2016 Tax Cards

Allowances

• *PA will be withdrawn at £1 for every £2 by which ‘adjusted income’ exceeds £100,000. There will therefore be no allowance given if adjusted income is £122,000 or more (2015/16: £121,200).
• ° Up to 10% of the PA (2016/17: £1,100; 2015/16: £1,060) can be transferred to a spouse or civil partner who is no more than a basic rate taxpayer.
• § The DTA taxes the first £5,000 of dividend income at nil rather than the rate that would otherwise apply ‐ see rates below. PSA operates as a nil rate band for interest income.

Rate bands

• BRB and additional rate threshold are increased by personal pension contributions (up to permitted limit) and Gift Aid donations.

Tax rates

Rates differ for General/Savings/Dividend income

• General income (salary, pensions, business profits, rent) uses personal allowance, basic rate and higher rate bands before savings income (interest). To the extent that savings income falls in the first £5,000 of the basic rate band, it is taxed at nil rather than 20%. The PSA (see allowances above) will tax interest at nil, where it would otherwise be taxable at 20% or 40%.
• Dividends are taxed as the ‘top slice’ of income. For 2016/17, the dividend received is taxable. In 2015/16, the dividend received was grossed up by 100/90 to determine the taxable dividend. A non-repayable tax credit equal to 10% of the taxable amount was then deductible against the income tax liability on the taxable dividend.

High Income Child Benefit Charge (HICBC)

1% of child benefit for each £100 of adjusted net income between £50,000 and £60,000.

Remittance basis charge

For non-UK domiciled individuals who have been UK resident in at least:

Registered pensions

• Annual relievable pension inputs are the higher of earnings (capped at AA) or £3,600.
• *For 2016/17 the AA is usually reduced by £1 for every £2 by which relevant income exceeds £150,000, down to a minimum AA of £10,000.

State pension

• §applies to those reaching state retirement age after 5 April 2016.

Class 1 (Employees)

• *Nil rate of employer NIC for employees under the age of 21 and apprentices under 25, up to £827pw.
• Employer contributions (at 13.8%) are also due on most taxable benefits (Class 1A) and on tax paid on an employee’s behalf under a PAYE settlement agreement (Class 1B).
• **Some businesses do not qualify, including certain sole director companies.

Class 2 (Self-employed)

Class 3 (Voluntary)

Class 4 (Self-employed)

Cars

Taxable benefit: Chargeable value multiplied by chargeable %.

Chargeable value:

Initial list price of car (including most accessories), reduced by any capital contribution (maximum £5,000) by employee when the car is first made available.

Chargeable percentage:

Vans

Chargeable value of £3,170 (2015/16 £3,150) if private use is more than home-to-work.

Fuel

Employer provides fuel for private motoring in an employer-owned:

Car: CO2-based percentage from above table multiplied by £22,200 (2015/16 £22,100).

Van: £598 (2015/16 £594).

Employee contributions do not reduce taxable figure unless all private fuel is paid for by the employee (in which case there is no benefit charge).

• *In 2016/17, individuals are taxed at 18%/28% on gains on residential property and receipt of carried interest. Trusts are taxed at 28% in these circumstances.
• **ER is available for lifetime gains of up to £10m. Qualifying disposals include a trading business, shares in a trading company (from a minimum 5% holding) by an officer/employee or certain holdings by external investors. Various conditions apply.

• *Additional deduction for qualifying R&D
• **Taxable expenditure credit for qualifying R&D
• SMEs that make losses can surrender the deduction to HMRC in exchange for a payment of 14.5% of the loss.
• From 1 April 2016, RDEC will be the only scheme available for large companies.

• * 6.4.14 for unincorporated businesses and LLPs
• **Transitional rules apply for accounting periods straddling a change in AIA limit.

• The special rate pool includes long life assets, integral plant in buildings, thermal insulation.

Annual Tax on Enveloped Dwellings (ATED)

ATED applies to ‘high value’ residential properties owned via a corporate structure, unless the property is used for a qualifying purpose. From 1 April 2016 the tax applies to properties valued at more than £500,000 (£1m from 1 April 2015 – 31 March 2016; £2m from 1 April 2013 – 31 March 2015).

Stamp Duty Land Tax (SDLT) and
Land and Buildings Transaction Tax (LBTT)

From 1 April 2015, SDLT was replaced in Scotland by LBTT. Like SDLT, it is payable by the purchaser.

• A supplement of 3% of the total purchase price applies for both SDLT and LBTT where a second home is purchased for more than £40,000 from 1 April 2016.
• *A rate of 15% applies to the total purchase price where the property is valued above £500,000 and purchased by a ‘non-natural person’ (e.g. a company).

Flat rate scheme (FRS)

• If using FRS, the VAT paid by the business is a fixed percentage (based on business category) of “FRS turnover” rather than the net of output tax over input tax. Input tax is usually not recoverable.

• Unlimited exemption for transfers between spouses/civil partners, except if UK domiciled transferor and foreign domiciled transferee, where maximum exemption £325,000.
• 100% Business Property Relief (BPR) for all shareholdings in qualifying unquoted trading companies, qualifying unincorporated trading businesses and certain farmland/buildings.
• 100% Agricultural Property Relief (APR) available on agricultural value of qualifying farmland/buildings.
• BPR or APR available at 50% on certain property.
• * Up to 100% of the proportion of a deceased spouse’s/civil partner’s unused nil rate band may be claimed to increment the current nil rate band when the survivor dies.
• ** Rate reduced to 36% if at least 10% of the relevant estate is left to charity.

Reduced tax charge on gifts within 7 years before death

• Annual exemptions for lifetime gifts include £3,000 per donor and £250 per recipient.

• Corporation tax is due 9 months and 1 day from the end of the accounting period, unless a ‘large’ company paying by quarterly instalments.

• *The “National Living Wage” for those over 25 is £7.20 from 1 April 2016.

You are advised to consult us before acting on any information contained herein.