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New Tax Year
The 2017 new tax year
Catherine Chapman :: Monday 5th June 2017 :: Latest Blog Posts
New Tax Year
Spring has arrived; a General Election is in sight, we have moved and the start of a new Tax Year... all since the last edition of the Downsman!
This month I thought I would just update you on the new tax rates and personal allowances from 6 April 2017:
You can choose which slice of income should be set against your personal allowance (£11,500) to achieve the best result.
| Taxable income above | Main Rate | Rate on Dividends | Why, what and who |
| £11,500 | 20% | 7.5% | Basic rate and personal allowance used |
| £43,000 | 40% | 7.5% | Higher rate for Scottish taxpayers |
| £45,000 | 40% | 32.5% | Higher rate for other taxpayers |
| £100,000 | 40% | 32.5% | Personal allowance withdrawn by £1 for every £2 of income |
| £123,000 | 40% | 32.5% | Higher rate – personal allowance completely withdrawn |
| £150,000 | 45% | 38.1% | Additional rate |
Above £45,000:
- marriage allowance not available (above £43,000 for Scottish taxpayers)
- savings allowance cut from £1,000 to £500
- capital gains taxed at 20% rather than 10%
- tax free childcare vouchers reduced from £55 to £28 per week
Above £150,000:
- pensions annual allowance is tapered down to £10,000
- saving allowance is nil
- tax free childcare vouchers reduced to £25 per week
Both these thresholds can be expanded if you pay pension contributions or make gift aid donations in the tax year. Gift aid donations can also be carried back one year.
Inheritance tax
From 6 April 2017 the new "residential enhancement" rate band is in operation. This is the introduction of a special residence nil rate band when a home is passed on death to direct descendants of the deceased. The maximum amount of this new band will rise in stages to £175,000 in 2020/21 and any unused residence nil rate band will be transferable to a surviving spouse or civil partner.
The maximum amount for all years from 2017/18 onwards is as follows:
- £100,000 2017/18
- £125,000 2018/19
- £150,000 2019/20
- £175,000 2020/21
If, however, the home is passed on death to a trust then unfortunately this relief will not be available. Do you need therefore to amend your Will? Please speak to your Solicitor regarding this point. If you do not have a Will then please, if you take nothing else from this article, speak to a Solicitor to ensure this is rectified!
Marriage allowance
Where both spouses or civil partners pay tax at no more than 20%, and one of them doesn't use all their personal allowance, that person can transfer £1,150 of their personal allowance to their partner. This saves tax of £230 in 2017/18. This marriage allowance can also be claimed for 2015/16 and 2016/17.
Children
A family that receives child benefit will have all the benefit clawed back as a tax charge if the highest earner in the family has income of £60,000 or more. Where this person has income of between £50,000 and £60,000, part of the child benefit is clawed back.
There are two ways to avoid this tax charge:
- arrange income sources so neither parent has total income over £50,000
- opt out of receiving child benefit
It is important to claim child benefit if you are eligible, even if you opt out of receiving the payment for a period. The benefit claim provides national insurance credits for the non-earning parent, which will help build up entitlement to the state pension.
Sundry income
Earning small amounts of extra income can be tax free up to these annual limits:
- £7,500 from letting a room in your own home as residential accommodation (rent-a-room relief)
- £1,000 from letting property which doesn't qualify for rent-a-room relief
- £1,000 from providing services, hiring assets or selling goods
These allowances are set against the gross income in those areas. You pay tax on any excess income without deducting expenses. The alternative approach is to not claim the allowance, deduct allowable expenses from the income and pay tax on the profit.
Rent-a-room relief applies per home, so it is halved where there are joint homeowners. The other allowances apply per individual, but they can't be set against income from your own company, a company that employs you or a partnership which you are a member of.
Again just a reminder - have you registered for your own Personal Tax Account (PTA)? By receiving your own PTA you are able to check and change your address through to completing your self-assessment tax return if you do not have an accountant or manger your tax credits. It is quick and straight forward. Go to: https://www.gov.uk/government/publications/your-personal-tax-account/your-personal-tax-account
Please contact Catherine at CBA Services Limited on 01258 840306 or 01725 552955, if you have any queries regarding the Budget or anything mentioned above or, if you need assistance with your bookkeeping, accountancy or tax issues.
Whilst care has been taken in preparing this publication it is for information only. It is not, and should not be construed, as advice and accordingly no reliance should be placed on the information contained herein.