UK Budget 2016 – The Main Points
Yesterday’s Budget has been described as a “sweet & sour” Budget – depending upon your perspective! Some of the main areas of interest are:
Re-basing of cost base for assets belonging to certain non-doms
From April 2017, there will be a re-basing of the cost base of foreign assets owned by non-domiciled individuals who become deemed domiciled under the new 15 out of 20 years of residence rules. This is an amazing stroke of good fortune for the non-doms concerned and effectively means that they will benefit from full rebasing to the market value of the asset in April 2017. Furthermore, it appears there will be no requirement that the proceeds are left offshore but, as ever, we await the HMRC policy update document for more detail.
UK Non Resident Capital Gains Tax Return
The requirement for a non resident to report a disposal of a residence within 30 days of the conveyance has been relaxed, provided the disposal meets the following conditions:
a disposal of a residential property on or after 6 April 2015 is for no gain or loss; or
the grant of a lease for no premium to an unconnected person is a bargain at arm’s length.
Small scale self-employment and Rent-a-Room
Small scale e-Bay vendors and Airb’nb landlords have been given two new tax reliefs. From April 2017, small internet-based traders with annual income of less than £1,000 will be exempt from taxation and the profits will not even have to be reported. If their income actually exceeds £1,000, this exempt £1,000 can be deducted from the income so it would appear there is no need to calculate actual expenses for these small-time traders.
In advance of this measure, for 2016/17, the Rent-a-Room exemption has significantly increased from £4,250 to £7,500.
Personal Allowances and Capital Gains Tax Rates
The 2017/18 personal allowance has increased to £11,500 and this is an across-the-board figure, as the higher Age Allowances will have been phased out by April 2017. The 40% higher rate tax threshold will then start at £45,000 for 2017/18.
To encourage investment in shares, the capital gains tax rates have been reduced to 10% for basic rate taxpayers and 20% for higher rate taxpayers but this generous reduction does not apply to gains from real property. Capital gains tax rates for buy-to-let or second homes remain at 18% and 28%, as now.
The ISA subscription limit for 2016/17 has been increased to £20,000.
From April 2017, a new type of “lifetime” ISA has been introduced, with a sweetner of a maximum £1,000 contribution from the Government each year until age 50 but this ISA is designed for long-term savings by under 40 year olds for either a first time home purchase or for a pension.
If you have any questions on these or other tax issues, please contact us on [email protected]