Changes to Personal Income Tax 2016/17
There are a number of significant changes taking place with effect from 6 April 2016, to take into consideration over the coming year.
The first is the removal of the notional tax credit on dividend income, which will be replaced by a new tax-free dividend allowance. Any dividend income received over £5,000 will then be taxed at 7.5% for basic rate tax payers, 32.5% for higher rate tax payers and 38.1% for people with taxable income over £150,000. Dividend income received after the £5,000 allowance can still be set against individuals personal allowances, which are increasing to £11,000 from 6 April 2016. This will affect any individual with dividend income.
There are also changes taking place in relation to savings interest, where the first £1,000 earned will now be covered by an annual allowance as all interest will be paid without the deduction of tax at source, again this is applicable to all individuals with savings income.
And finally. Fully furnished residential properties let by individuals and company landlords have in the past been able to claim a wear & tear allowance, which was 10% of the rents received less certain expenses. This relief was given even if no expenditure was incurred in the year. But from 1 April 2016 for corporation tax purposes and 6 April 2016 for income tax purposes, wear and tear allowance is being abolished and only costs actually incurred may be claimed. The proposal is to give greater consistency and fairness across the residential property letting sector. This new regime will not apply to furnished holiday or commercial lets.