1. Tax credits and Tax free childcare
The rate at which a claimant’s award is reduced as each pound of their income exceeds the income threshold (known as the taper rate) will remain at 41% of gross income from April 2016.
The level of income at which a claimant’s tax credit award begins to be tapered away (known as the income threshold), will remain at £6,420 per year from April 2016. Claimants earning below this amount will retain their maximum award. Consequently the income threshold for child tax credit-only claimants will remain at £16,105 in 2016 to 2017.
As announced at Summer Budget 2015, the income rise disregard in tax credits will reduce from £5,000 to £2,500. This is the amount by which a claimant’s income can increase in-year compared to their previous year’s income before their award is adjusted.
Tax free childcare
The government will lower the upper income limit per parent from £150,000 to £100,000 and increase the minimum income level per parent from the equivalent of 8 hours to 16 hours at the national living wage.
2. Stamp Duty Land Tax (SDLT) and Capital Gains Tax (CGT)
SDLT: additional properties
Higher rates of SDLT will be charged on purchases of additional residential properties (above £40,000), such as buy to let properties and second homes, from 1 April 2016.
The higher rates will be 3 percentage points above the current SDLT rates. The higher rates will not apply to purchases of caravans, mobile homes or houseboats, or to corporates or funds making significant investments in residential property given the role of this investment in supporting the government’s housing agenda.
The government will consult on the policy detail, including on whether an exemption for corporates and funds owning more than 15 residential properties is appropriate.
The government will use some of the additional tax collected to provide £60 million for communities in England where the impact of second homes is particularly acute.
SDLT: changes to the filing and payment process
The government will consult in 2016 on changes to the SDLT filing and payment process, including a reduction in the filing and payment window from 30 days to 14 days. These changes will come into effect in 2017 to 2018.
CGT: payment window
From April 2019, a payment on account of any CGT due on the disposal of residential property will be required to be made within 30 days of the completion of the disposal. This will not affect gains on properties which are not liable for CGT due to Private Residence Relief. The government will publish draft legislation for consultation in 2016.
3. Making tax digital
The government will invest £1.3 billion to transform HM Revenue and Customs (HMRC) into one of the most digitally advanced tax administrations in the world. Most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account, reducing errors through record keeping.
HMRC will ensure the availability of free apps and software that link securely to HMRC systems and provide support to those who need help using digital technology. This will not apply to individuals in employment, or pensioners, unless they have secondary incomes of more than £10,000 per year.
The government will publish its plans to transform the tax system shortly and will consult on the details in 2016.