ISA Changes!

A new ‘Help to Buy’ ISA initiative is being introduced this autumn to encourage first time buyers to save regularly for a deposit for a home, and these are now being offered by several major financial institutions.

Each saver will be able to invest up to £2,400 a year (up to a maximum of £12,000) and the government will top up the savings by 25% (up to a maximum of £3,000). For further information please see this HMRC factsheet.

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From 6th April 2015 there has also been a new ‘inherited ISA allowance’. Spouses and civil partners of ISA holders who have died since 3rd December 2014 can now have an additional allowance equivalent to the value of funds held in their ISAs when they died.

The inherited ISA allowance is in addition to the normal annual ISA allowance, and can be used for up to three years from the date of death.

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Update to Income Certification

Since the rules for obtaining a mortgage or loan have been tightened up, it has become increasingly difficult to obtain sufficient evidence of earnings for the application process.

Previously, many lenders would request an original HMRC ‘SA302’ tax calculation as proof of earnings. However, as HMRC were getting deluged with requests for these forms, they have devised a new process to enable individual taxpayers and Agents to access the forms themselves.

If you submit your tax returns yourself using the HMRC online filing software, you can print the documents yourself – the instructions can be found here.

If your accountant submits your tax returns on your behalf, they can print the forms for you.

New Permanent Annual Investment Allowance

HMRC’s Annual Investment Allowance (AIA) allows you to claim tax relief of up to 100% on the purchase of assets for use in your business.

This can enable you to claim tax relief on many common business assets such as vans, office equipment, furniture, and machinery.

In a Tax Tip last December, we advised that the qualifying expenditure limit was due to drop from £500,000 to just £25,000 from 1st January 2016.

However, in the recent Budget, HMRC announced that instead, the AIA will be set at a more generous £200,000, on a permanent basis.

This will assist businesses in planning their capital expenditure, as there will no longer be the potential for a temporary allowance to be withdrawn.

Employment Allowance Increase

Many employers have been enjoying the benefits of the Employment Allowance, which started in April 2014.

Currently, employers can reduce the amount of National Insurance contributions they pay for their employees by up to £2,000. The good news is that it was announced in the recent Budget that with effect from April 2016, the allowance is set to increase to £3,000.

The bad news is that the allowance will no longer be able to be claimed by companies whose only employee is the sole director.

Company Cars: Tax Increase!

From 6th April 2015, all company cars are liable to benefit in kind charges, including electric cars.

Zero-emission cars now incur a benefit of 5% of their list price, whilst low emission cars (those between 51-75g/km) give rise to a benefit of 9%, an increase of 4% from last year.

All other company cars have seen an increase in the taxable benefit of up to 2%, with the maximum rate being 37% of the list price.

Although this maximum rate is set to stay at 37%, more cars will be brought into that band over the next four years – currently it applies to cars with emissions of 210g/km and above, but by 2019-20 it will include cars with emissions of 165g/km and above.

Higher Rate Thresholds

The threshold for higher rate tax and the National Insurance upper earnings limit is to be increased for both the 2016-17, and the 2017-18 tax years.

The limit, currently set at £42,385, is due to rise to £43,000 from 6th April 2016, and again to £43,600 from 6th April 2017.  A typical higher rate taxpayer will benefit by £142 in 2016-17.

This will be the first time since 2010 that the higher rate threshold will go up by more than inflation, and it is planned that the limit will increase to £50,000 by the end of the current parliament.

Personal Allowance Increase

The Personal Allowance is to be increased once again for the 2016-17 tax year.

This is currently set at £10,600 per annum, however, it’s due to increase by a further £400, to £11,000, edging it closer to the Government’s current target of £12,500.

This will mean that taxpayers may be able to earn an additional £400 tax free, which could save basic rate tax-payers as much as £80 per year in tax.

New Tax Lock!

Legislation is planned to introduce a new “Tax Lock”, which will prohibit any increase in the rates of income Tax, National insurance and VAT.

The lock is planned to last for the duration of the current Parliament.

However, capital gains tax falls outside of this ‘triple lock’, so could potentially be subject to increases during the same period.

The National Minimum & Living Wages

From 1st October 2015, the National Minimum Wage (NMW) is increasing to £6.70 (from £6.50) per hour, for over 21 year-olds.

The minimum wage for apprentices will also increase, from £2.73 to £3.30 per hour, and the NWM for 18-20 year-olds will increase to £5.30 per hour, from £5.13.

From April 2016 however, these rates will be replaced by the new National Living Wage (NLW), announced in the recent summer budget.

This will mean that workers aged 25 and over, will have to be paid a minimum of £7.20 an hour, and the rate is set to rise to £9.00 per hour by 2020.

Please see here for more detail on this summer’s budget.

Changes to The Non-Resident Landlord Scheme

HMRC have recently changed the process for dealing with landlords who are resident overseas, but own and let property in the UK.

Letting agents within the UK must release details of income received by non-resident landlords to HMRC, and they must also deduct basic rate tax from the receipts, before paying it over to the landlord.

As well as this, the agent (or tenant) must submit an annual return to both HMRC and the landlord by 5th July each year, despite the fact that HMRC will no longer be sending out these annual return forms!

The form can be downloaded here, if needed.