Getting ahead and planning your tax in 2016 is vital, especially in an environment that is constantly evolving. Changes to the personal finance policy and legislation will continue throughout the year, therefore it is important that you are clued up on what is to come. We’ve taken a look at some of the most important areas of taxation in 2016 and the changes that you need to know about.
Changes to dividend taxation
New dividend taxation rates will come into play at the start of the new financial year, April 6th 2016. This will mainly affect company owners who pay themselves through dividends. The major change is a new £5,000 tax-free rate, accompanied by new bands of 7.5%, 32.5% and 38.1% for basic rate, higher rate and additional rate taxpayers. Those who receive income from dividends are advised to renew and income plans with a tax planning specialist.
New personal savings allowance
A new personal savings allowance will provide everyone with a certain amount of tax-free income from savings. At the moment, any interest gained on fixed term bonds and current accounts is subject to tax, this new allowance will grant basic rate taxpayers £1,000 tax-free and £500 tax free for higher rate taxpayers. This will come into play on April 6th. The government estimate that this will lead to 95% of people not paying tax on interest gained from these savings.
Reduced deposit protection
The amount of money that the government will protect will be reduced from £85,000 to £75,000. This means that any individual accounts held with a balance of £85,000 will have £10,000 that is no longer protected by the government guarantee. Those who are concerned about this are advised to speak to their financial planner or independent tax advisor to see if moving a portion of this money is the best course of action.
Introduction of second home stamp duty
An additional stamp duty on second homes was announced during the Government’s Autumn statement. This will be in place from April 1st, and anyone buying a second home or a property for buy to let purposes will need to pay 3% above what their normal rate of stamp duty would have been if the purchase had been a primary residence. This will lead to a significant difference between property purchase prices before and after the 1st April. Landlords in particular are urged to find out how this will affect any future property investment.
Tax planning is naturally a highly specialised area, and if you are to minimise your liabilities while maximising your wealth over the coming 12 months, it will be vital for you to receive the most informed expert advice.