- From April 2016, the dividend tax credit with be abolished and instead the first £5,000 on dividend income will be tax-free.
- After the allowance of £5,000, dividend income will be taxed at 7.5% (0%) for basic rate taxpayers, 32.5% (25%) for higher rate taxpayers and 38.1% (30.56%) for additional rate taxpayers. The figures in brackets are the current effective rates of tax for comparison.
- This change will increase the tax payable for those taking a combination of dividends and salary
Personal Income Tax
- There will be an increase to the personal allowance from £10,600 in 2015/16 to £11,000 in 2016/17.
- It will continue increase to £11,200 from 2017/18.
- The higher rate threshold will increase from £42,385 in 2015/16 to £43,000 in 2016/17.
- It will continue increase to £43,600 from 2017/18.
National Insurance Contributions
- The Annual Employment Allowance will increase from £2,000 to £3,000 from April 2016. This allowance is not available where the director is the sole employee.
- From April 2016, the minimum living wage will increase for workers aged 25 and above to £7.20 an hour and will reach £9 an hour by 2020.
- From April 2016 wear and tear allowance will be replaced with a new relief that allows all residential landlords to deduct the actual costs of replacing furnishings.
- From April 2017 the relief on finance costs that individual landlords of residential property will be restricted to the basic rate of tax.
- The corporation tax rate will reduce from 20% to 19% in 2017 and 18% in 2020.
Annual Investment Allowance
- The annual investment allowance is currently £500,000 and will remain at this rate until 31 December 2015.
- This will increase the permanent level of the AIA to £200,000 for all qualifying investment in plant and machinery made on or after 1 January 2016.
- The inheritance tax nil rate bands remain at £325,000 until April 2018. This will continue to be frozen at £325,000 until April 2021.
- An additional nil-rate band will be introduced when a residence is passed on death to direct descendants. This will be £100,000 in 2017-2018, £125,000 in 2018-2019, £150,000 in 2019-20 and £175,000 in 2020-21.