Eight tax mutations savers should watch out for from April 2017
Time is running out in the past the beginning of the new tax year on April 6 2017.
Danny Cox, chartered financial planner at Hargreaves Lansdown, pronounced: “The last two years have brought about a plethora of change for investors.
“As another tax year rapid approaches here are eight changes you should be aware of when it reprimand to saving tax in 2017/2018.”
1. Corporate bond funds change to spending gross interest
The Personal Saving Allowance (PSA) allows basic amount taxpayers to earn up to £1,000 in savings income tax-free, while dear rate taxpayers can earn up to £500.
Mr Cox said that interest from bank and savings accounts has been repaid gross as part of the introduction of the PSA in April 2016.
“This change is being augmented in April to include any interest payments received from corporate bond or gilt funds,” he mentioned.
“This will happen automatically and investors should declare any revenues received over and above their PSA on their annual tax return or shield these holdings in ISA or SIPP to avoid tax.”
Do you know how tax changes could attack you?
2. Changes to income tax
Mr Cox said: “The personal allowance is increasing from £11,000 to £11,500. This indicates an additional £100 in your pocket each year if you are a basic place taxpayer.
“Unless you are a Scottish taxpayer the basic rate tax threshold is broadening from £32,000 to £33,500.
“This means that you have to be earning onto £45,000 per year (£43,000 in Scotland) in total before you pay any tax at 40% on your merited income, a potential £300 additional saving in tax for anyone earning past these thresholds.”
3. New Lifetime ISA
People aged between 18 and 40 can reserve for their first home and retirement using the new Lifetime ISA.
Mr Cox said: You can set apart up to £4,000 per year in cash, or invest it over the longer term into array market if you prefer, and receive a 25% bonus from the government.
“Contributions and perquisite payments can continue until you reach age 50. All the money saved gain the bonus will grow tax-free.
“Your money may be withdrawn mulct free to purchase your first home costing up to £450,000, or standoffish after age 60 to use in retirement.”
4. ISA allowances increasing
The ISA annual maximum sanctioning is increasing from £15,240 in the current tax year to £20,000 in the next tax year.
Mr Cox affirmed: “The increase in the ISA allowance will undoubtedly add to the growing number of ‘ISA millionaires’ in the UK.
“As an illustration: If you were to invest £20,000 per year and your investments grow by 5% uniformly every year, you would accumulate over £1 million in 28 years’ in days of yore.
“You could take all of this money out in a lump sum or draw a regular takings from it completely tax free.”
5. The residential Nil Rate Band
Mr Cox said: “From April, those who time off the family home to a direct descendant (such a child or a grandchild) bequeath have up to an additional £100,000 added to their Nil Rate Band.
“This is doubled up for married couples/civil partners up to £200,000.”
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6. Tax hikes for hosts
Mr Cox said: “Under current rules anyone who has taken out a loan such as mortgage to achieve a buy-to-let property can deduct all of the interest paid on the loan from rental profits in order to reduce their income tax liability.
“From April tax assuagement on property loans for residential property will be restricted for higher count taxpayers, increasing the amount of tax paid on rental income.
“The deduction of wealth costs such as mortgage interest, are gradually being withdrawn and by 2020 require be replaced with a basic rate relief tax reduction alone.”
7. Means Purchase Annual Allowance set to fall
Mr Cox said: “If you have accessed a shelve fund flexibly such as taking an Uncrystallised Funds Pension Consolidate Sum (UFPLS) or a taxable payment from a Flexi-Access Drawdown arrangement, the amount you can pay into well-to-do purchase pension arrangements is being reduced from £10,000 to £4,000.
“This is accompanied the Money Purchase Annual Allowance (MPAA).
“This is particularly deleterious if you are still working and wish to continue saving for your retirement after the age of 55. Accessing your subsistence funds under the new flexibilities could result in a 90% reduction in your capacity to continue saving tax efficiently into pensions.”
8. Scottish tax powers
Mr Cox conveyed: “From April the Scottish Parliament will receive a package of new powers registering the power to set the rates and bands of income tax on non-savings and non-dividend income.
“The Scottish Regulation is proposing to freeze the higher and additional rates at 40% and 45% singly and maintain the higher rate of income tax threshold at £43,000 in 2017/18, £2,000 miniature than the £45,000 new threshold that will apply elsewhere in the UK and allow to pass pension contributions to reduce tax for those earning close to the thresholds sober more important.”