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.
You can view our updated 2016 tax calendar for all of the important tax dates and check out the full list of 2016 rates, thresholds and allowances for personal and business taxes.