There was very little detail on tax changes announced in the Autumn Statement and spending review delivered by Chancellor George Osborne on 25 November 2015, but we will learn more about these on 9 December 2015 when the Finance Bill 2016 draft clauses are published. We should also learn, shortly, the outcome of the consultation on extending the averaging period for self-employed farmers from two to five years. The indications are that farmers will have the option of averaging over either a two or five year period. We will comment further when we have had the chance to review the detailed legislation.
It should also be noted that the Scottish Government’s budget will be published on 16 December 2015, where amongst other things, the initial Scottish rate of income tax will be announced.
In the meantime, below is what we believe to be the summarised highlights of the Autumn Statement. The exact tax implications will always be specific to your individual circumstances and we would always recommend that you contact us to consider the implications for you in detail. Please do not hesitate to contact us if you wish to discuss any of these issues in more detail.
There will be no further cuts to tax credits contrary to what was previously discussed by the government.
The reduction rate of tax credits to claimants with working tax credits will remain at 41% of gross income above a threshold of £6,420 per year from April 2016.
For claimants only receiving child tax credits, the gross income threshold will remain at £16,105 from April 2016, after which the 41% reduction will apply.
However, please note that the income rise disregard in tax credits will still be reducing from £5,000 to £2,500 from April 2016. This means that a claimant’s income can only increase by up to £2,500 compared to the previous year, before their tax credits entitlement is reduced.
From April 2017, working families with 3-4 year olds will be able to receive up to 30 hours of free childcare, funded by the government. However, this will only be available to parents who work above 16 hours a week and earn less than £100,000 per year.
Stamp Duty Land Tax Increase on Additional Properties
A 3% increase on the current stamp duty land tax rates will be charged on purchases of additional residential properties from 1 April 2016. This will affect individuals buying second homes and buy to let properties, but does not affect corporations making investments in residential property.
Capital Gains Tax Payments on Account on Sale of Residential Properties
Where there is capital gains tax to pay on sales of residential properties from April 2019 onwards, a payment on account will be required to be made within 30 days of sale of the property. This will not affect gains on properties which are not liable for CGT due to Private Residence Relief.
Digital Tax Accounts
The government is putting plans together to make the UK’s tax system digital. Under this new digital system businesses, landlords and self-employed people will be expected to update their tax affairs quarterly via their individual digital tax account with HMRC. This is to be put in place in order to reduce record keeping errors.
The government will be publishing these new digital plans in due course and will be consulting in detail in 2016.
Going forward, these new digital accounts will not apply to pensioners or individuals who are just in employment, as long as they do not receive additional income of more than £10,000 per year.
Company Car Benefit
The increase in the company car benefit will be introduced more gradually than initially anticipated for low emission vehicles; to encourage investment in environmentally friendly vehicles. Rates on higher emission cars will be increased by 3% from 2019-20. However, the 3% diesel supplement will remain until April 2021.
Small Business Rate Relief extension
The small business rate relief scheme is to be extended for a further year, and will now end in March 2017.
Businesses with one property with a rateable value of £12,000 could get 100% rate relief, double the standard 50% on properties that are valued at £6,000.
The government intends to create three million new apprenticeships by 2020, funded by a levy.
With effect from April 2017 a rate of 0.5% of an employer’s pay bill will be introduced as a levy on employers with pay bills over £3million. This is only expected to affect less than two per cent of UK employers.
Greaves West and Ayre are authorised and regulated by the Financial Conduct Authority for Investment Business and by the Institute of Chartered Accountants in England and Wales for audit work. This document is intended as a brief guide to the subject matter and in no way constitutes advice or recommendation. The factsheet is based on our understanding of current and proposed legislation which could be subject to change at any time. Specific financial & legal advice should always be sought before taking any action.