UK: Tax changes for individuals; foreign exchange rules

UK: Tax changes for individuals; foreign exchange rules

Tax professionals in the UK anticipate that the Autumn Statement, scheduled to be delivered 25 November 2015, will include measures affecting individual taxpayers, such as provisions concerning tax credits, and changes to taxation of dividends, residential property, and non-UK domiciled individuals.

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The UK government already announced that dividend income will be taxed at increased rates from April 2016. Other changes due to be effective beginning April 2016 include: 

  • Personal allowance increase
  • Income tax, a higher rate threshold increase
  • Taxation of lump sum death benefits from pensions
  • Reduced pensions annual allowance for higher earners

Foreign exchange gains and losses

Changes to the loan relationship and derivative contract rules have an effect on the taxation of foreign exchange gains and losses. 

One of the key changes to the loan relationship and derivative contract rules made in Finance (No. 2) Act 2015 is that, for accounting periods beginning on or after 1 January 2016, the starting point will be that amounts recognised in profit and loss are to be brought into account for tax purposes.  

This fundamental change affects the taxation of foreign exchange, and a number of changes to the loan relationship and derivative contract legislation are included within the Finance (No. 2) Act 2015 as a consequence. In general, the outcome of the changes is to maintain the current tax result for foreign exchange. However, the analysis has changed so careful consideration must be given to the correct ax treatment under the new rules.  

 

Read a November 2015 report [PDF 799 KB] prepared by the KPMG member firm in the UK: Weekly Tax Matters (20 November 2015)

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