Happy New Year! We hope that 2016 brings you wealth, health and happiness.
For many individuals and businesses, the New Year is a perfect opportunity to start planning for a fantastic year ahead and there is certainly a lot in store for 2016.
In his Autumn Statement back in November, the Chancellor announced that the UK is a recovering economy and the figures certainly speak for themselves. Consumer confidence is at an all-time high, we have more money in our pockets, thanks to sustained low inflation, low fuel costs and increased wages – and we are spending our extra cash!
AIA in place
There’s been a bit of a question mark over the status of the Annual Investment Allowance, or AIA, as the threshold has been moved from pillar to post over the last year or so. The threshold plummeted from £500,000 to £25,000 which was due to come in to effect from January 2016. However, thankfully, the Chancellor adjusted this in his July Budget, providing clarity on the situation as it stands. Therefore, from January 2016, if you plan to invest in plant and machinery, you can now benefit from a tax relief up to the value of £200,000.
New alcohol trading laws
You may remember a previous WK blog on this which outlined the new laws on The Alcohol Wholesaler Registration Scheme (AWRS) coming in to effect from January 2016. From now on, if you are a wholesaler of alcohol, you will need to make sure you comply with these new rules by returning an application form, before April 2016. Anyone refusing to do so could face a hefty fine.
Buy to let changes
This has been a hot topic in the press recently and it is certainly one which has caused a stir here at Wilkins Kennedy. The Chancellor announced changes to the current regime that will see the introduction of an extra 3% above current Stamp Duty Land Tax (SDLT) from April 2016. This new rate will be charged on purchases of additional residential properties (above £40,000), such as buy to let properties and second homes. Draft legislation will be published for consultation in January 2016 so look out for our commentary on this in the New Year.
It is thought that this new rate has been designed to further deter buy to let investors, who also saw the reduction of tax relief on mortgage interest payments and made changes to the Wear and Tear allowance earlier in 2015. This should, hopefully, give way to first time buyers as buy-to-let investors leave the market and as a result keep house prices more competitive.
No doubt these changes will be far from popular for landlords in 2016, but for estate agents it could be good news as people flood the market with new purchases, before the changes come into effect in April.
The other hot topic for 2016 is the upcoming changes to dividend tax credits. Currently, individuals in receipt of dividends benefit from a 10% tax credit which for basic rate tax payers meant they could enjoy their dividend tax free. Higher rate tax payers paid an effective 25% tax rate. However, from April 2016, new rules will allow anyone who receives dividend income to pay no income tax on the first £5,000. Basic rate taxpayers will pay 7.5% tax on any additional dividend income, higher rate taxpayers will pay 32.5% and additional rate taxpayers 38.1% but there will be no tax credit. Therefore, if you plan to take a dividend higher than £5,000 after April, you may wish to bring your plans forward in order to benefit from the higher threshold. Draft legislation is currently out for consultation so look out for our commentary on this in the New Year.
Let us not forget that 2016 is the year pension planners need to act fast if they are to take full advantage of their pensions before changes come into force on 6th April 2016. The pension Lifetime Allowance will drop to £1 million from its current threshold of £1.25 million and from April 2016 the £40,000 annual allowance will be reduced if you have an income of over £150,000, including pension contributions.
Finally, from April 2016, the Government will introduce a new mandatory National Living Wage for workers aged 25 and above. It is hoped that Minimum Wage earners will see an increase of around £910 per year for a full time worker.
If you could do with a helping hand, whether it’s effective tax planning or how any upcoming changes will affect you or your business, then get in touch with us today to see how we can help.
All the best for a successful 2016!