TAX TIPS by Dean Flood

TAX TIPS by Dean Flood

George Osborne’s 1st budget speech for the new government in early July of this year set out the government’s financial plans for the next five years. Below are some important points that may be relevant to your business or personal tax circumstances.

Revised Tax Regime for Dividend Income As from 6th April 2016, subject to levels of investment income and overall taxable income, the 1st £5,000 of dividend income for individuals will, effectively, not be assessable to tax. The old system of ‘national tax credits’ is also being removed. To perhaps counter these perceived positives for tax payers, dividends in excess of £5,000 will be assessed for 7.5% tax even at the basic rate threshold, where they are currently not taxed.

The general consensus amongst tax advisers is that it is still more tax efficient to operate a reasonably profitable business through a limited company however the tax advantages will have been reduced by this legislation. Taxpayers with owner managed businesses may also wish to consider dividend planning either side of the 6th April 2016 to establish as to whether accelerated dividends may be to their advantage. Reduced tax relief for interest Charges on ‘Buy to Lets’ Over the next six years the government will be phasing in a restriction on higher rate tax relief for mortgage interest. The full effect of the changes will therefore not be immediate but it has prompted many advisers to consider whether operation of long term buy to let activity through a Limited Company is becoming more attractive for tax purposes.

Annual Investment Allowance Levels Although HMR&C had previously indicated a reduction to the Annual investment Allowance (the amount that businesses can spend on certain capital equipment and gain full tax relief), this position has been somewhat reversed and the relief is now available up to £200,000 (after 1st January 2016) where it has previously expected to fall to £25,000. This is good

Dean Flood, Chartered Certified Accountant and Partner at Rowland Hall

news for businesses with growth intentions.

Corporation Tax Rates The chancellor has extended recent policies to reduce corporation tax rates (now 20%) and has indicated further reductions to 19% (April 2017) and 18% (April 2020). NIC Employment Allowance As from April 2016, the employer’s annual employment allowance (the amount credited by HMR&C against the employer’s NIC costs) will rise from £2,000 to £3,000. However, the allowance is being removed for sole employee directors of their own companies.

www.rowlandhall.co.uk Tel: 01375 378 828/ 01268 696 878

REGISTERED AUDITORS BUSINESS ADVISERS

Thurrock