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.