A new tax year began on 6 April 2017, which means that a number of significant tax changes have now taken effect – and some further changes are still ahead.
To keep your tax-planning in check, you may wish to consider the following:
- As of 6 April 2017, taxpayers can now enjoy a new personal allowance of £11,500, up from the previous £11,000.
- 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 are now restricted to the basic rate of tax (20 per cent) on 25 per cent of interest paid. This affects those who let residential properties as an individual, or in a partnership or trust.
- Tax-free eligibility has effectively been removed from a number of benefits in kind, as of the beginning of this month. Tax-free benefits in kind are now limited to: ultra-low emission cars, pension contributions, cycle to work schemes, childcare vouchers and charitable donations under the Payroll Giving scheme.
- 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.
- Tax-Free Childcare will replace the outstanding childcare voucher system as of 28 April 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 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.