Tax Credit U-Turn
In the Summer Budget the Chancellor proposed cutting the rates and thresholds for working and child tax credits. This would have reduced the income of many low-paid families significantly. The House of Lords blocked the legislation which was to have introduced this change.
The Chancellor has now announced that the rates and thresholds for tax credits will be frozen for 2016/17 at the 2015/16 levels. There is one exception – the disregard of rising income is to be brought in line with the disregard for falling income. Both will be set at £2,500 for 2016/17.
The Government is also proposing to review the rules concerning making single or joint claims for tax credits as this is an area where claimants are easily confused and many mistakes are made.
Property Investors hit with stamp duty and land tax increases
In the Summer Budget the Chancellor announced a restriction on the deductibility of interest from rental income for individual landlords of residential property. This restriction will be phased in from 2017/18 to 2020/21, and it may make letting uneconomic for landlords whose businesses are relatively highly geared. The latest attack on property investors is a proposed 3% increase in Stamp Duty Land Tax.
Landlords who can buy properties to let without a mortgage are not affected by the interest restriction. To discourage such cash-rich individuals from purchasing multiple properties to let or to hold as second homes, particularly in holiday areas like Cornwall, an additional SLDT charge of 3% will be payable by individual purchasers of residential properties worth over £40,000 from 1 April 2016. This supplemental SDLT charge won’t be payable by corporate purchasers (15 properties or more) or by funds such as Real Estate Investment Trust (REITS). The proposed rates are:
|Purchase price||SDLT rate, cumulative|
|Up to £125,000||3% £3,750|
|£125,000 – £250,000||5% £10,000|
|£250,000 – £925,000||8% £64,000|
|£925,000 – £1,500,000||13% £138,750|
|£1,500,001 and over||15%|
SDLT is currently payable within 30 days of the completion of the purchase and the SDLT return must be filed within the same period. The Government is proposing to reduce the payment and filing period to just 14 days from the completion date of the sale, sometime in 2017/18.
Capital Gains Tax changes
CGT is normally payable by individuals by 31 January after the end of the tax year in which the gain arose. This gives the taxpayer between 10 and 22 months from receipt of the proceeds to calculate the tax due and pay it over to HMRC. From 6 April 2015 non-resident taxpayers have had a shorter time frame in which to report the sale of UK residential property and pay the tax due – only 30 days from the completion of the disposal. HMRC now propose to extend the 30 day reporting and CGT payment deadline to all UK taxpayers who make taxable gains when selling residential properties for disposals on or after 6 April 2019.
ISA Limits for 2016/2017 to stay the same
The annual limit for savings in an ISA has been frozen at £15,240 for 2016/17. The Junior ISAs limit has been frozen at £4,080.
Car and Fuel benefit charges
Diesel company cars currently carry a 3% supplement on the percentage of list price used to calculate the taxable benefit. This diesel supplement was to be removed from 6 April 2016, but it will now stay in place until 2020/21.
Employees and directors with company cars, and who also have some or all of their private fuel paid for by their employers, are subject to the fuel benefit charge – determined by multiplying a notional list price by the appropriate percentage for the car, based on its CO2 emissions. The car fuel notional list price will increase from £22,100 to £22,200 with effect from 6 April 2016. For a company car emitting between 111 to 115g CO2 per km, the scale charge would be 20% of £22,200 and this would result in taxable fuel benefit of £4,440 and £1,776 income tax for a 40% taxpayer. At 11p per mile the employee would need to drive 16,145 private miles to make having private fuel paid for worthwhile.
Private use of company vans
Where employees are provided with a company van, the taxable benefit increases from £3,150 to £3,170 for 2016/17 and there will be an additional taxable benefit of £598 where private fuel is provided by their employer.
Note that this charge does not apply to all company van drivers, only those who use the van for private journeys.
Company Car advisory fuel rates
Not part of the Autumn Statement, but you need to know that some of the rates are reduced from 1 December 2015 (previous rates are shown in brackets where there was a change):
|1,400 cc or less||11p||7p|
|1,600 cc or less||9p|
|1,401cc to 2,000cc||13p (14p)||9p|
|1,601cc to 2,000cc||11p|
|over 2,000cc||20p (21p)||13p||13p (14p)|
National Insurance Rates frozen for 2016/2017
There will be no increase in the rates of national contributions (NICs) for employers, employees nor the Class 4 rate for the self-employed for 2016/17, although the Upper Earnings Limit for employee contributions and Upper Profits Limit for Class 4 contributions will be increased to £43,000, in line with the higher rate tax threshold.
Employees’ contributions will be payable at 12% on earnings between £155 per week and £827 per week and 13.8% employers contributions will start at £156 per week. The employment allowance increases to £3,000 for 2016/17 and will continue to be deductible from employers’ NIC, although it will no longer be available to one man companies.
Apprenticeship levy from 2017
A new apprenticeship levy will be introduced from 6 April 2017. Although all employers will be required to pay this new levy, set at 0.5% of their annual payroll cost, each employer will also have an annual credit equivalent to £15,000 to set against the levy, which means only the largest employers with payrolls of £3 million or more will actually pay the levy. Based on an average salary, this means that only employers with more than around 100 to 120 employees will be affected. It is not clear at this stage as to what is meant by payroll.
