The changes to personal finance legislation and policy in 2016 will keep on coming thick and fast throughout the year. For those of you eager to learn more about the changes already announced for the coming twelve months, we’ve highlighted six changes below, which may impact you. Don’t forget: if you’re concerned about any of these changes, or others previously mentioned, you can always contact us through the usual methods.
Personal savings allowance
A new personal savings allowance will grant the majority of us a certain amount of tax-free income from our savings, additional rate tax payers will not be able to claim this. Currently, interest made on products such as fixed-term bonds and current accounts is subject to tax, but the new allowance will give basic rate taxpayers £1,000 tax free and higher rate taxpayers £500 tax free. The allowance applies from the new tax year on 6th April 2016 and the government estimates that it will mean 95% of people will not pay tax on interest from these forms of saving.
New single state pension introduced
The single tier state pension will also come into force at the start of the new tax year, for anyone who retires on or after 6th April 2016. The new flat rate has been set at £155.65, but retirees need to be aware that, despite the slightly misleading name, not everyone will receive this amount. If you have ‘contracted out’ of the state pension, for example, then you may not be entitled to the full amount of weekly pension. The government themselves admit that ‘most people’ who reach state pension age during the first few years of the single tier state pension will have contracted out at some point in their working lives, so do check how much state pension you will be able to claim.
Deposit protection reduced
During 2015 and some years prior to that the government protected all of the savings we had to the tune of £85,000 per account. In 2016, however, the limit falls to £75,000. This means that, should you currently hold individual accounts with a balance of £85,000, £10,000 of this is now no longer protected by the government guarantee. Again, if you are concerned, please speak to your adviser, but it may be a sensible course of action to move some of the money you currently hold in accounts with balances over £75,000.
Digital tax accounts
Digital tax accounts are coming… albeit on a fairly slow rollout at the moment! The plan from HMRC is that everyone who fills out a self-assessment tax form will do so digitally by 2020. Currently, the government is only asking wealthy taxpayers with multiple income sources to use the system, but early 2016 will see the next batch of ‘trialists’ given accounts and completing returns. Watch out for an envelope through the post (or an email!) from HMRC, letting you know that you’re one of the lucky new crop.
Second home stamp duty is introduced
Announced during the Autumn Statement, the extra stamp duty on second home purchases is being rolled out quickly and will be in place and ‘live’ from April 1st 2016. Those purchasing a second home, or buy to let property will need to pay 3% above whatever their normal rate of stamp duty would have been, had the purchase been of a primary residence. Whilst this may seem like a relatively small increase, the difference between purchasing pre-April 1st and post-April 1st can be significant. Landlords who are planning further property investment in 2016 may particularly wish to check or to consult us on how their taxation will be affected.
Dividend taxation changes
The new rates of dividend taxation come into force at the start of the new financial year on April 6th 2016. Company owners, who may pay themselves partially through dividends, may be particularly affected as the change introduces a new £5,000 tax free rate with new bands of 7.5%, 32.5% and 38.1% above this for basic rate, higher rate and additional rate taxpayers respectively. If you do currently receive a substantial amount of income from dividends then now is a good time to review your income plans with your financial planner or accountant.
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