Autumn Budget 2017- Personal Tax

Tax rates

There were no changes to rates of income tax announced in the Budget.

Allowances and tax bands

The personal allowance for 2018-9 will be £11,850, with the income on which you start to pay tax at 40% increasing to £46,350.

This means that most people with straight forward tax affairs and no benefits in kind (for example, cars or health insurance) should have a tax code of 1185L taking effect in April 2018.

Other allowance levels can be found on the HMRC web site here.

ISAs

The ISA limit will remain at £20,000 for 2017-8.

The Lifetime ISA

A reminder that the ‘Lifetime ISA’ was introduced from 6 April 2017.  This allow adults under 4o to open a Lifetime ISA and pay in up to £4,000 per annum.  The government will add a 25% bonus to the ISA, so, up to £1,000.

Contributions can continue up to the age of 50.

Funds can be used to buy a first home at any time from 12 months after opening the account, and can be withdrawn, with the bonus, from the age of 60.

Savers can make withdrawals at any time before the age of 60, but the bonus element and any interest or growth on it will have to be returned to the government, and an additional 5% charge will be applied if the withdrawal is not for the purchase of your first home.

Tax-free childcare

The tax-free childcare scheme first announced in the 2013 budget is now being be rolled out, with it currently being available for children born on or after 1 April 2013 and disabled children.

Parents of older children can sign up to receive an email when the scheme is extended to children of their age here.

The scheme is be worth up to £2,000 per child (under the age of 12) each year (£4,000 for disabled children).

The existing scheme Employer-Supported Childcare will remain open to new entrants until April 2018 to support the transition between the schemes

Tax Credits

There are two types of Tax Credits; Working Tax Credit (WTC) and Child Tax Credit (CTC). The CTC is potentially available to families who have responsibility for one or more child.

There were no changes to tax credits announced in the Budget 2017.   The rates of payments, can be found at here,  have increased slightly for disabled workers and children, but remain largely the same.

Child Benefit

There were no changes announced to child benefit in Budget.  Rates for 2018-9 will remain at £20.70 for the first child and £13.70 for subsequent children.

Don’t forget that there are special rules for higher earners which mean that, once the income of one of the parents reaches £50,000, 1% of the Child Benefit award will effectively be lost for every £100 of that parent’s income between £50,000 and £60,000 and at £60,000 of income, any remaining benefit will be withdrawn.

Landlords

A reminder of the interest restrictions announced in the Summer Budget 2015 that started to come in to effect from April 2017:

Landlords will no longer be able to deduct all of their finance costs from their property income to arrive at their property profits if they pay tax at the higher rate. They will instead receive a basic rate reduction from their income tax liability for their finance costs.

Landlords will be able to obtain relief as follows:

  • in 2017-8 the deduction from property income will be restricted to 75% of finance costs, with the remaining 25% being available as a basic rate tax reduction.
  • in 2018-19, 50% finance costs deduction and 50% given as a basic rate tax reduction.
  • in 2019-20, 25% finance costs deduction and 75% given as a basic rate tax reduction.
  • from 2020-1 all financing costs incurred by a landlord will be given as a basic rate tax reduction.

 

Rent a room

Rent a Room relief, which provides for tax-free income that can be received from renting out a room or rooms in an individual’s only or main residential property remains at £7,500 per year.

It was announced that there will be a consultation on the future of rent a room relief.

Making Tax Digital

Making Tax Digital (MTD) has been going through consultations over the past year or so.

Under the scheme, limited companies, unincorporated business and landlords will have to use online software to report their income and expenses to HMRC at least quarterly.

The requirements were due to come into effect from April 2018 for unincorporated businesses and landlords with turnover (ie income before costs) of £10,000 or more, but the Chancellor announced in the Spring Budget that implementation will be delayed until April 2019 for those with turnover under the VAT threshold.

A further delay was announced in July 2017 such that the start date is delayed until April 2019 for businesses with a turnover above the VAT threshold and at least April 2020 for other businesses.

 

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