The Tax Changes You Need to Know About 2016/17
Posted 27 Mar 16
After discussing Budget 2016 changes in our previous articles, here we would like to take a closer look at the new laws and legislations regarding tax which freelancers, contractors and small business owners will be subjected to in the beginning of the 2016/17.
The changes have been made in all areas of tax law and they were announced in the Finance Bill 2016 approved by Parliament last summer.
The way dividends are taxed is going to be similar to the way Income Tax is currently structured. Every small business owner will be allowed £5,000 tax-free of their dividends. Further changes include the increase of tax rates for dividends. If you would like to find out more about dividend tax and how the changes will influence your company, contact one of our expert accountants at Tawanda Accountants today.
With the 6th of April comes an increase in the amount of money you will be able to claim before incurring Income Tax, also known as the Personal Allowance) to £11,000. A further increase to £11,500 is scheduled in April 2017.
The biggest change in the income tax comes for those in the Higher Rate (40% tax). it will increase from £43,000 (2016//17 rate) to £45,000 in April 2017.
VAT Registration threshold
We have discussed the fundaments of VAT law for small companies in the UK in our previous articles. The Budget 2016 has confirmed the rise of the VAT registration threshold to £83,000 from April 2016.
Director’s Loan Accounts
The current penalty of 25% on the unpaid Director’s Loan (repayment has to be made within 9 months) will be increase to 32.5% in April 2016.
Further changes have been announced in the areas of Savings and Allowances. A Personal Savings Allowance will be introduced in 2016/17, which means that those who pay basic rate tax (earning less than £43,000 a year) won’t be changed any tax on the first £1,000 of savings interest. If you are in the Higher Tax rate you will be still able to claim the new Personal Savings Allowance, however, the threshold will be £500.
The changes also bring good news to business owners who hire staff. The Employment Allowance, which allows current employers to reduce their National Insurance Contributions bill by £2,000 - will be increasing to £3,000.
Another information which can also interest those employing staff, the increase of the minimum wage to £7.20 for over 25’s has been announced. HMRC also introduced penalties for those employers not paying their employees the minimum wage and anyone found guilty of this offence may be disqualified from being a Company Director for up to 15 years.
If you would like to find out more about tax changes upcoming in 2016/17 or find out the best strategy for your company which can be subjected to these changes, contact us today at Tawanda Accountants.