Employers who take on apprentices will receive vouchers funded by the apprenticeship levy to set against the cost of those apprentices.
Announcements for businesses
Support for smaller businesses
The Chancellor reported that the UK’s small and medium sized enterprises now employ 15.6 million people, up from 13.7 million in 2010. Over the last two years the number of small businesses employing someone other than the owner has grown by 100,000.
The government understands that small businesses need tailored support. Already, Start-Up Loans have provided £180 million of funding to 33,600 entrepreneurs and in the last Parliament, the government cut the cumulative burden of regulation by over £10 billion.
Other support for smaller businesses that have previously been announced include:
- From April 2016 the Employment Allowance will rise to £3,000, benefiting over 1 million employers, and helping many businesses take on their first employee.
- The cancellation of the planned September 2015 fuel duty increase means a small business with a van will have saved £1,357 by the end of 2015-16 compared to plans inherited by the government at the start of the last Parliament.
- The government will meet its commitment to 75,000 Start-Up Loans by the end of this Parliament.
Small business rate relief
English firms can claim the small business rates relief if they only use one property and its rateable value is less than £12,000. This relief was due to end on 31 March 2016.
The Chancellor has announced today that the relief will be extended for a further year. Businesses will now get 100% relief until 31 March 2017 for properties with a rateable value of £6,000 or less. This means you won’t pay business rates on properties with a rateable value of £6,000 or less.
The rate of relief will gradually decrease from 100% to 0% for properties with a rateable value between £6,001 and £12,000.
Car benefit diesel supplement
The 3% supplement added to the benefit in kind charge for drivers of diesel powered company cars is to continue beyond April 2016 and will now cease to apply from April 2021.
Announcements for home owners
London help to buy loan scheme
The present help to buy loan scheme that applies across the UK, provides a 20% contribution from government, requires a 5% deposit from the buyer, with the balance funded by a 75% mortgage.
As house prices are running at much higher levels in London, from early 2016 qualifying buyers in London will still need to find a 5% deposit, but government will contribute up to 40% with the required mortgage funding dropped to 55%.
These government equity loans will now be available until 2021.
Help to buy shared ownership scheme to be extended
Shared ownership allows families in England, on lower incomes, to buy an interest in their home and rent the rest. People can buy between 25% and 75% of a home in this way.
The rent charge won’t be more than 3% of the non-purchased part of the property.
The qualifying income limits are to be changed. Current restrictions will be lifted from April 2016. Anyone who has a household income of less than £80,000 outside London, or less than £90,000 inside London, will be able to participate.
First time buyers’ starter homes discount
200,000 new homes are to be designated Starter Homes and developers will be able to offer them to first time buyers aged under 40 at a 20% discount.
Stamp duty increase for second homes and buy-to-lets
From 1 April 2016, individuals buying a second home or a buy-to-let property will face an extra 3% stamp duty charge above the current stamp duty land tax rates.
Housing Association tenants
Rights to buy to be extended to Housing Association tenants during 2016. Potentially, this could give 1.3 million households the opportunity to buy their own home.
Capital Gains Tax (CGT) on sale of residential property
From 2019, the government intends to require a payment on account, within 30 days of a sale, of any CGT due on the disposal of a residential property.
This will not apply where no CGT is payable, for example if covered by Private Residence Relief.
Announcements for individuals
As announced in the introduction to this statement the intended reduction in tax credits next year has been withdrawn. For 2016-17:
- The rate at which a claimant’s award is reduced over the income threshold, will remain at 41% of gross income.
- The income threshold will remain at £6,420.
- The income threshold for child tax only claimants will remain at £16,105.
- The income disregard will reduce from £5,000 to £2,500.
As the other elements that make up the payment of tax credits are also unchanged claimants should find their benefits from this source unchanged from April 2016, unless their personal circumstances or income levels have changed.
The Chancellor did comment that tax credits are being phased out in any event and replaced by universal credits.
Basic state pension increase announced
From April 2016, the basic weekly state pension will increase to £119.30, an increase of £3.35.
Part-time rail season tickets and money back…
Two new features to be introduced:
- Commuters will be able to buy part-time season tickets on selected routes, and
- Commuters will be able to claim money back if a train is more than 15 minutes late.
VAT raised on sales of women’s sanitary products
The UK is unable to zero rate VAT on these products under existing EU rules. Whilst representations are being made the Chancellor is to redirect the VAT revenue raised to selected women’s charities.
George Osborne said:
“300,000 people have signed a petition arguing that no VAT should be charged on sanitary products. We already charge the lowest 5% rate allowable under European law and we’re committed to getting the EU rules changed.
Until that happens, I’m going to use the £15 million a year raised from the Tampon Tax to fund women’s health and support charities. The first £5 million will be distributed between the Eve Appeal, SafeLives, Women’s Aid, and The Haven – and I invite bids from other such good causes.”
Warm home discount scheme extended
The present £140 discount from electricity bills for certain low income households is to be extended and can be claimed from suppliers to 2020-21.
Minor whiplash claims to be curtailed
In an attempt to curtail exaggerated whiplash claims the government is ending the right to claim cash compensation.
More injuries will be able to go to the small claims court as the upper limit is to be increased from £1,000 to £5,000.
This may reduce the cost of insurance for motorists – estimated falls of £40 to £50 a year can be expected.