Budget updates

Posted on 21/09/2015 at 11:20

The recent Budget in July announced some tax changes that will have a major impact on quite a number of our clients.  Although much of the press surrounding the Budget concentrated on the cuts in Welfare spending, there were a number of proposed tax changes of great importance.

Full details of these are not available at the date of writing this Newsletter; however we will be monitoring these changes closely.  Where we believe any clients will be directly affected, we will be advising them in more detail but if any client believes they will be affected by any of these changes and wants further advice, please do contact us.

The following Budget proposals are those which we believe will most directly affect our clients:

Following on from the previous changes detailed in the last Newsletter on incorporation of a business, where the vendor (individual) and purchaser (company) are related, the Government is removing Corporation Tax relief for all future acquisitions of goodwill (and “customer related intangible assets”).  This measure applies to company accounting periods beginning on or after 8th July 2015 but not for acquisitions made before 8th July 2015.

The Annual Investment Allowance for capital investments will be set a new permanent level of £200,000 for qualifying expenditure after 1st June 2016.

The NIC employment allowance of £2,000 is to be increased to £3,000 per annum from April 2016.  However, the allowance will no longer be available to companies where the Director is the sole employee (this point needs to be clarified in future as regards a company which has two Directors, say husband and wife).

Restriction of the income tax relief that individual landlords can receive in respect of interest paid on mortgages used in connection with purchase etc. of let residential property.  Instead of claiming a deduction for the full mortgage interest against income as at present (thus achieving for higher rate taxpayer, tax relief at 40% or 45%) individuals will instead claim a basic rate tax reduction from their tax liability.

Any excess of the interest paid in one year not used, (e.g. if there was not enough tax due against which to claim the credit in full), can be carried forward.

This measure is to be phased in over 4 years from April 2017.

There are also to be changes in the Wear and Tear allowance for furnished lettings.  This is to be replaced from April 2016 with a proposed new relief that allows all residential landlords to deduct the actual costs of replacing furnishings.

The rent a room relief is to be increased to £7,500 with effect from 6th April 2016.