Tax Changes from April 2017

There are a number of tax changes that have come into effect this month;

1) From 6th April 2017 the IR35 status of a contract in the Public Sector is to be determined by the client, and not the contractor. The client may be the agency or the Public Sector organisation.

This has caused a lot of uncertainty, with many taking the risk averse decision and applying IR35 to all, instead of looking at each contractor individually.

2) The flat rate VAT scheme rules have changed for limited cost traders (businesses with goods which are less than 2% of the VAT inclusive turnover, or less than £1,000 per year). If this applies to you then the VAT rate increases to 16.5% from 1st April 2017.

3) The personal allowance has risen from £11,000 in 2016/17 to £11,500 this tax year, and the higher rate tax band starts at £45,000 increased from £43,000 last tax year.

4) Buy to let investors won’t be able to offset the full cost of their mortgage interest against rent this tax year. This will be phased in this year, with only 75% of the mortgage interest being deductible.

5) The amount that you can invest in an ISA per year has increased from £15,240 to £20,000.

Lifetime ISA’s (LISA) have been introduced from 6th April 2017. You can save up to £4,000 per year, which will be topped up by a 25% Government bonus. You can open a LISA if you are between 18 and 40 years old, and you can contribute up to the age of 50 years old. Not many providers are offering the LISA yet, a possible reason for this is that there is a 25% charge applied on exit.

For more information on any of the above changes please get in touch.