It's that time of the year again where we wave goodbye to one tax year and usher in the next. For 2016 there are a number of changes to tax with announcements made as little as a few weeks ago in the UK Budget.
So, let's take a rundown of the important changes you should take note of.
Income Taxes (Personal and Business)
- Income tax rates remain unchanged but you can now earn £43,000 before paying the 40% higher rate of tax. This is through an increase of the tax free personal allowance to £11,000 and small increase to the higher rate threshold to £32,000.
- Transferable marriage allowance maximum is now £1,100.
- Upper earnings limit raised by £12 a week meaning more of your income can be subject to the higher 12% NIC rate.
- Dividends are now taxed in a completely changed method. Out goes the tax credit and in comes three bands and a new £5,000 zero-rated starting band, effectively reducing the tax on the first £5k of dividend income to zero.
- Savings receive a new £1,000 or £500 allowance for basic and higher rate taxpayers respectively.
- Capital Gains now have new lower rates of 10% for basic rate and 20% for higher rate and above. The lower rates apply only to non-residential. Residential and carried interest rates remain the same as last year at 18% and 28%. Use our updated capital gains tax calculator here to calculate the changes.
- National Minimum Wage raised to £7.20 per hour for employees aged 25 and up, £6.70 per hour for employees aged 21-24, £5.30 per hour for employees aged 18-20 and £3.87 per hour for employees aged under 18. The minimum wage for Apprentices is set at £3.30 per hour.
- Gift Aid claim limit for businesses to claim the additional Government top-up increased to £8k.
- Capital Gains Tax reductions may prompt more investment in businesses as rates for shares etc are reduced to (10%/20%).
- Employment allowance for NICs raised to £3k (increase of £1k). This lump sum can be subtracted off the Employers NIC bill.
- No more Employers NICs for Apprentices under age 25.
- Lower Business Rates via the Small Business Relief Scheme that remains doubled for 2016. This means 100% relief for businesses with rateable values of less than £6k and a some relief for rateable values of up to £12k.
- Rent-a-room allowance rises to £7,500.
- ISA limit raised to £15,240 per year and savers can now withdraw from the account and later re-invest the same amount without losing the tax free advantage.
- We have already written about some other changes that come into force on Wednesday, specifically to do with property and Buy to Let. Read more here.