The Spring Budget 2017 is less than a week away, with Chancellor Philip Hammond due to announce further changes affecting finances of UK individuals and businesses for the 2017/18 tax year and beyond.
However, there are a number of pre-announced changes due for confirmation by the Chancellor in his Spring Budget speech.
Below is a full round-up of the changes that have already been discussed in previous Budget speeches:
From the next financial year, the amount an individual can pass on to their family without having to pay inheritance tax is to increase significantly on the basis that what they pass on includes their primary place of residence.
From 6th April 2017, a new allowance titled the ‘main residence nil-rate band’ will be introduced, starting at £100,000 and growing by £25,000 every tax year up until £175,000 (2020/21).
The new nil-rate band is in addition to the existing £325,000 inheritance tax allowance available to every UK individual. Subsequently, from 6th April 2017, in the event an individual leaves their main property to their children or grandchildren, the amount they can pass on tax free will amount to:
- £425,000 (2017/18)
- £450,000 (2018/19)
- £475,000 (2019/20)
- £500,000 (2020/21)
Note: Married couples and civil partners can claim unused inheritance tax allowance from their spouse or partner. Therefore, over the next four years, the total amount a couple can pass on tax-free to their loved ones is:
- £850,000 (2017/18)
- £900,000 (2018/19)
- £950,000 (2019/20)
- £1,000,000 (2020/21)
The amount an individual can earn before they have to pay income tax – known as the personal allowance – is set to rise to £11,500 in 2017/18. The government predicts that this move should take up to 1.3 million people out of having to pay income tax altogether.
The basic rate threshold where individuals pay 20 per cent income tax is now £11,501-£45,500. The higher-rate 40 per cent threshold begins from £45,501-£150,000.
Buy-to-let tax relief
The 2017/18 tax year will put a ceiling on the amount of tax relief that can be claimed on mortgage interest by buy-to-let landlords.
At present, landlords may deduct the cost of the mortgage interest they pay from their rental income when supplying their taxable profits from second or multiple properties.
However, during the next four years, landlords will gradually lose the ability altogether to deduct the interest from their rental profits. From 6th April 2017 landlords will be able to deduct 75 per cent, phasing down to nothing by 2020/21.
As revealed by former Chancellor, George Osborne during last year’s Budget, the Lifetime Isa will offer a new tax-free savings opportunity for those aged 18 to 39 from 6th April 2017.
The government is committing £1 for every £4 an individual saves up to a maximum bonus of £1,000 per year.
It’s important for individuals to bear in mind that should they withdraw these savings before the age of 60 – without using it to purchase their first home – they may incur a financial penalty.
Additionally, the annual Isa allowance, which can be invested in a range of cash, stocks and shares also rises to £20,000 in 2017/18.
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