Current Issues | Tax | 8th March 2017
Budget Highlights 2017
Income tax rates are unchanged. The personal allowance for 2017/18 is £11,500 and the basic rate band is £33,500. The £5,000 dividend allowance applies until 6 April 2018 when it falls to £2,000.
A £1,000 trading allowance and a £1,000 property income allowance apply from 6 April 2017.
From 2017/18, employees can get £500 of pensions advice paid for by their employer free of tax and NIC, and can also draw £500 from their pension fund tax-free in each of three years for this cost.
Capital gains tax
The annual exemption for 2017/18 is £11,300.
Extensive changes to income tax, capital gains tax and inheritance tax apply from 6 April 2017.
National Insurance contributions (NIC)
Both employers’ and employees’ contributions will apply to weekly earnings over £157.
Rates are unchanged for 2017/18, but from 6 April 2018 Class 2 contributions end and Class 4 increase to 10% (from 9%).
Cash basis accounts - The turnover limit for unincorporated traders who wish to prepare their accounts on the cash basis rises from £83,000 to £150,000 from 6 April 2017.
Individuals with rental income not exceeding £150,000 p.a. will be taxed on the cash basis from 6 April 2017 - unless they choose otherwise.
This will not apply if the landlord is a company, trustees, PRs of a deceased person, an LLP or is in partnership with a company, business premises renovation allowances are claimed or if the cash basis receipts for the tax year exceed £150,000 or if the landlord elects as much.
Amendments affect capital expenditure by landlords who adopt the cash basis.
This is quite apart from the proposed extension of 'making tax digital' [MTD] to traders and such landlords from April 2018.
The limit to 20% tax relief on finance costs for landlords of residential property will begin to bite from 6 April 2017.
The annual allowance on contributions once benefits have been drawn is cut from £10,000 to £4,000 from 6 April 2017.
Some transfers requested after 9 March 2017 to Qualifying recognised overseas pension schemes (QROPS) will be subject to a 25% tax charge.
The rate is cut to 19% from 1 April 2017.
Large companies and groups will suffer changes to the relief for losses and deductible interest.
Land in the UK - The regime introduced from 5 July 2016 in the Finance Act 2016 is to be tightened up to bring in all profits from dealing or developing land recognised after 7 March 2017 in accounts prepared under GAAP.
Appropriations to trading stock – Where an investment property is appropriated to trading stock it has been possible to elect for the asset’s cost to be the transfer value. For appropriations after 7 March 2017 this is to apply only if otherwise there would be a chargeable gain.
VAT - registration and de-registration limits are increased, to £85,000 and £83,000 respectively.
Inheritance tax (IHT)
The new residence nil rate band of £100,000 (tapered down if the net estate exceeds £2m) applies on death after 5 April 2017 where the main residence of the deceased is left to children or grandchildren.
Interests in offshore ‘close’ companies and partnerships are subject to UK IHT from 6 April 2017, to the extent their value is attributable to UK residential property, as also are loans financing such property.
The existing IHT exemption for donations to political parties is to include donations made to qualifying political parties in the devolved legislatures and parties that have acquired representatives through by-elections.
Non resident trusts – Major changes apply from 6 April 2017 to the income tax and capital gains tax liabilities of settlors and beneficiaries of offshore trusts.
The new Apprenticship Levy at 0.5% applies from 6 April 2017 to companies and groups with an annual payroll exceeding £3m.
ATED - The £500,000 threshold for a single residence in the UK from 1 April 2017 (above which ATED is payable, subject to possible exemptions) is the market value as at 1 April 2017 or the cost on subsequent acquisition. Some of the rates are increased, to £220,350 for properties worth over £20m.
ISAs - The annual limit is increased to £20,000 from 6 April. A Help to Buy ISA may be converted into a Lifetime ISA from 6 April 2017.
Specific advice should be obtained before taking action, or refraining from taking action, in relation to the above. If you would like advice or further information, please speak to your usual Shipleys contact.