More tax free allowances from 6 April 2017
In addition to the current £5,000 tax free dividend allowance and the personal savings allowance of up to £1,000 there will be two further tax free allowances starting from 6 April 2017. These will be a new £1,000 tax free allowance for self-employed income and a £1,000 rental income allowance.
These new allowances mean that individuals doing a small amount of self-employed work or receiving a small amount of rental Income will not need to report such income and consequently may fall outside self-assessment.
Note that the £1,000 allowances are the gross amounts that will be tax free each year. Where the gross income exceeds £1,000 there will be the choice of paying tax on the excess over £1,000 or deducting allowable expenses in the normal way.
For example Mr Nikon has a full time employment but also has a part - time photography business earning £1,500 a year with £800 of business expenses. Rather than paying tax on the net profit of £700 the new system will mean that he will only be taxed on £500 (£1,500 less the £1,000 allowance). If his gross income was below £1,000 it would be tax free and would not need to be reported to HMRC, probably keeping him outside of self-assessment.
If you would like more information, or would like to discuss your tax affairs in general, please contact our Tax Partners Steve Crompton or Chris Barrington on the details below:
Partner – Head of Tax
direct dial: 01942 292541
mobile: 07790 840394
direct dial: 01942 292505
mobile: 07730 436070