TAX RATES & ALLOWANCES

Tax Rates & Allowances

Tax Rates & Allowances

The tax law changes rapidly and affects the relevant rates and allowances.

In this section we have come up with a summary on each type of tax along with their relevant rates and allowances. Our latest tax rates and allowances section includes the following;

  • Income tax
  • National insurance
  • Tax credits
  • VAT
  • Corporation tax
  • Capital gain tax
  • Inheritance tax
  • Stamp duty taxes
  • Rates & threshold for employers

Please get in touch with us for further information.

 

BUDGET 2016 SUMMARY:

Dividend taxation – all change from April 2016
The tax regime for dividends will change for 2016. This sees the abolition of the dividend tax credit of 10%, a dividend tax-free allowance and tax rates for dividend receipts.

Dividend tax allowance £5,000
Basic rate taxpayers    7.5%; you will pay personal tax on dividends on basic tax band
Higher rate taxpayers  32.5%
Additional rate taxpayers  38.1%

Corporation tax rates (Financial year from 1st April to 31st March)
The government has set the Corporation Tax main rate (for all profits except ring fence profits) at 20% for the year starting 1 April 2016.
At Summer Budget 2015, the government announced legislation setting the Corporation Tax main rate (for all profits except ring fence profits) at 19% for the years starting the 1 April 2017, 2018 and 2019 and at 18% for the year starting 1 April 2020.

Property letting
There were a number of announcements regarding property letting. You can see the wear and tear consultation elsewhere in this issue. Restricting finance cost relief for individual landlords was another significant potential change.

New measure will restrict relief for finance costs on residential properties to the basic rate of income tax.
This measure will restrict relief for finance costs on residential properties to the basic rate of income tax and will be introduced over four years from 6 April 2017.

The measure will not affect companies renting out property. The measure will not affect individuals renting out commercial property or furnished holiday letting.

The measure will affect residential property in the UK and elsewhere. The measure will affect mortgage interest, interest on loans to buy furnishings and fees incurred taking out or repaying mortgages or loans.

Landlords will no longer be able to deduct all of their finance costs from their property income to arrive at their property profits. They will instead receive a basic rate reduction from their income tax liability for their finance costs.

Landlords will be able to obtain relief as follows:

Finance cost allowed in full            Finance cost restricted to basic rate
Year to 5 April 2016                   100%                                                        0%
Year to 5 April 2017                   100%                                                        0%
Year to 5 April 2018                   75%                                                          25%
Year to 5 April 2019                   50%                                                          50%
Year to 5 April 2020                   25%                                                          75%
Year to 5 April 2021                   0%                                                            100%

Wear and tear allowance to be replaced with a new relief.
Landlords can currently claim a wear and tear allowance when they rent out furnished residential property to cover the cost of replacing furnishings. This wear and tear allowance is calculated as 10% of the rental income less expenses incurred by the landlord which are normally paid for by the tenants. No wear and tear allowance is available for unfurnished residential properties. The wear and tear allowance is available for individuals and companies.

From 6 April 2016 (1 April 2016 for companies) the wear and tear allowance will be replaced with a new relief. This will allows landlords for both furnished and unfurnished properties to get tax relief on the cost of replacing furnishings based on the cost when the furnishings are replaced.

Furnished holiday lettings will continue to be eligible for capital allowances.

The consultation Replacing Wear and Tear Allowance with Tax Relief for Replacing Furnishings in Let Residential Dwelling-Houses closes on 9 October and seeks views on replacing the wear and tear allowance with a new relief that allows a deduction for the actual costs of replacing furnishings in let residential properties.

VAT treatment for prompt payment discounts
Changes to the VAT treatment of prompt payment discounts for all supplies of goods and services came into effect from 1 April 2015.

A Prompt Payment Discount (PPD) is an offer by a supplier to their customer of a reduction in the price of goods and/or services supplied if the customer pays promptly; that is, after an invoice has been issued and before full payment is due. For example a business may offer a discount of 5% of the full price if payment is made within 14 days of the date of the invoice.

Prior to 1 April 2015 suppliers making PPD offers were permitted to put on their invoice, and account for, the VAT due on the discounted price, even if the full price (i.e. the undiscounted amount) is subsequently paid. Customers receiving PPD offers were able to recover as input tax the VAT stated on the invoice.

After 1 April 2015 suppliers must account for VAT on the amount they actually receive and customers may recover the amount of VAT that is actually paid to the supplier.

These changes will mean an increase in the VAT due on supplies of goods and services where a prompt payment discount is offered but not taken up. Customers that have restricted VAT recovery such as private and non-business customers and partially exempt businesses will suffer additional VAT costs as a result of this change.

Please feel free to contact us if you require any further information.

 

 

LEGAL NOTICE AND WARNING:

The information displayed in this section should not be used as a definitive guide, since individual circumstances may vary. Specific advice should be obtained where necessary. We accept no responsibility of use of above information on your own.