The Autumn Statement was delivered by George Osbourne on the 25th of November. This speech looked at not only a spending review of the Countries finance but also some big tax changes were announced. So we are going to explain some of the big tax changes which were announced:
Online Tax Accounts and the death of the annual tax return
It was announced by the government recently that they are planning to phase out the annual tax return for the self-employed and replace it with a live up to date online account.
When this was announced there was not very much information as to the details of this. However in the Autumn Statement it was revealed that you will be able to use free apps alongside an online account.
This tax account will have to be kept up to date each quarter. This means that for the self-employed you will have to input your income and expenses once per quarter instead of once per year.
If you are an employee under PAYE or receive a pension income you will not need to have an online tax account.
Essentially it is digitising your tax return and making the information much more up to date. We still don’t know whether this will mean that your tax will be paid quarterly or not yet.
Tax credits are a benefit for people who are on a low income which aims to top up their earnings. In the summer budget it was announced that the amount of tax credits given out to families was going to be cut with savings of £4.4bn estimated.
George Osbourne lost a key vote in parliament on tax credits and as a result he announced a U-turn on the proposed reductions in tax credits.
As a result families which were now expecting yearly cuts of up to £1,200 will no longer face that loss of annual income.
A Hint to Salary Sacrifice Changes
Many of you will be familiar of the salary sacrifice scheme where you receive child care vouchers or have a bike on the cycle to work scheme. Under salary sacrifice the amount you are sacrificing (e.g. £100 childcare vouchers) are deducted from your salary before the tax is paid.
No changes were actually announced in the Autumn Statement but the Government warned that they were concerned about salary sacrifice and are considering possible changes.
Capital Gains Tax Time Limit Changes
Capital gains tax is a charge on the profits you make when you sell something, such as a business, shares or a rental property).
Any capital gains or losses your make are currently reported on your tax return. This means you have from the end of the tax year until the 31st of January to report and pay any gains which arise.
The change announced in the Autumn Statement relates to the sale of investment properties. Under the change you will now have 30 days in order to pay the capital gains tax over to HMRC instead of waiting up to 10 months.
Stamp Duty Changes
Yet another changes was announced to make owning rental properties more expensive from a tax perspective.
From April 2016 any new investment properties or second homes purchased which cost more than £40,000 will be subject to higher rates of Stamp Duty Land Tax.
Any new property purchased will be subject to a 3% stamp duty surcharge. Effectively this means that for properties valued between £125,000 to £250,000 the taxes charged will increase from 2% to 5%.
This is a double blow for property investors as they are paying more in tax and also any gains will also have to be paid sooner.