Tax rules can and do change with a varying impact depending on individual circumstances, which can also alter over time. In an April 2017 post, we discussed a number of pending tax changes. Our latest tax changes update follows:
ISA Tax Allowance
The ISA allowance for the 2017-18 tax year has increased to £20,000 (up from £15,240 in the last tax year). The allowance may be fully utilised using one type of ISA or spread across several variants.
For example, up to £4,000 could go into a LISA – Lifetime ISA (if you are between 25 and 40 years old) with the balance spread across cash ISA’s, investment ISA’s (stocks and shares) and perhaps the new ‘Innovative Finance ISA’s’ (Peer to Peer lending). Remember that investments can fall in value as well as rise, and you could get back less than you put in.
Capital Gains tax allowance
The Individual Annual Exempt Amount for Capital Gains Tax has been increased slightly to £11,300 (up from £11,100) for the 2017/2018 tax year. For those making gains over this amount, various Capital Gains Tax rates apply based on a number of personal (and income) circumstances. Capital gains tax is paid on profit from the sale of a range of personal possessions (including second homes) in any given tax year.
Many people fail to use their Capital Gains Tax allowance. This can be a very effective way of taking gains (to be used as income) or, with careful planning, reinvesting into ISAs or Pensions but it is important to take professional advice.
Tax Relief Available For Interest On Buy-To-Let Mortgages Is Reducing
Buy-to-let investors are no longer able to offset all their mortgage interest against their profits. The amount of mortgage interest tax-deductible will continue to reduce over the next three years until it reaches zero.
Tax relief will be replaced by a 20pc tax credit against which 75pc of mortgage interest may be offset against profits. This will fall to 50pc next year, 25pc the next year and zero in 2020.
While the move mainly affects those who already pay higher-rate income tax, it will push some basic-rate taxpayers into the higher-rate bracket once their rental income has been taken into account.
Please remember this article is for general information purposes only. If you’re unsure about any aspect of tax planning, seek professional independent advice. Remember, the value of investments can fall as well as rise and you may get back less than you invest.
All statements concerning the tax treatment of products and their benefits are based upon our understanding of current tax law and HMRC practices both of which are subject to change in the future. Levels and bases of reliefs from taxation are also subject to change, and are dependent on your individual circumstances.’