You may have heard that big tax changes are coming in April.
The chances are, at least one of the changes will affect you in one way or another.
With that said, let’s take a look at the expected changes.
In a constant effort to tackle climate change, the Government have decided to significantly increase road tax prices. The goal is to incentivise people to drive newer low-emissions vehicles.
As a result, fully electric cars that are powered by hydrogen fuel cells will be exempt from road tax. In addition, cars purchased before 1st April 2017 that emit less than 99mg/km of CO2 will be road-tax except for the vehicles entire life.
Those who purchase low emissions cars (<99mg/km) after 1st April 2017 can expect to pay £120 in the first year and £140 per year thereafter. There is however one exception to this. If you purchase a car for over £40,000 then you will attract a ‘luxury tax’ of at least £310/year regardless of the emissions it produces.
Those looking to purchase new higher-emissions vehicles will be hit hardest by these tax increases. Here’s how it will work:
- Up to 131g/km – £200 instead of £130
- Up to 151g/km – £500 instead of £180
- Up to 171g/km – £800 instead of £295
- Up to 191g/km – £1,200 instead of £490
- Over 255g/km – £2,000 instead of £1,100
So, if you are looking to purchase a new car in 2017 – expect to pay more car tax than you initially budgeted for!
Good news – tax brackets are increasing.
The personal allowance for tax-free income will rise from £11,000 to £11,500 as of April 2017.
The basic rate 20% tax limit will increase to £33,500 whilst that 40% threshold will increase to £45,000.
Those earning over £150,000 pay the additional rate of 45%.
The current employer supported childcare is to be replaced with a tax-free childcare.
So, for the first £10,000 a years’ worth of childcare costs, the government will contribute 20%. This essentially means that the Government will cover up to £2,000 per year, per child in childcare costs.
This scheme will only be available to those who are not already receiving child tax credits. It will also be unavailable to those earning north of £150,000 a year.
Corporation Tax and National Insurance
A large percentage of contractors pay corporation tax as they work through their own service companies. They also pay lower levels of National Insurance as a result. For most public-sector workers, this may not be the case for much longer.
If HMRC deems that the contract is between an employer and an employee (rather than a relationship between two organisations), the contractor must pay normal rate tax and National Insurance contributions. Unfortunately, they will not be entitled to sick pay or holiday pay.
Non-domiciled status is something that foreign citizens residing in the UK can claim. It essentially allows them to pay an annual fee to the treasury and then earn tax-exempt income overseas.
This has been criticised as a tax-avoidance method for higher-earners. As a result, changes are going to be made.
From April, those who have been a UK resident for 15 out of the last 20 tax years will be deemed “domiciled”. As a result, they will pay UK citizens tax rates. In addition, they will be required to pay inheritance tax on all their estate.
From 1st April 2017, there will be some significant tax changes coming into place.
If you feel that you may be affected by any of these changes, then it may be worth doing a bit of research or contacting Citizen’s Advice to learn more.