The recent passing of the Finance Bill 2016 (a vehicle for renewing taxes, delivering new proposals and maintaining administration) saw many of the measures unveiled by the chancellor come to fruition.
To separate fact from fiction, we’ve put together a handy breakdown of the most relevant tax-related reforms that are likely to affect our clients:
1. New Annual Investment Allowance
The start of 2016 saw the Annual Investment Allowance (AIA) threshold fall from its record high of £500,000 to a new limit of £200,000. As part of the capital allowances regime, businesses can offset the full cost of plant and machinery against profits during the year of purchase. AIA was due to fall to £25,000 yet the chancellor was quick to reveal a new permanent and realistic level of £200,000.
2. Reduction in Lifetime Allowance
The Lifetime Allowance (LTA) is the maximum amount an individual can take in pension benefits during their lifetime before incurring additional tax. This figure takes into account the total combined value of pension funds upon retirement, excluding state pension and any dependant pensions. The LTA threshold current stands at £1.25m but will reduce to £1m from April.
3. Large business tax compliance
The Finance Bill 2016 implemented a new mandatory requirement for all large businesses, with more than 250 employees, to publish and report tax strategies to HMRC. The reforms, which will affect around 2,000 of the UK’s biggest firms, are driven by a need to address those that present a significant risk to the Exchequer. It also sets out to deliver greater transparency around a company’s approach to HMRC, shareholders and consumers. Those that fail to file and do so in time could face a non-publication penalty of £7,500.
4. A criminal offence for offshore evaders
As part of the Government’s commitment to tackle evasion, avoidance and ensure firms pay their fair share, the Finance Bill 2016 brings a tougher anti-offshore tax regime. This includes new criminal offences for those who fail to notify HMRC of their tax liabilities, submit a return or does so with inaccuracies.
The rules also bring a new power to name and shame those that have deliberately assisted tax evaders to hide assets and taxable gains and income outside the UK.
5. Abolishing tax on savings
From April 2016, ministers will introduce a new tax-free Personal Savings Allowance of £1,000 on the interest earned on savings, which will benefit 95 per cent of savers. To be eligible for the saving, your taxable income must be less than £42,700 a year. Those earning between £42,701 and £150,000 will receive a reduced allowance of £500.
For more information on how the Finance Bill 2016 may affect you, contact Gill Molloy on 0161 703 2500.
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