Important changes to the tax system
5th May 2017
The Corporation Tax rate drops from 20% to 19% on 1st April 2017 (and to 17% on 1st April 2020). This means that Companies will pay a bit less Corporation Tax going forward!
Dividend Tax – the bad news
The impact of the dividend tax (an extra 7.5% on dividends received in excess of £5,000) will more than cover any saving from a reduction in Corporation Tax. The big news in January 2018 will be the shock many taxpayers will receive when they see how much tax they have to pay. For example, someone who receives £20,000 in dividends, from shares they hold in the Company run by their spouse, may not be used to having any tax to pay. But now they will have to:
a) Submit a 2017 Self-Assessment Tax Return and
b) Pay tax in January 2018 of £1,125 plus Payments On Account (see our video on payments on account)
If the spouse receives a similar amount of dividends, their tax bill will be higher by the same amount.
National Minimum Wage
On 1st April 2017, the National Minimum Wage, for over people aged 25 and over, increased to £7.50/hour. For a 37.5 hour week, this equates to £281.25/week or £14,625.00/year.
Mortgage Interest on Buy-to-let properties
The first stage in restricting higher rate tax relief on mortgage interest began on 6th April 2017. For the 2017/18 tax year, three quarters of the mortgage interest obtains tax relief; and one quarter is used to calculate a tax reduction at 20%. This sounds complicated – and it is.