Happy Tax New Year

The weather has been more like summer than early spring and many people have been out enjoying themselves, probably unaware that this week the tax year ends and starts again.  For many this event is not that important but given that the Budget was just a few weeks ago, the changes confirmed in that statement will affect many people and some will not feel like celebrating but will feel the distinct chill of winter.

There was good news for those who are basic rate tax payers as the basic rate band was extended by £630, and we found out that next tax year the personal allowance will increase to £9,205.  This is good news that won't be shared by those subject to higher rate tax but perhaps the biggest surprise because it was one of the few things that was not leaked, was the so called "Granny Tax". 

This change will see those over 65, who previously enjoyed a higher personal allowance, if their income was below £24,000 for 2011/12 (£25,400 for 2012/13), now see this allowance frozen.  The allowance will remain frozen until the increasing personal allowance for those under 65 catches up.  This amounts to a real increase in the tax due from these taxpayers.  It was also the confirmed that the 50% rate that was seen by many in business as stifling growth in business would be cut to 45%, a rate seen as more acceptable.

Those taxpayers who are hit by this lowering of the basic rate band must continue to think about ways they can perhaps share their investment and other income with their spouse or civil partner, who are perhaps subject to tax at a lower rate. On top of this, those who were receiving the child element of the tax credit, which in the last tax year was lost from £40,000, will now see this ebb away like all other tax credits at 41% so anyone earning over £24,000 will lose this credit. 

As previously announced there was no increase in the annual exemption for Capital Gains Tax so it remains at £10,600 for this year.  Furthermore, the rates remain unchanged at 10% for qualifying business sales increasing to 18% for lower rate taxpayers and a top rate of 28% for those earning more than £34,470. Those with disposals to make in the next tax year should continue to split any asset sales with their lower rate taxpayer spouse or civil partner, if this is appropriate.

Inheritance Tax (IHT) also remained unchanged with the nil rate band staying firmly rooted at £325,000 with no change until 2015 at the earliest. The Chancellor did confirm the introduction of a reduced IHT rate to 36%, “if you leave 10 per cent or more of your estate to charity”.  Whether this will encourage charitable giving remains to be seen but it is certainly a move in the right direction.

So Happy New Tax Year to you all, there’s something affecting most people it’s just that not all of it is worth celebrating!

Graham Poles
Tax Partner

If you like this article and would like our FREE updates sent straight to your inbox then subscribe to our monthly newsletter

Subscribe

Get in touch

To find out more about how we can help you or your business, call us on 0808 144 5575 and speak to a member of our team. Alternatively use our contact form to send us a message or arrange a callback.

CALL 0808 144 5575

or

Contact Us

All content © 2015 Armstrong Watson. All Rights Reserved. Website by Simon Pighills.

Armstrong Watson LLP is a limited liability partnership registered in England and Wales, number OC415608. The registered office is 15 Victoria Place, Carlisle, CA1 1EW where a list of members is kept. Armstrong Watson Accountants, Business & Financial Advisers is a trading style of Armstrong Watson LLP. Armstrong Watson LLP is regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities.

Armstrong Watson Audit Limited is registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales. Registered as a limited company in England and Wales No. 8800970. Registered office: 15 Victoria Place, Carlisle, CA1 1EW

Armstrong Watson Financial Planning Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 542122. Registered as a limited company in England and Wales No. 7208672. Armstrong Watson Financial Planning & Wealth Management is a trading name of Armstrong Watson Financial Planning Limited. Registered Office: 15 Victoria Place, Carlisle, CA1 1EW