The Finance Bill 2016 was given Royal Assent on 15 September 2016, so becomes the Finance Act 2016.
Key features of Finance Act 2016 include:
• Dividend taxation - The taxation of dividends was reformed from 6 April 2016, including the abolition of the 10% dividend tax credit (i.e. such that dividends are received gross) and the introduction of a dividend nil rate of up to £5,000 per tax year. Furthermore, dividend tax rates (for 2016/17) are 7.5% for individuals who are basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers, representing an increase of 7.5% on the effective rate of tax for such taxpayers compared with 2015/16.
• Capital gains tax rates - The rates of capital gains tax (CGT) were generally reduced from 6 April 2016. A CGT rate of 10% applies where an individual is not liable to income tax at the higher rate; there is also a CGT rate of 20% to the extent that the individual is a higher rate taxpayer, or chargeable gains exceed the unused part of the individual’s basic rate band. However, these rates are subject to certain exceptions (i.e. the CGT rates are 18% and 28% instead), such as in relation to chargeable gains accruing on disposals of residential property (that do not qualify for private residence relief) and carried interest. By contrast, the CGT rates for 2015/16 are 18% and 28% respectively.
• Transactions in securities etc – The anti-avoidance legislation on ‘transactions in securities’ was tightened from 6 April 2016, and the counteraction process was aligned more closely with self-assessment compliance checks. Furthermore, a new targeted anti-avoidance rule was introduced for certain company distributions in respect of share capital on a winding up, which treats such distributions from 6 April 2016 as being chargeable to income tax (as opposed to capital gains tax) if certain conditions are met.
• Stamp duty land tax - A higher stamp duty land tax (SDLT) charge was introduced (i.e. such that the rates are 3% higher than the equivalent normal residential rates for each of the SDLT bands) on the purchase of additional dwellings (e.g. second homes) costing more than £40,000, with effect from 1 April 2016.
• Inheritance tax: ‘downsizing’ - The benefit of the inheritance tax ‘residence nil rate band’ was extended in certain circumstances involving ‘downsizing’ on or after 8 July 2015, in relation to deaths from 6 April 2016
Our authors have been working hard to ensure that when you see the new editions of our titles that have been updated in line with the Finance Act, you will find clearly thought and practical guidance to help you explain these issues to your clients.