latest budget statement:

·         The basic rate has fallen from 20% to 10%.

·         The 28% higher rate has been cut to 18%.

It’s important to remember that gains made on the sale of residential property not eligible for private residence relief will not be affected by these changes, and will remain taxed at the 18%/28% rates.

Contact us

Want to know more about how your finances will fare this year?

Contact us on 01628 631 056 or email geoffk@knightandcompany.co.uk to discuss how these changes will affect your financial situation.