Is the snap election a taxation godsend?
The Government has rushed through the Finance Bill 2017 with only four hours of debate, due to the decision to hold a General Election. How has the limited timeframe affected the legislation? Emma Woods highlights some of the provisions that have been dropped.
You may have heard about HMRC’s attempt to make the filing of tax information and returns more efficient under the banner of ‘Making Tax Digital’ or MTD. The idea is that by uploading income and expenditure via cloud-based software or apps, the submission of information would become faster and easier.
The initiative, however, has now been subject to delay. Initially scheduled to affect large businesses from April 2018 and the self-employed and landlords, with income in excess of £10,000, from April 2019, the plans may now be being put off. The introduction of MTD has been controversial and the delay may allow HMRC to consider the likely consequences.
Many taxpayers would have been disappointed by the recent Budget announcement of the reduction in the dividend allowance from £5,000 to £2,000, which was due to take effect from 6 April 2018. This would have reduced the potential tax-free income to £14,500 and given some tax payers an additional bill of £150. However, lack of time to debate this in the Finance Act has meant that the £5,000 allowance has been retained.
Also disappearing are the-tax free trading and rental allowances for those self-employed individuals and landlords whose total income is less than £1,000. Had these measures been passed, then they would have taken out of tax those individuals who, for example, trade on eBay or householders who let out their drives.
Since April 2015, the Money Purchase Annual Allowance (MPAA) – an annual allowance of £10,000 in respect of money purchase pension contributions – has applied to individuals who have flexibly accessed their pension benefits. Its introduction was to ensure there are no potential recycling issues, with individuals claiming further tax relief on any new contributions made, having just accessed pension benefits under the new flexible arrangements. It was intended to reduce this allowance to £4,000, but that proposal has been scrapped.
Legislation that would have seen IHT chargeable on all UK property, regardless of ownership structure and affecting all non -UK domiciled individuals, has also avoided ending up on the statute book.
If you’re celebrating at any of delays described above, it’s likely that your elation will be short-lived. You should be prepared for some – or all – of these provisions to re-appear in future legislation.