Dividend Tax, Personal Savings Allowance, Renewals, Stamp Duty and Employment Allowance

Feb 21, 2016   //   by Ralph   //   Latest News

Those of you who are used to Ralph’s articles will have to wait until next month as, at the time of writing this article, he is in Australia for a month.  He’s asked me, Lauren Baddeley, to update you on the latest news from the tax world in his absence.

It’s that time of year again when we all let out a big sigh of relief as the rush of January is over as the deadline for filing self assessment returns has passed.  Our attention now turns to the 6th April and the upcoming changes.

Dividend tax

One of the biggest changes from 6th April 2016 is the way that dividends will be taxed.  Any of you that receive dividends will know that up until this date you could receive dividends up to your basic rate allowance and not have to pay any tax as there was a tax credit on such, well that is now changing.  HMRC have abolished the tax credit for dividends instead opting to give £5,000 dividends tax free and then begin taxing them at 7.5% for basic rate tax payers.  Anything above the basic rate band will be taxed at 32.5% until the additional rate kicks in at 38.1%.  Dividends received from pensions and ISAs will remain unaffected.

This will mean that even basic rate tax payers will have to complete self assessment returns from 6th April 2016 if they receive dividends over £5,001.  It will also affect company directors who currently take a low salary and high dividend.

moneyPersonal savings allowance

Another change from 6th April 2016 is that banks and building societies will no longer be taxing interest paid to customers.  This is because for basic rate tax payers the first £1,000 of saving income will be tax free, for higher rate tax payers this reduces to £500 and there is no allowance for upper rate taxpayers.  This will however mean that for the lucky few who earn more than their tax free amount there will be a requirement to complete self assessment returns to pay the appropriate tax due.

Renewals basis

Some good news for landlords, HMRC have agreed to reintroduce the tax relief on replacement of furnishings in rental properties from 6th April 2016.  This will mean that any freestanding kitchen appliances, carpets and so on will once again qualify for tax relief.  In opposition to this HMRC will withdraw the 10% wear and tear allowance that landlords of furnished rentals were able to benefit from on the same date.

Stamp duty

Another change for existing and potential landlords to consider is that stamp duty will be increasing by 3% on additional residential property purchased with a consideration above £40,000 on 1st April 2016.  If you are considering venturing into the world of buy to let properties, or even considering adding to your portfolio then aim to have all purchases completed before then.  This will also apply to those who purchase a second home.


Employment allowance

The good news is that the employment allowance is going up from £2,000 to £3,000 as of 6th April 2016 which employers will be able to deduct from the employer’s national insurance contributions that they have to make.  The bad news is that HMRC will withdraw this allowance for any single director companies.

The author Lauren Baddeley ACCA is based at TA Gittins & Company’s Wrexham office and can be contacted on 01978 264846 or via email on lauren.baddeley@tagittins.co.uk.  Ralph Robson FCCA may be contacted at the same number or via email on ralph.robson@tagittins.co.uk.

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