As another tax year begins, we look at the new business / personal tax measures and rate changes that have come into effect this month.
Business tax changes
- The VAT registration threshold has risen to £82,000. The de-registration threshold has increased to £80,000.
- The business rates multiplier is 49.3p; the small business rate is 48p. You can apply for small business rate relief if the rateable value of your premises is £12,000 or less. Find out more in our business rates guide.
- The main rate of Corporation Tax (on profits of £1.5m or more per year) has now aligned with the small profits’ rate (paid by most small businesses) – at 20%.
- If your business hires under 21s, you will not have to pay Employers’ National Insurance Contribitions (NICs) on salaries up to £815 per week. Read more in this Government guide.
Personal tax changes
- The personal allowance (the amount you can earn before paying any income tax) has risen to £10,600.
- The higher rate threshold is £31,786. So you start paying 40% on income over this threshold, plus the personal allowance, i.e. income above £42,385.
- Your first £5,000 in savings-related income is now free from tax.
- The Couple’s Allowance allows those who are married or in a civil partnership to transfer up to £1,060 of their personal allowance to their spouse/partner. There is a catch though; it only applies if there is one basic rate taxpayer, and one non-taxpayer in the relationship. Find out more here.
- A raft of new ‘pension freedom’ rules came into effect on 6th April. If you draw down your pension now, you will taxed at income tax rates (20, 40 or 45%), rather than the higher 55% rate which applied beforehand. You can also take 25% of your pension pot as a tax-free lump sum. If you die before the age of 75, your pension pot can be passed on tax-free. The pension changes are complex, so try this useful BBC guide for more details.
- The Capital Gains Tax (CGT) threshold is now £11,100. Thereafter any gains are taxed at the basic and higher CGT rates (18 or 28%).
- The annual ISA allowance rises from £15,000 to £15,240 (the ‘junior ISA’ allowance rises from £4,000 to £4,080).
- From May 1st, Air Passenger Duty has been abolished for under-12s travelling in economy class.
For a complete list of tax rates and allowances for the current tax year, visit the 2015-16 tax rates. FreeAgent has also published a handy guide to 5 tax changes you should be aware of this tax year.