The mechanisms to pass new tax law have been disrupted by the EU referendum and the following General Election. A number of measures which were to come into effect from April 2017 or earlier had not yet been passed into law. However, the Government plans to publish another Finance Bill very shortly to include all the following tax changes to be backdated to take effect from the intended start date.
Property & Trading Income
From 6 April 2017 individual taxpayers will be entitled to two annual £1,000 allowances to cover rental income (but not from letting your own home under the Rent-a-Room scheme) and sundry other income, respectively. Taxpayers who receive small amounts of income within these allowances, won’t have to report that income on their tax returns.
From 6 April 2017, individual landlords with annual gross rents of no more than £150,000 will be expected to keep their business records using a simplified form of accounting called the cash basis. Each landlord will be able to opt-out of using the cash basis and use normal accruals accounting instead.
Many people who were born abroad or who have chosen another country as their permanent home will not be domiciled in the UK. These people will be affected by new deemed domiciled rules, which will be backdated to 6 April 2017.
Once you are aged 55 or over you can draw funds from your money purchase pension schemes. If you take more than the tax-free cash (25% of the fund), your additional pension contributions are restricted to £10,000 per year. This contribution limit will be retrospectively reduced to £4,000 with effect from 6 April 2017.
Individuals who worked as contractors or freelancers in the 1990s and 2000s were often offered loans instead of regular pay. These workers were led to believe that the ‘loan’ would never be repayable and they would only be taxed on the nominal interest due on the loan.
HMRC is changing the law so that any of those ‘loans’ which remain outstanding on 5 April 2019 will be taxed as earnings, at the date the loan was originally advanced. This means the contractor will be liable for interest on that tax calculated over many years. Alternatively, the worker can settle the tax due now. Talk to us if you are in this position.