Tax changes from April 2016 – what’s new?
There are many changes being implemented in UK taxation and accounting rules this year. This is a very brief summary aimed at owners of small businesses, sole traders and sole directors.
Personal tax allowances and tax bands
- The income tax personal allowance increases to £11,000 and the basic rate limit increases to £43,000.
- Married couples’ can share part of their allowance, for low income families.
- Income tax remains at 20% (basic rate) 40% (higher rate) and 45% (upper rate).
- The capital gains tax (CGT) exempt amount is £11,100.
- CGT rates remain at 18% (basic rate taxpayers) 28% (higher rate taxpayers).
- There is a 0% savings tax band of £5,000 and a new 0% personal savings allowance of £1,000 for basic rate payers and £500 for higher rate payers.
- There is a new range of ISAs savings including a right to buy ISA and it is anticipated a crowdfunding ISA will be launched.
- A new tax regime for dividends begins from April 2016.
- Dividends will be taxed at 0% for the first £5,000, then 7.5% (basic rate), 32.5% (higher rate) and 38.1% (upper rate).
- The compulsory National Living Wage (NLW) is being introduced from 1 April 2016. It is the legally required minimum level of pay for workers aged 25 and over. The penalty for failure to pay either the NLW or the NMW of these will also increase from 100% of the underpayment to 200% of the underpayment on 1 April 2016.
- National Minimum Wage increases have been announced for October 2016.Age 25 and over: £7.20 – (This is the National Living Wage effective from April 2016 and so will not increase in October 2016)Age 21 – 24: from £6.70 to £6.95
Age 18 – 20: from £5.30 to £5.55
Age 16 – 17: from £3.87 to £4.00
Apprentice rate: from £3.30 to £3.40
Please note – from 2017 the date for all minimum wage increase will be changed from October to April each year. This is to bring National Minimum Wage increases in line with National Living Wage increases.
There will be a new exemption from income tax and national insurance for trivial benefits up to £50, with an annual cap of £300 for office holders of close companies and their families or households. The exemption is an ‘all or nothing’ exemption: if the value of the benefit is £60 then the full amount of £60 is taxable, not just the £10 excess. Examples of trivial benefits include things like birthday/wedding/Christmas gifts and workplace refreshments (coffee, tea, biscuits).
Auto-enrolment continues to be rolled out. This is a compulsory change for everyone paying workers, and there are strict deadlines and procedures to meet. I have arranged for a cost-effective solution for my payroll clients, and will be speaking to everyone in due course. If you process your own payroll, make sure you check your staging date on the Pensions Regulator website, and start preparing in plenty of time.
RTI (real time information)
The temporary relaxation in RTI reporting for micro employers will end as planned on 5 April 2016. The concession allowing employers to submit returns up to three days late without being subject to late filing penalties is withdrawn.
From 6th April there will be no Employers’ NIC on wages paid to apprentices aged under 25 or employees under 21 earning up to the Upper Earnings Limit of £43,000.
The Employers’ NICs allowance increases to £3,000 but is no longer available for companies where the sole director is the only employee.
For more information on any of the above please get in touch.