By Mark Jones, director of Carmarthen-based Clay Shaw Butler chartered accountants and business consultants. The Money Matters column appears in the Pembrokeshire Herald, the Carmarthenshire Herald and the Llanelli Herald newspapers.
Our spotlight on the latest Budget from Chancellor of the Exchequer Philip Hammond (started in Money Matters last week) continues this week.
At Clay Shaw Butler chartered accountants, we have produced a summary on the tax measures which may affect you, your family and your business.
Here are some points on personal tax changes . . .
Tax on dividends:
In 2018/19 the first £2,000 of dividends are chargeable to tax at 0% (the Dividend Allowance).
The Dividend Allowance will remain at £2,000 for 2019/20. Dividends received above the allowance are taxed at the following rates:
- 7.5% for basic rate taxpayers
- 32.5% for higher rate taxpayers
- 38.1% for additional rate taxpayers.
Dividends within the allowance still count towards an individual’s basic or higher rate band and so may affect the rate of tax paid on dividends above the Dividend Allowance.
To determine which tax band dividends fall into, dividends are treated as the last type of income to be taxed.
In 2017/18 the Dividend Allowance was £5,000.
The reduction in the allowance particularly affects family company director-shareholders who extract monies from the company by means of a small salary and the balance in dividends.
The cost of the restriction in the allowance for basic rate taxpayers is £225 increasing to £975 for higher rate taxpayers and £1,143 for additional rate taxpayers.
Tax on savings income:
Savings income is income such as bank and building society interest.
The Savings Allowance, which was first introduced for the 2016/17 tax year, applies to savings income and the available allowance in a tax year depends on the individual’s marginal rate of income tax.
Broadly, individuals taxed at up to the basic rate of tax have an allowance of £1,000.
For higher rate taxpayers the allowance is £500. No allowance is due to additional rate taxpayers.
Some individuals qualify for a 0% starting rate of tax on savings income up to £5,000.
However, the rate is not available if taxable non-savings income (broadly earnings, pensions, trading profits and property income less allocated allowances and reliefs) exceeds £5,000.
Rent-a-room relief gives relief from income tax for up to £7,500 of income to individuals who let furnished accommodation in their only or main residence.
Following consultation on the draft legislation and to maintain the simplicity of the system, the government will not include legislation for the shared occupancy test.
The government will retain the existing qualifying test of letting in a main or only residence.
Rent-a-room relief was introduced 26 years ago to encourage individuals to make spare capacity in their homes available for rent rather than letting out their entire property.
The emergence and growth of online platforms have made it easier than ever for those with accommodation to access a global network of potential occupants.
The government wants rent-a-room relief to be better targeted to achieve its objective of incentivising individuals to share their homes.
You can find out more about money matters on the Clay Shaw Butler website (under our news for business section) – http://www.clayshawbutler.com/news/latest-news-for-business
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