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Personal tax changes confirmed

The Summer Budget changes formally completed their progress through the legislative process and received royal assent on 18 November 2015.

We have summarised in this posting the main changes to personal tax that are now enacted:

1.The tax lock is now in place. This should prevent any increase in:

a.The rates of income tax.
b.Class 1 NICs

2.Personal allowances are set for 2016-17 and 2017-18.

3.From 6 April 2016, high income persons will have their pension deduction for tax purposes reduced. The annual allowance will be reduced by £1 for every £2 of adjusted income over £150,000. Once adjusted income reaches £210,000, the annual allowance will be reduced to a minimum level of £10,000.

4.Lump sums benefits paid on the death of a person under 75 from 6 April 2016 will generally be exempt from a deduction of tax. This will remove the 45% tax charge on lump sum benefits paid to an individual beneficiary. Lump sum benefits paid on the death of a person over 75 will generally be taxed on the recipient at their marginal rate of income tax.

5.The nil rate band for residences is confirmed for inheritance tax purposes. This will be introduced from April 2017 and will be fully enacted by April 2020. To qualify for the new allowance the property must be left to a direct descendent (this will include step children and foster children).

6.Three changes to property tax are enacted:

a.Increase in the rent-a-room allowance to £7,500 from 6 April 2016.
b.Abolition of the wear and tear allowance and introduction of a new replacement furniture relief from 6 April 2016, and
Restrictions to the tax relief that landlords will be able to claim for finance charges, including buy-to-let mortgage interest. The measure will be introduced progressively from April 2017 and be fully implemented by April 2020.