Posts by marksandco

Rent-a-room relief

With effect from 6 April 2016, the rent-a-room relief (the gross income you receive when renting out a room in your own house which is free of tax) rises from £4250 to £7500.

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brighton accountants

New dividend tax

It’s not uncommon for directors/shareholders of small companies to pay themselves from their companies via a mixture of salary and dividends.

Up until now, if your total personal taxable income for the current tax year comprises of only monies taken from your company, then you could take £671 per month as salary, plus up to £30900 as net dividends, and pay no personal tax.

However, from 6 April 2016, this all changes.

From 2016/17, if you take the above amounts, the salary remains tax-free, but the dividends will be taxed differently.

Using the £30900 dividend as an example, the new rules state that of the £30900 dividends, the first £5000 will be tax-free, but the remainder, less any unused personal allowance,  will be taxed at 7.5%, meaning additional personal tax of about £1700.

For those who take dividends so that they go into higher rate tax, there will be the 7.5% tax charge up to basic rate limit, plus a further 32.5% on the excess that is in the higher rate tax threshold (rises to 38.1% for additional rate tax payers).

Not all is bad news – the company tax rate will be reduced from 20%, to 19% with effect from 1 April 2017, and to 18% from 1 April 2020.

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brighton accountants

Buy to Let Landlords

Landlords paying higher rate income tax will no longer be able to deduct all of their mortgage interest/finance costs from their rental profits. Instead, they will effectively receive a basic rate reduction. This restriction will be phased in over four years starting from April 2017.

In addition to the above, the 10% ‘wear and tear allowance’ will be reformed and replaced with a new relief that allows residential landlords to deduct the actual costs of replacing furnishings.

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