Tax trends to keep an eye out for this year
Beginning with the start of the current tax year on 6 April 2017 a number of new tax measures came into effect. The most significant of these key changes impact on individual buy-to-let landlords; and the estates of anyone owning a house which is left to their direct descendants on their death.
However, some of the tax changes in the Spring 2017 Budget were casualties of the snap election called by Theresa May in April. The Chancellor of the Exchequer, Philip Hammond, was forced to cull many of the proposed changes so that he could quickly push through Parliament a vastly slimmed down Finance Bill containing only those measures which had cross party approval.
Consequently a number of major changes that were in the pipeline have been lost. These include:
- the substantial reduction of the tax-free dividend allowance from £5,000 to £2,000 in April 2018;
- the two new 2017/18tax free allowances of £1,000 each for individuals who:
- sell goods or provide services, and/or
- receive income from the letting of property
- the introduction of digital taxation this was scheduled to start on 6 April 2018 for traders with turnover above the VAT registration threshold.
As the election has delivered a hung Parliament it remains to be seen if, or when, these intended items of legislation will re-appear.
Putting these issues to one side many opportunities to:
- save on tax; and
- help you keep as much as possible of your disposable income
are already in place.
Here are three examples:
1. Individual Savings Account (ISA)
From 2017/18 the annual subscription limit for all qualifying individuals has increased dramatically from £15,240 to £20,000.
You do not pay any tax on the interest you earn in a cash ISA. Also free of tax are the income or capital profits in a stocks and shares ISA.
You can subscribe to an ISA if you are
- both resident and ordinarily resident in the UK for the purposes; and
- aged 18 or over, although 16 or 17 year olds can invest just in cash.
2. Marriage Allowance
This enables you to transfer £1,150 of your 2017/18 personal allowance to your spouse or partner. By so doing you will save tax of £230 for the year (£1,150 @ 20 per cent).
To claim the marriage allowance all four of the following requirements must apply for 2017/18:
- you are married or in a civil partnership;
- both of you were born after 5 April 1935;
- your income is not more than £11,500, plus up to £5,000 of savings income (after taking off your personal savings allowance); and
- your spouse or partner’s income is between £11,501 and £45,000
3. Rent a Room
If you need more income and do not want to move home why not rent out a room to a lodger or bed-and-breakfast guest? The space you let you must be in your only or main home which can be a house, flat, caravan or even a houseboat. Up to £7,500 (equivalent to a weekly rent of £144.20) is tax free under this type of relief.