May and June are usually relatively quiet months in terms of tax changes and advancements, but it is still important to keep on top of your tax planning and be aware of any recent or upcoming changes which might affect you.
This is especially true this year with the General Election on the horizon – which could bring with it a raft of tax changes in coming months.
As it stands, there is one key change due to be phased in at the beginning of June, which is as follows:
- As of 1 June 2017, the standard rate of Insurance Premium Tax (IPT) will rise from 10 per cent to 12 per cent. However, the higher rate of IPT will stay at 20 per cent.
However, with the General Election just around the corner, clients are advised to keep an eye out for any potential tax changes announced by the leading political parties as part of their 2017 manifestos.
A raft of previous changes recently took effect at the beginning of last month in line with the beginning of the new tax year. As of the beginning of April:
- The income limit for married couple’s allowance has also now risen from £27,700 to £28,000.
- Inheritance Tax (IHT): There is now an additional nil rate band allowance available in instances where a residence is passed to a direct lineal descendent or other ‘qualifying beneficiary’ at the point of death. Known as the new residence nil rate band allowance, this can be used in addition to the standard tax-free IHT allowance of £325,000. In the 2017/18 tax year, your allowance can be extended by £100,000 under the new rules. It is important to review your Will to take advantage of the changes.
- The amount of Income Tax relief landlords are entitled to on the financing costs of residential property is changing between April 2017 and 2020, and will soon be restricted to the basic rate of tax (20 per cent). This affects those who let residential properties as an individual, or in a partnership or trust.
- Measures have been brought in to limit the Income Tax and Employer’s National Insurance contributions advantage of various benefit in kinds (BIK) offered to employees through salary sacrifice. However, the rules remain unchanged in respect of BIK in the form of ultra low emission vehicles, employer provided pension savings, childcare vouchers and cycle to work schemes.
- As of 6 April 2017, the maximum amount that can be paid into ISAs has been raised from £15,240 to £20,000.
- The limit on Junior ISAs or Child Trust Funds has also now been raised from £4,080 to £4,128.
- The Lifetime ISA has now been launched. It is possible to open a Lifetime ISA between the ages of 18 and 40. LISAs enable you to save up to £4,000 each year and receive a Government bonus of 25 per cent on any savings deposited before your 50th birthday. Money put into these accounts can be saved until you are 60 and used as retirement income – or you can withdraw it to help buy your first home.
- Tax-Free Childcare, first introduced on 28 April 2017, will replace the outstanding childcare voucher system – with all eligible parents brought in by the end of 2017. The new scheme is able to provide parents with children under the age of 12 with up to £2,000 a year per child. Meanwhile, families with children aged three and four years old will have their entitlement to free childcare increase from 15 to 30 hours per week from September 2017.
These are just a few examples of the many savings that can be made by prudent tax planning. For more information on any end of year tax planning issues, and opportunities to reduce your tax bill, please contact us.