New Tax year artcile photo

New Tax Year Changes

New Tax Year Changes

The new tax year will see a raft of financial changes, ranging from a new flat-rate state pension scheme to an increase in the amount that people will be able to earn through letting a spare room.

 

New Savings allowance

Basic rate taxpayers can now earn up to £1,000 a year in savings interest before they have to pay any tax on it, while those on a higher rate are getting a tax-free allowance of £500 a year. Anyone earning up to £17,000 a year can take all of their savings interest tax-free, while anyone earning more than £150,000 a year will have it taxed at 45%.

State pension overhaul

Anyone reaching state pension age from the 6th April 2016 will qualify for the government’s new single flat rate payment, which offers up to £155.65 a week. It replaces the previous system of a basic state pension and an additional state pension with a single payment, but as before, how much you get will depend on how long you have been making national insurance contributions.

Landlords’ repair allowance

Up to now, landlords with buy-to-let properties have been allowed to claim a 10% wear and tear allowance on any furnished home they are letting, even if they haven’t had to spend anything on replacement items or refurbishments. As of now, they can only reclaim what they have actually spent.

Rise in rent-a-room allowance

The amount homeowners can earn tax-free from taking in a lodger or holiday-maker is increasing to £7,500 (and rising by another £1,000 in April 2017). Under the new limit a Landlord can make up to £144 a week without facing an income tax bill.

Pension lifetime allowance falls

The total amount that can be invested in an individual’s pension pot has been cut from £1.25m to £1m. On investments above that amount the government will charge tax at 25%, or 55% if the additional money is withdrawn as a lump sum.

Capital Gains tax cut

The tax paid by investors who sell assets has been reduced. The change means that higher rate taxpayers will pay 20% on investments gains rather than the previous 28%, while those who are not higher rate taxpayers will pay 10% instead of the previous 18%. The change does not apply to property.

Personal allowance rises

The amount you earn before paying tax rises to £11,000, while the amount you earn before paying tax at 40% has risen to £43,000.

ISAs to include peer-to-peer

The annual ISA allowance (£15,240 for 2016/17) can now be held in a new “innovative finance ISA”. This means that investments in peer-to-peer lenders such as Zopa and Funding Circle can now earn returns free of tax, however none of the best-known providers have yet received their regulatory approval.

Non-EU Workers’ Deportation

Unless they are on a list of shortage profession, skilled workers from outside the EU who have been living here for fewer than 10 years will need to earn at least £35,000 a year to settle permanently in the UK.

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Further Information can be at: 2016 tax year: what you need to know | Money | The Guardian

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