Hard to believe it’s 12 months already since George Osbourne delivered the ground-breaking 2016 budget, complete with its not-at-all-embarassing disability benefit u-turn. What goodies does Philip Hammond have in store for us this year? More importantly, how will they affect your clients’ cash flow?
If you really want to do so, you can check out the speech in full, or find the headline tax and rate changes here. As ever, we at Prestwood have been working hard to save you from having to pore over HMRC technical documents. As soon as you install our Budget Update, you and your clients will benefit from the latest tax rates and allowances. You may also notice a couple of previous budget promises, which are going live this April.
Inheritance Tax relief on family homes:
Phase 1 of the Government’s plans for IHT relief on family homes comes into play this year.
The “residence nil-rate band” is worth £100,000 per person, when passing on a main residence. This is in addition to the normal £325,000 allowance.
As a result, each individual can pass up to £425,000 without paying IHT, providing this includes the family home, and isn’t passed via a discretionary trust.
The allowance will increase by £25,000 each year, up to £175,000 by April 2020. This will give each person a £500,000 allowance; £1m for a couple. On first death, any unused allowance will pass to the surviving spouse or civil partner.
Estates worth £2m will see the additional band tapered so they lose £1 for every £2 over the threshold.
In Prestwood, you’ll see a line stating “Less Residence nil-rate band” in your client’s IHT calculation.
Scottish Rates of Income Tax:
If you have a client who is resident in Scotland, you can tick the option to “Use Scottish rate of Income Tax” in their Personal Details in Prestwood. This will apply the Scottish tax bands and rates to both client and partner.
This change is on a per-client basis. By default all clients will continue to use UK Income Tax rates.