The UK government has announced its emergency summer budget which they hope will improve the tax free personal allowance system, reform dividend tax as well as ensuring that businesses and high net worth individuals are paying what they owe.
Good news for businesses: Corporation tax will be reduced to 19% in 2017 and 18% in 2020. The main rate of Corporation Tax has already been reduced down from 28% in 2010 to 20%, in order to boost UK corporation attractiveness and benefit over a million already established businesses.
The tax-free Personal Allowance will be increased from £10,700 in 2015 to £11,000 in April 2016. This means that an average individual will be £900 a year better off in 20160 2017.
The government has also pledged to increase the Personal Allowance to £12,500 by 2020, and a new law introduced so that once it reaches this level, people working 30 hours a week on the National Minimum Wage won’t pay Income Tax at all.
Restructuring dividend tax
The dividend tax credit (which reduces the amount of tax paid on income from shares) will be replaced by a new £5,000 tax-free dividend allowance for all taxpayers from April 2016. Tax rates on dividend income will be increased.
This simpler system will mean that only those with significant dividend income will pay more tax. Investors with modest income from shares will see either a tax cut or no change in the amount of tax they owe.
Ending permanent non-dom status
Permanent non-dom status will be abolished from April 2017. From that date, anyone who’s been resident in the UK for 15 of the past 20 years will be considered UK-domiciled for tax purposes.
Making sure individuals and businesses pay what they owe
The government will continue to clamp down on tax avoidance, as well as increasing resources for HM Revenue and Customs (HMRC) so they can ensure people pay the tax that’s due.
This will include:
• Allowing three times the current number of criminal investigations HMRC can commence into complex tax crime, focusing on high net worth individuals and companies.
• Allowing HMRC to access more records to identify businesses that aren’t declaring tax.
• Ensuring that international companies pay tax on profits diverted from the UK by introducing a ‘general anti-abuse rule’ penalty and tough new measures for serial avoiders, including publishing the names of those who are found to be constantly using tax avoidance schemes.