Happy New (Tax) Year!
The 6th April marked the start of the new tax year, and with it the introduction of a range of changes to the UK’s taxation system.
Steve Maggs, Tax Partner at Robinson Reed Layton, the Cornish firm of Chartered Accountants and Chartered Tax Advisers, has produced a list of six of the headline changes that everyone should know about:
Personal Allowance and Higher Rate Threshold Increases
The personal allowance for 2017/18 has increased by £500, which means that the majority of taxpayers will now be able to earn £11,500 before they start paying tax on their earnings. The threshold for the higher rate of income tax will now be £45,000.
The National Living Wage and the National Minimum Wage have increased
An important change for the new tax year for both workers and employers is the increase in the National Living Wage and National Minimum Wage, coming into effect on 1st April 2017. The Living Wage is now set at £7.50, while the Minimum Wage has increased to £7.05 for those aged 21-24.
Corporation Tax Changes
The much publicised reductions to corporation tax have now come into force, with the tax now being levied at 19% of a company’s profits for 2017/18, falling to 17% by 2020 under current Treasury proposals. As the rate of corporation tax continues to fall, businesses operating as sole traders or partnerships should consider whether or not incorporation would benefit them. Businesses also stand to benefit from changes (effective from 1st April 2017) to the way in which carried forward losses can be used in calculating their corporation tax bills.
The 6th April 2017 saw the introduction of a new Residence Nil Band (RNRB) worth £100,000 on top of the existing inheritance tax threshold. The RNRB, also known as the family home allowance, has been introduced to allow more people to pass on their home to their children or grandchildren, without the burden of inheritance tax being applied.
Introduction of the Apprenticeship Levy
As part of the Conservative government’s continued drive to support apprenticeships, employers with pay bills of over £3 million per year will now be required to pay the apprenticeship levy at 0.5% of their monthly pay bill. This money will then be reinvested back into the training of apprentices.
The amount an individual can save in ISAs each tax year has jumped from £15,240 to £20,000. The government has also introduced the Lifetime ISA, which allows people under the age of 40 to open an account and save for either retirement or a first home, whilst receiving a 25% cash bonus from the government on their annual contributions.
Commenting on the changes being introduced for the new tax year, Steve said:
“Whilst these changes are not ground-breaking, there are some significant changes that have come into effect. The rate of change the tax system is currently experiencing means that it is more important than ever for people to speak to an experienced Chartered Tax Adviser to ensure that their personal and business tax affairs are structured as efficiently as possible.”
For further information on Robinson Reed Layton, please visit their website http://www.rrlcornwall.co.uk/