Tax Changes for 2016

Tax Changes for 2016
Here is a round-up of the key tax changes taking place in the new tax year running from April 2016.

Lower Landlord 'Wear and Tear' Allowance
Landlords can now only claim tax back on money actually spent on replacing furniture and other household items, not the traditional 10pc. The government thinks this change will encourage landlords to improve conditions for tenants by renovating their rental properties more regularly.

Capital Gains Tax down
Investors selling assets now pay less tax on equity. High rate taxpayers now pay 20pc down from 28pc and non-higher rate taxpayers will pay 10pc down from 18pc. Unfortunately, landlords won't benefit from the capital gains tax. They have had an 8pc surcharge put on the 8pc reduction, wiping out their tax gain.

Savers Rewarded
Savers have been given an upper limit of £1,000 for all savings before they are taxed, and those on a higher rate are getting a tax-free allowance of £500pa. A basic rate taxpayer with £50,000 in the bank and earning 1.5pc in interest would usually have paid £150 tax on a £750 annual return - this year, they keep all of it. Meanwhile, a higher rate taxpayer will pay £100 on a previous tax of £300.

State Pension Changes
The government now offers a flat rate payment of up to £155.65 a week for those reaching state pension age. However, the rate you get depends on how long you've been making national insurance contributions.

Rent-a-Room allowance increases

Homeowners who let out one of their rooms now have a maximum earning threshold of £7,500 before they get taxed - the equivalent of £144 a week without it being taxed as income.

Pension Lifetime Allowance falls
An individual can only put £1m into their pension pot, down from £1.25m. Investments bigger than that will be taxed at 25pc or 55pc when additional money is withdrawn as a lump sum. Anyone expecting a pension income of £43,478 a year could now breach the new limits.

Personal Allowance up
You can now earn £11,000pa before you pay any tax, and you may now earn £43,000pa before paying the higher rate tax of 40pc.

Non-EU workers must earn more to stay
Skilled workers from outside the EU will have to earn £35,000 a year before they can settle in the UK permanently if they have lived in the UK for less than 10 years. However, if their profession is short-skilled then this new criteria will not apply.