In light of George Osborne’s budget announcements this month we take a quick look at a few of the key tax changes that will be coming into force – and how these might affect you.
The ‘personal allowance’ threshold (the amount at which most taxpayers start paying income tax) will be raised from £10,600 in the current tax year to £11,000 from April 2016 and £11,500 in April 2017. The threshold for higher rate tax (40%) will also rise, from £42,385 to £43,000 in 2016 and £45,000 in 2017.
How will it affect me?
If you are a standard rate taxpayer then you will be able to take home slightly more money before you start paying tax – if you take home £25,000 a year before tax, you will be £6.67 a better off a month after April this year.
The amount that couples can pass on tax-free after their death will rise from £650,000 to £1m from 2017 to 2020.
There will be a new ‘family home allowance’ (eventually worth £175,000 per person on top of the existing £325,000 tax-free allowance), which will start to be introduced in April 2017. This means that in 2020 individuals can pass on assets worth up to £500,000, including a home, without paying any Inheritance tax at all. (Making a total of £1million for married couples).
The new ‘family home allowance’ will be introduced gradually - £100,000 in 2017-2018, £125,000 in 2018 – 2019, £150,000 in 2019-2010 and £175,000 in 2020-2021.
How will it affect you?
If you leave property to a loved one in 2020, or if you are left a property, the inheritance tax that needs to be paid will be reduced.
Currently on a property worth £500,000 your family would only receive £325,000 as a tax-free allowance, meaning they would pay 40% inheritance tax on the balance – £70,000 in total. The new changes mean they will pay £30,000 in 2017 gradually reducing down to nothing after April 2020.
There will be a new tax on sugary drinks from 2018 in an attempt to cut down on obesity in the UK.
How will it affect you? Drinks will be placed into two different bands for the levy, depending on the drink's sugar content. The lower band will place an additional charge on drinks with a total sugar content above 5g per 100ml, while drinks with more than 8g of sugar per 100ml will be found in the higher band.
The charge will equate to an additional 18p per litre for the lower band and 24p per litre for the higher band.