New tax year: personal changes

6 April 2017 sees the introduction of a number of new rates and allowances as well as some changes to the rules. Here's an overview of the main changes for 2017/18 that affect personal finances.

Income tax

The personal allowance for 2017/18 is £11,500 and the basic rate limit is £33,500. The Scottish basic rate limit is £31,500.

Property and trading income 

A £1,000 allowance for property income and a £1,000 allowance for trading income will come into effect from 6 April. 

You won't need to declare or pay tax if you have income from either source of less than £1,000. 

If you have income above £1,000, you will be able to deduct expenses in the usual way or deduct the £1,000 allowance.

ISA and Lifetime ISA

Individuals will be able to save up to £20,000 tax-free into an ISA. The annual allowance for Junior ISAs will increase to £4,128.

A new type of ISA – the Lifetime ISA – will be available for adults under the age of 40. 

Individuals will be able to contribute up to £4,000 a year and will receive a 25% bonus from the government. 

These savings can be used to purchase a first home once the account has been open for a year.

Alternatively, savings can be withdrawn for any reason from the age of 60. Withdrawing the funds at other times may lead to a withdrawal charge of 25%.

Inheritance tax and property

An additional residence nil-rate band will be available to those passing on a main home to a direct descendent.

The £100,000 allowance is an addition to the existing tax-free inheritance tax allowance of £325,000. It will increase by £25,000 each tax year until it reaches £175,000 in 2020/21.

Speak to us about determining your eligibility.

Residence and domicile

Anyone who has been a resident in the UK for 15 of the last 20 tax years will be considered domiciled for tax purposes. The individual will become domiciled on the 16th year. 

This means that the remittance basis of taxation will no longer be an option, and that a person will no longer be able to become a non-dom on a permanent basis. 

The permanent non-dom status will be replaced by the deemed-domicile status. This will include years of residence while the individual is under the age of 18. 

However, a person can lose their deemed-domicile status if they become a non-resident of the UK for at least 6 years.

Capital gains tax

The annual capital gains tax (CGT) exemption for individuals will increase by £200 to £11,300 (£5,650 for trusts).

After this, gains are taxed at a rate that is income-dependent. 

For basic rate taxpayers the CGT is 10% and 20% for higher and additional rate taxpayers. 

Residential property and carried interest are taxed at 18% and 28%. Trusts pay CGT at 20% (with the exception of the residential property and carried interest). 

Contact us to discuss your personal tax planning for 2017/18.