(Tax) change is in the air!
Top 3 tax changes for 2016/2017 financial year
This past Wednesday 6th April marked the start of a new financial year. As previously announced, it brought with it a host of tax changes that will affect almost all UK tax payers; many of whom will now be newly incentivised to seek expert advice on their financial planning. As there have been so many changes introduced of late, here we summarise the most important issues affecting tax payers in the 2016/17 financial year ahead.
Tax change #1: Income tax
Personal allowance for this coming tax year has risen from £10,600 to £11,000 within the basic rate tax band of £32,000, which means that most of the population can earn up to £43,000 before entering the higher tax bracket. Similarly, if an individual has savings that are subject to income tax then the first £1,000 will be tax free; creating a further saving of £200.
Tax change #2: Investment Tax
Dividend Tax Credit has been replaced by a new Dividend Tax Allowance which sees the first £5,000 of dividend income exempt from tax. Any further dividends will be taxed on one of three different rates: for basic-rate taxpayers this is 7.5 per cent, higher-rate taxpayers pay 32.5 per cent and additional-rate taxpayers 38.1 per cent.
Tax change #3: Property Tax
Effective as of 1st April 2016, landlords and other property owners buying second homes now face a 3% stamp duty surcharge on existing price bands, which will greatly impact their overall buying cost. Less severe is the scrapping of the 10% wear and tear allowance, meaning that landlords will need to ensure scrupulous record keeping of work carried out to their rented properties in order to claim for maintenance.
For more detail on this year’s tax changes, listen into this week’s edition of The Investment Club show on Share Radio, where VSC client and chartered accountant Eric Clapton of Clapton Consultants discusses the changes with presenter Simon Rose. Click here to listen.