There were many changes introduced in the Budget less than a month ago - but most of the changes mentioned there are not in legislation until the 2018 tax year - so here is quick recap on changes taking effect for the 2017 tax year which started today.
For Individuals
- The headline figure that affects everyone is the increase in the personal tax-free allowance. For 2017, this tax allowance is now £11,500 - a £500 increase.
- The higher rate threshold has also increased by £1,500 if you're not in Scotland. In Scotland the higher rate tax band will kick in at £500 less than the rest of the UK. This effectively freezes it at 2016 year levels. So, people earning less than £45,000 pay basic rate tax, but in Scotland only people earning less than £43,000 pay basic rate tax.
- Living wage increases to £7.50 for people aged 25 and over (an increase of 30 pence). 21 to 24 year olds see a 10 pence increase to £7.05. 18 to 20 year olds see a 5 pence increase to £5.60. 16 to 17 year olds see a 5 pence increase to £4.05. Apprentices see a 10 pence increase to £3.50.
- A new lifetime ISA can now be opened for adults up to age 39. Save up to £4,000 per year and receive a 25 percent bonus on the deposit per year. The maximum bonus is capped at £1,000 and bonuses are paid up to the 50th birthday. Potentially worth £32,000 tax free for the youngest accounts. An 18 yr old adding £300 per month every month would close the account at age 50 with a balance of £160,000.
- Inheritance tax changes mean up to £500,000 can be passed on to children/grandchildren tax-free. This is compounded with £2 million+ estates having a reduced allowance.
- For those partaking in small ventures such as online auctions or maybe occasionally renting space there are two new tax allowances. These allow up to £1,000 raised from each of these ventures to be tax-free.
For Businesses
- The headline figure here is the reduction of Corporation Tax to 19 percent from 20 percent. This is also the final year where the dividend allowance will be £5,000. It is substantially reduced in 2018 to £2,000.
- The new 2017 tax year will be the final year for businesses with turnovers above the VAT threshold to use the old Self Assessment system for reporting tax to the revenue. From April 2018, businesses turning over more than the £85k VAT threshold would need to submit quarterly returns to HMRC digitally.
We have updated our website and apps with new calculators, rates and allowances to reflect the new figures and the 2017 year is now the default tax year - Happy new tax year!.