BUSINESS IN FOCUS
BUDgET 2017 – hoW IT AffECTS yoU!
ThE ChAnCEllor PhIlIP hAMMonD PrESEnTED ThE lAST SPrIng BUDgET on WEDnESDAy 8 MArCh 2017. ThIS ArTIClE foCUSES on ThE ISSUES lIKEly To AffECT yoU, yoUr fAMIly AnD yoUr BUSInESS.
PErSonAl TAX – PErSonAl AlloWAnCE The personal allowance is £11,500 from 6 April 2017. however, not everyone has the benefit of the full personal allowance. There is a reduction in the personal allowance for those with 'adjusted net income' over £100,000, which is £1 for every £2 of income above £100,000. So, for 2017/18 there will be no personal allowance available where adjusted net income exceeds £123,000.
PErSonAl TAX – TAX BAnDS The basic rate of tax is currently 20 per cent. The band of income taxable at this rate is £33,500 so that the threshold at which the 40 per cent band begins is £45,000 for those who are entitled to the full personal allowance. The additional rate of tax of 45 per cent remains payable on taxable income above £150,000 for all UK residents.
PErSonAl TAX – DIVIDEnD TAX BAnDS Dividends received by an individual are subject to special tax rates. The first £2,000 of dividends, known as the Dividend Allowance, are charged to tax at zero per cent. Dividends received above £2,000 and any other income, eg, employment income, savings income etc, are taxed at the following rates: • 7.5 per cent for basic rate taxpayers
• 32.5 per cent for higher rate taxpayers
• 38.1 per cent for additional rate taxpayers.
The government expect that, even with the reduction in the Dividend Allowance to £2,000 (previously £5,000 up to 5 April 2017), 80 per cent of 'general investors' will pay no tax on their dividend income.
however, the reduction in the allowance will affect family company shareholders who take dividends in excess of the £2,000 limit. The cost of the restriction in the allowance for basic rate taxpayers will be £225 increasing to £975 for higher rate taxpayers and £1,143 for additional rate taxpayers.
PErSonAl TAX – ISAS The overall ISA savings limit is £15,240 for 2016/17, but will jump to £20,000 in 2017/18.
PErSonAl TAX – TAX-frEE ChIlDCArE The Chancellor has confirmed that tax-free childcare will be rolled out from April 2017. Tax-free childcare will be gradually rolled out for children under twelve.
Under the scheme, the relief will be 20 per cent of the costs of childcare up to a total of £10,000 per child per year. The scheme will therefore be worth a maximum of £2,000 per child (£4,000 for a disabled child).
It is expected that all parents in the household will have to meet the following conditions:
• meet a minimum income level based on the equivalent of working 16 hours a week at national minimum wage or national living wage rates;
• each earn less than £100,000 a year; and
• not already be receiving support through tax credits or universal credit.
The existing scheme, Employer- Supported Childcare, will remain open to new entrants until April 2018 to support the transition between the schemes.
PhArMACy In foCUS - 53 The government has also confirmed
that from September 2017, the free childcare offer will double from fifteen to 30 hours a week for working families with three and four year olds in England. In total this is worth up to £5,000 for each child.
BUSInESS TAX – CorPorATIon TAX rATES Corporation tax rates have already been enacted for periods up to 31 March 2021. The main rate of corporation tax was 20 per cent up to 31 March 2017. The rate has been reduced to 19 per cent from 1 April 2017. This will be reduced to 17 per cent from 1 April 2020.
BUSInESS TAX – MAKIng TAX DIgITAl for BUSInESS (MTDfB) The government has now announced a one-year deferral from the mandating of MTDfB for unincorporated businesses and unincorporated landlords with turnovers below the VAT threshold of £85,000 from 1 April 2017. for those that have turnovers in excess of the VAT threshold the commencement date will be from the start of accounting periods which begin after 5 April 2018.
BUSInESS TAX – rESTrICTIonS on rESIDEnTIAl ProPErTy InTErEST from 6 April 2017, landlords will no longer be able to deduct all of their finance costs from their property
income. They will instead receive a basic rate reduction from their income tax liability for these finance costs. finance costs include mortgage interest, interest on loans to buy furnishings and fees incurred when taking out or repaying loans or mortgages.
The restriction will be phased in, with 75 per cent of finance costs being allowed in 2017/18, 50 per cent in 2018/19, 25 per cent in 2019/20 and be fully in place for 2020/21. The remaining finance costs for each year will be given as a basic rate tax reduction but cannot create a tax refund.
If any of the points noted above affect you or somebody you know please speak to Steven McVitty for independent professional advice.
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