Although there were many changes introduced in the Budget last month – most of the changes will not come into legislation until the 2018 tax year. So, here’s a quick recap on the changes that do take effect for the 2017 tax year which starts today.
- The headline figure that affects everyone is the increase in the personal tax-free allowance. For 2017, this tax allowance is now £11,500 – a £500 increase, saving £100 tax.
- The higher rate threshold has also increased by £1,500 if you’re not in Scotland. In Scotland the higher rate tax band will kick in at £500 less than the rest of the UK – effectively freezing it at 2016 year levels. So, people earning less than £45,000 pay basic rate tax, but in Scotland only people earning less than £43,000 pay basic rate tax.
- Living wage increases to £7.50 for people aged 25 and over (an increase of 30 pence). 21 to 24 year olds see a 10 pence increase to £7.05. 18 to 20 year olds see a 5 pence increase to £5.60. 16 to 17 year olds see a 5 pence increase to £4.05. Apprentices see a 10 pence increase to £3.50.
- A new lifetime ISA can now be opened for adults up to age 39. Save up to £4,000 per year and receive a 25 percent bonus on the deposit per year. The maximum bonus is capped at £1,000 and bonuses are paid up to the 50th birthday.
- Inheritance tax changes mean up to £500,000 can be passed on to children/grandchildren tax-free. This is reduced for estates worth more than £2 million.
- The headline figure here is the reduction of Corporation Tax to 19 percent from 20 percent. This is also the final year where the dividend allowance will be £5,000 – reducing in 2018 to £2,000.
- The new 2017 tax year will be the final year for businesses with turnovers above the VAT threshold to use the old Self Assessment system for reporting tax to the revenue. From April 2018, businesses turning over more than the £85k VAT threshold would need to submit quarterly returns to HMRC digitally.
If you would like to discuss your own tax planning, please contact us >>