Personal allowance and higher rate threshold
The personal allowance will be increased from £11,000 in 2016/17 to £11,500 in 2017/18.
The higher rate threshold will increase from £32,000 in 2016/17 to £33,500 in 2017/18. Individuals entitled to a full personal allowance will not be liable to higher rate tax until their total income exceeds £43,000 in 2016/17 and £45,000 in 2017/18.
The national insurance contributions (NICs) upper earnings limit will also increase to remain in line with the higher rate threshold.
Property and trading income allowances
The government will introduce a new £1,000 allowance for property income and a new £1,000 allowance for trading income from April 2017. Individuals with less than £1,000 of either source of income will no longer need to declare or pay tax on that income.
Those with income above £1,000 will be able to deduct their expenses in the usual manner or simply deduct the £1,000 allowance.
Finance costs restriction for landlords
Legislation will be introduced relating to finance costs on residential properties incurred on or after 6 April 2017 in order to ensure that:
• individual beneficiaries of deceased persons' estates are entitled to the basic rate tax reduction
• the total income restriction to the tax reduction applies where the relevant finance costs or property profits are higher than the total income
• the total income is a measure of the net taxable income after other reliefs
• any carried forward tax reduction is given in any subsequent year in which property income is received, even if there is no restriction on the deduction of finance costs in that year, as the loan may have been repaid.
Reform of the wear and tear allowance
As announced at Summer Budget 2015, the wear and tear allowance is being abolished from April 2016. Landlords will be able to deduct the actual costs of replacing furnishings.
Profits from trading in and developing UK land
The government is acting to ensure that there is a level playing field between non-UK resident developers of UK property and UK developers.
The legislation will introduce a standard set of rules for taxing trading profits derived from trading in and developing land in the UK.
It will be introduced from report stage and will take effect from the date of introduction. Anti-avoidance rules will take effect from budget day to counteract any arrangements put in place.
The new rules will apply even if the overseas developer has no permanent establishment in the UK. The profits will be subject to either income tax or corporation tax depending upon the business structure used by the developer.
Bad debt relief for peer-to-peer lending
Tax relief will be allowable on bad debts incurred on peer-to-peer loans against other peer-to-peer income.
Extending farmers averaging period
Farmers will have the choice of averaging their profits for income tax purposes over 2 years or 5 years. This was announced earlier in Autumn Statement 2015 and will apply from April 2016.
From April 2017 non-UK domiciled individuals will be deemed UK domiciled if they have been resident in the UK for 15 of the past 20 tax years. This was announced in Summer Budget 2015.
In addition individuals who were born in the UK and who have a UK domicile of origin will revert to their UK domiciled status whilst they are resident in the UK.
The government will also legislate to charge inheritance tax (IHT) on all UK residential property indirectly held through an offshore structure from 6 April 2017.
Benefits in kind
The law regarding the taxation of benefits in kind is being clarified with effect from 6 April 2016.
The concept of ‘fair bargain' only applies to general taxable benefits where the taxable amount is based on the cost to the employer of providing the benefit.
If an employee receives goods or services from their employer at the same cost as a member of the public there is no benefit in kind.
The concept of ‘fair bargain' does not apply to the taxation of certain benefits in kind which have specific charging rules, such as beneficial loans, accommodation and company cars.
Income from sporting testimonials
All income received by an employee from a sporting testimonial or benefit match will be chargeable to income tax and NICs.
There will be a one-off exemption of £100,000 of the income received from events held during a single testimonial or testimonial year.
If the proceeds exceed £100,000 PAYE will need to be applied.
The exemption will not be available if the right to the testimonial is contractual or customary.
The new rules will apply for income received from testimonial events held on or after 6 April 2017 where the testimonial was awarded on or after 25 November 2015. If the testimonial was awarded before 25 November 2015 then existing arrangements will apply.