Tax Free Allowances & Tax Relief Updates - 2017!

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.

Don’t Forget “Rent A Room” Relief

Whilst on the subject of tax free allowances remember that there is a further £7,500 a year allowance deducted from rent received from lodgers where you rent out part of your main residence.

This allowance increased from £4,250 from 6 April 2016 so that now the first £7,500 rent from lodgers is tax free. Where income from lodgers exceeds £7,500 a year only excess is taxable.

Tax Free Childcare Accounts To Start 6 April 2017

New tax-free childcare accounts were announced in 2014 to replace the employer-provided childcare voucher scheme. Introduction has been delayed by legal disputes with organisations involved in administering the existing scheme, but the new accounts will at last be introduced on a trial basis in early 2017.

The new scheme will then be rolled out across the country based on the results of the trial. The rules are complex, but where both parents work and earn at least £115 per week, they will be able to put up to £8,000 a year into a special account which the Government will top up with 20p for every 80p contributed by the parents. This account can only be used to pay for childcare such as nursery fees.

It is anticipated that the new scheme will eventually replace the existing childcare voucher scheme which is only available to employees who work for organisations that offer such schemes. The new system will benefit the self-employed as well as those workers in organisations that currently do not provide childcare vouchers.

Contact us if you need more information or business help:
PJ | ☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com