The chancellor will hold a full budget on 16th March. This is an initial step to put the public finances in a positive position by the end of the term in Parliament by 2020.
We have had an emergency budget, an autumn statement and the strategy to have a £10bn surplus by 2020. The Office of Budget Responsibility (OBR) and many analysts consider that there are a lot of matters in play such as interest rates and wages that could cause the chancellors strategies to take a different route to those planned.
The Budget though is certain to be one of the biggest changes to taxation in recent history. The tax planning considerations will be important, so decisions made prior to 6th April, may well have lasting impacts post that date.
We would suggest that advice from either your accountant, Independent Financial Adviser or both is a wise consideration.
So let’s have a quick look at some of the considerations.
One that has quite possibly flown under the radar is Dividend Tax. The first £5,000 is tax free but after that, 7.5% tax will be payable on all dividends for every taxpayer. As suggested above, a word with an accountant as to taking increased dividends before the 6th April might be a conversation worth having for smaller company directors. With the Dividend Tax changes ISA’s will look good and with an individual limit of £15,240 per year, so £30,480 per couple into a tax free wrapper per annum.
The changes to the tax reliefs and taxation of Buy-To-Let (BTL) properties has been in the media a lot. Probably because a lot of people hold these types of investments or were planning on buying some this year. Wear and Tear Allowance at 10% will be abolished from 6th April 2016. From April 2017 the amount of mortgage interest eligible for tax relief will be reducing and this will be phased in from 2017 – 2020. The general feeling is that the majority of BTL investors aren’t aware of the potential impact this will have on their income tax liability! George Osborne said these rules won’t affect basic rate tax payers but that is only a half truth. We have not got time to explain here in this article but if you want to contact us we can explain. It has been calculated that any higher-rate taxpayer landlord whose mortgage interest is 75% or more of their rental income, net of other expenses, will see all of their returns wiped out by 2020.
From April 2016 a 3% stamp duty surcharge will be applied on any Buy To Let or second home purchase. There is the potential for unintended Consequences perhaps? So say an existing landlord moves home or a first time buyer inherits a property they don’t use themselves or alternatively a situation we see regularly people forced to buy prior to sale of their current home how will they be treated?
Savings Income - a nil tax rate on the first £5,000 but this does not apply if your non savings income exceeds the savings rate band which is currently £15,600 . Remember offshore bond profits are classed as savings income. You can check your savings tax payment using the tool on the HRMC website using this link http://www.hmrc.gov.uk/tools/r85/r85-2015.htm
We of course have to mention Pensions. The annual allowance is being reduced from £80,000 this year to £40,000 next tax year and with higher earners it is even more of a problem as anyone earning £150,000 or more the level of annual allowance will be tapered down to £10,000. A great reason to speak to an Independent Financial Adviser before the 6th April.
Capital Gains tax can be a useful planning tool and with the volatility in the global markets it is likely that investors have had some gains or losses. They can potentially utilise their individual exempt amounts to realise gains or losses to reduce higher rate capital gains being paid. As ever advice should be taken on income and tax planning.
For a free, no obligation initial chat about your individual finances, call us on 0800 0112825, e-mail info@wwfp.net or take a look at our website www.wwfp.net.
The value of shares and investments can go down as well as up. Your home may be repossessed if you do not keep up repayments on your mortgage.
Worldwide Financial Planning Ltd who are authorised and regulated by the Financial Conduct Authority. 'The FCA does not regulate Credit Cards, Will Writing and some forms of mortgage and Inheritance Tax Planning.'
Information given is for general guidance only, and specific advice should be taken before acting on any suggestions made.
All information is based on our understanding of current tax practices, which are subject to change.
For the purposes of mortgage Worldwide Financial Planning is a credit broker and not a lender.
