- Currently, all landlords are able to claim a deduction against rental income for mortgage interest and other finance costs. From April 2017 there will be a phased change so the tax deduction of mortgage interest and other finance costs will be limited to the basic rate (20%) for non-corporate landlords.
- From 1 April 2017, the Substantial Shareholding Exemption (SSE) conditions will be relaxed. The main change removes the trading condition for the selling company (investing company). This means a disposal made by a company (e.g. the holding company of a trading company or an existing Family Investment Company) of its only qualifying investment could now benefit from the SSE without the need to liquidate the company. To qualify for the SSE, the investee company must continue to be a trading company, or a holding company of a trading group prior to the disposal.
- From June 2017 there will be a new reporting requirement for trusts. The trust register will record details of trustees, settlors and beneficiaries. It will apply to trusts with a UK tax consequence (so it may include non UK trusts with a UK tax liability) but will not be open to the public.
- The Government is to consult on bringing all non-UK resident companies receiving taxable income from the UK into the corporation tax regime in order to align the tax treatment of non-UK resident companies with UK companies. This would, for example, be relevant to non-UK resident landlords owning UK property.
- The introduction of Making Tax Digital (MTD) will lead to a fundamental change for all individuals in how they interact with HM Revenue and Customs (HMRC) and comply with their obligations. UK individuals already have access to their own Personal Tax Account enabling them to see their tax information online and through which they can communicate with HMRC. Individuals with a turnover of more than £10,000 from an unincorporated business or from rent will need to update HMRC every quarter and it is expected that this will apply from 2018. However, following recent consultation, this threshold may change. From April 2017 there will be changes to the cash basis for businesses and an extension of it to property businesses with the turnover limit being set at £150,000.
- The Government is consulting on changes to the allocation and reporting of taxable profits of partnerships. Changes to the tax reporting for partnerships aim to enable information to be more easily linked to individual partner’s Digital Tax Accounts. Overall these changes may be more administratively complex for partnerships particularly for those structures involving tiers of partnerships. A partnership at the bottom of a structure will need to know who its ultimate partners are and also how its profits are shared between those ultimate partners.
- The annual allowance for pensions savings for those with pensions already in drawdown will be reduced from £10,000 to £4,000 from April 2017. This reduced annual allowance is designed to prevent pension savers from re-cycling funds that they have already drawn from their pensions.
- From April 2017 the tax treatment of distributions from foreign pensions plans received by UK-resident individuals will be more closely aligned with the tax regime for UK registered pension schemes. This will remove certain beneficial reliefs that were previously available.
Jane Crotty. Director, Private Client
Simon Johnson. Director, Private Client