The new tax year started this morning and below is a highlight of important changes you need to be aware of.
The personal allowance has increased to £11,850, meaning that one can now earn £987.50 per month before paying any income tax. The basic rate band has also increased from up to £33,500 to up to £34,500. Tax payers should check their tax codes to ensure that the new personal allowance has been correctly recorded.
The dividend allowance that was introduced in April 2016 has now plummeted from £5,000 to £2,000 per year for individuals. This means potentially extra tax of £225 on dividend income. There is still no dividend allowance available to estates and trusts to replace the dividend tax credit that was removed two years ago.
The overall ISA investment limit remains at £20,000, but the junior account limit has increased slightly to £4,260. Readers should ensure that their annual ISA allowance is used each year to avoid paying any unnecessary tax.
Capital Gains Tax
The individual capital gains tax allowance has increased from £11,300 to £11,700, and for trusts the allowance is now £5,850.
Of course, there are four applicable rates of capital gains tax, depending on the income level of the person making the disposal and what they are disposing of – these range from 10% to 28%.
Whilst there has been no change to the Nil Rate Band, the new Residence Nil Rate Band has now increased from £100,000 to £125,000, reflecting an additional tax saving of £10,000.
Any unused Residence Nil Rate Band can be claimed from a predeceasing spouse, regardless of when they died. However, the rules surrounding claiming the Residence Nil Rate Band are complicated and professional advice should be taken.
Contact our Private Client team on 01865 244661 to discuss how we can help you negotiate the new tax year with ease!