Personal Income Tax
Previous Budgets saw the Chancellor of the day make a raft of changes to reduce the amount of Income Tax that people pay; which should ultimately lead to less reliance on benefits.
Today’s Autumn Statement saw no significant changes to any of the rates that have previously been announced, and the Chancellor reaffirmed the Government’s target of a £50,000 higher rate personal Income Tax threshold within the current parliament.
The main allowances and tax rates for individuals from 5 April 2017 onwards are as follows:
April 2017 sees the personal allowance set at £11,500.
Income Tax bands
April 2017 will also see the higher rate tax threshold set at £45,000, as previously announced.
Rental property – restricting loan interest relief for landlords
Despite calls for the ‘restriction of loan interest relief for residential landlords’ to be scrapped, no announcements came in today’s Autumn Statement!
This piece of legislation, which comes into force from 6 April 2017 onwards, restricts the amount of relief that landlords can claim on finance costs to the basic rate of tax. This means that landlords will no longer be able to deduct all of their finance costs from their property income when calculating their taxable rental profits.
This measure will be phased in gradually over a four year period from 6 April 2017 onwards.
· In 2017/2018 they will be able to deduct 75% of the finance costs incurred with the remaining 25% being available as a basic rate tax deduction.
· In 2018/2019 they will be able to deduct 50% of the finance costs incurred with only basic rate tax relief being given on the remaining 50%
· In 2019/2020 they will be able to deduct 25% of the finance costs incurred with only basic rate tax relief being given on the remaining 75%
· In 2020/2021 all finance costs incurred will be given as a basic rate tax reduction
One announcement which we have been expecting for a while was that the benefits that arise from most salary sacrifice schemes will no longer be present from April 2017 onwards as they will be taxed the same way as normal salary.
In salary sacrifice schemes employees exchange part of their salary for a benefit, such as a mobile phone. Both the employer and the employee usually make a tax saving under these types of schemes.
Further details will follow on this in due course, but pensions, childcare and cycle to work schemes will all be exempt from the new rules and there will be a phasing out period for some schemes which were in place before April 2017.
If you have any Income Tax queries, please contact one of our Tax Specialists on 01228 711888.