Breakdown of new tax legislation for this coming year

Published:  06 April, 2018

David Redfern, founder of DSR Tax Claims, looks at some of the changes that will be in place this coming tax year.

The reduction to the dividend allowance as having particular potential to impact on taxpayer's finances. Noting the drop in the allowance from £5,000 to £2,000 in tax year 2018/19, Redfern said: "the reduction in dividend allowance on share investments could lead to a basic rate taxpayer being expected to shell out an extra £225 in tax a year, rising to £975 for higher rate taxpayers, which is a significant increase in taxation and could wipe out some of the gains from the increase in the personal allowance".

He also highlighted changes to income tax relief for interest against rental income, restricted to the basic rate of tax, with only 50% of the interest now fully deductible from rental income (down from 75%), noting that this could impact on higher-rate taxpayers who claim child benefit and are subject to the High-Income Child Benefit Charge.

Redfern noted: "these changes are being phased in over four years but due to their complex nature, they have the potential to make the rules around tax relief on rental income very complicated".

As well as highlighting the increase to the personal allowance, up to £11,850 from £11,500, Redfern also noted that the rules had been changed around Marriage Allowance to make it easier to claim on behalf of a deceased spouse of civil partner to allow claims to be backdated.

He stated that "whilst most of the changes might be seen as unwelcome on behalf of taxpayers, it is good to see that there are some changes which will benefit the taxpayer rather than government coffers".

Redfern added the increase in the Capital Gains Tax annual exempt amount to £11,700 as another welcome change for taxpayers. He finished by noting that one of the more significant changes, allowing HMRC to recover Self Assessment debts through PAYE income in real time, was not due to take effect until April 2019, allowing those affected a further 12 months to avoid being targeted by the change.

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