According to the Autumn Statement, income tax reliefs and capital gains tax exemption will no longer be available with effect from 1 December 2016 on any shares acquired in consideration of an employee shareholder agreement entered into on or after that date.
This will allow any individual who has received independent advice regarding entering into an employee shareholder agreement before the 23 November 2016 the opportunity to do so before 1 December (but not later).
They can still receive the income and capital gains tax (CGT) advantages that were known to be available at the time the individual received the advice.
According to the Autumn Statement, the effective date will be 2 December, where independent legal advice is received on 23 November prior to 1.30pm.
There will also be two new income tax allowances of £1,000 each, for trading and property income.
As mentioned by former chancellor George Osborne, people who let out a room via sites such as AirB&B or renting out their driveway for less than £1000 a year, will no longer have to declare or pay tax on that income.
The trading income allowance will now also apply to certain miscellaneous income from providing assets or services.
Sue Moore, technical manager at the Institute of Chartered Accountants of England and Wales, said: "It basically decriminalises what some people have been doing anyway.
"People might not bother reporting they have rented out their driveway, for example, every time there has been a match at Twickenham, so this change saves on administration for everybody."
Moreover, social investment tax relief (SITR), which investors in community and other "socially responsible" investment bonds and similar schemes have been using, will be given a boost.
From 6 April 2017, the amount of investment social enterprises aged up to seven years old can raise through SITR will increase to £1.5m.
The government has also asked the Office of Tax Simplification to carry out reviews of the VAT system and stamp duty on share transactions.
However, there are now so many changes the lower end of the tax system is "bewildering", according to Tim Stovold, head of tax at Kingston Smith.
He said: "In recent Budgets the chancellor has added to the bewildering array of minor tax reliefs for individuals.
“The personal savings allowance, the dividend allowance, the property income allowance, the trading income allowance and the transferable personal allowance for married couples and civil partners, are a few among the many.
“The complexity of the tax system is becoming so mind boggling for individuals on comparatively low levels of income that very few of these reliefs are likely to be used. It is disappointing the chancellor has made no effort to simplify the tax system for the very lowest earners.”
A table of the most recent tax changes is outlined below:
Tax | 2015 Summer Budget | Changes in 2016 Budget | Changes in 2016 Autumn Statement |
| Income tax | Personal allowance to increase from £10,800 in 2015/6 to £11,000 in 2016/7. Increases in the main rates of income tax were ruled out but the higher rate threshold from will rise from £42,385 in 2015/16 to £43,000 in 2016/17 and to £43,600 in 2017/18. | Personal allowance to rise to £11,500 in 2017/2018. Higher rate threshold will rise by £2,000 to £45,000 in 2017/18. | Gov't pledges to meet commitment to raising income tax personal allowance to £12,500 and the higher threshold to £50,000 by end of this parliament. Once it reaches £12,500, it will rise in line with CPI. |
| Pension allowance | Lifetime allowance remained at £1.25m and annual allowance at £40,000. From April 2016 there will be a taper to the annual allowance for those with adjusted annual incomes, including their own and employer’s pension contributions, over £150,000. | Lifetime Isa introduced. LTA for most people is £1m in the tax year 2016-17.
| No changes announced to pensions allowance. Money Purchase Annual Allowance will be reduced to £4,000 from April 2017. From 6 April 2018, the government still intends to index the standard Lifetime Allowance annually in line with CPI. |
| Capital gains tax | Rates unchanged but the government said it would stop investment fund managers from using tax loopholes to avoid paying the correct amount of capital gains tax on the profits of the fund payable to them. | From 6 April 2016, higher rate of CGT will be reduced from 28% to 20%. The basic rate of CGT will be reduced from 18% to 10%. Entrepreneurs’ relief will be extended to long-term investors in unlisted companies. This will provide 10% rate of CGT for gains on newly issued shares in unlisted companies bought on or after 17 March 2016. | Tax advantages linked to employee shareholder status will be abolished for arrangements entered into on, or after, December 2016. |
| Bank levy | A phased reduction of the bank levy rate was announced, from 0.21% to 0.18% from January 2016, 0.17% from January 2017, 0.16% from January 2018, 0.15% from January 2019, 0.14% from January 2020 and 0.1% from January 2021. | No changes. | Bank levy charge will be restricted to UK balance sheet liabilities from 1 January 2021. |
| A tax on banking sector profit from 1 January 2016, set at 8%. | |||
| Inheritance tax | A transferable nil-rate band will be introduced from April 2017. This will apply when a main residence is passed on death to direct descendants. | Government will legislate to charge IHT on all UK residential property indirectly held through an offshore structure, from 6 April 2017. | |
| The allowance will be up to £100,000 in 2017/18, up to £125,000 in 2018/19, up to £150,000 in 2019/20, and up to £175,000 in 2020/21. | Gov't confirms that from April 2017, IHT will be charged on UK residential property when held indirectly through an offshore structure. | ||
| There will be a tapered withdrawal of the main residence nil-rate band for estates with a net value of more than £2m. The existing nil-rate band will remain at £325,000 from 2018/19 until the end of 2020/21. | |||
| Corporation tax | The government will reduce the corporation tax rate from 20 per cent to 19 per cent in 2017 and 18 per cent in 2020. | Rate of corporation tax will be cut to 17 per cent by 2020. | Gov't pledges to uphold the 17 per cent cut and reduce burden of business rates by £6.7bn over next five years. |
| Tax on savings interest | From April 2016 the government will remove the Dividend Tax Credit and replace it with a new tax-free Dividend Allowance of £5,000 a year for all taxpayers. | Isa allowance to rise from £15,240 to £20,000 in April 2017. | Isa allowance rises will be as outlined by George Osborne in his Spring Budget in 2016. |
| Combined with the personal savings allowance, from April 2016 individuals can receive up to £17,000 of income a year tax-free, and separately invest up to £15,240 a year through an Isa tax-free. | Any adult under 40 can open a new Lifetime Isa, saving up to £4,000 each year with a £1,000 government bonus | ||
| Dividend tax rates set at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers. | Tax rules will be changed on Oeics, authorised unit trusts, investment trusts and peer to peer loans. This means income tax deductions on interest will no longer be payable from April 2017. | Gov't is to equalise tax treatment between offshore and onshore funds. | |
| Isa savings of deceased will benefit from tax advantages during the administration of their estate. |
