Autumn Budget 2018 - How it Affects you

autumn budget 2018 philip hammond

30 October 2018 09:35

The Chancellor kicked off his Budget speech with a promise of a “budget for Britain’s future”.

After downgrading growth forecasts in his previous Budget, the chancellor has now revised the growth forecast back up. In 2020 he expects growth to be 1.4%, 1.5% in 2021 and 2022 and 1.6% in 2023.

He has also announced he expects borrowing to be £11.6bn lower than forecast in his Spring Statement, falling to £19.8bn in 2023-24.

In what is certain to please the public, Mr Hammond referred to the already announced £20.5bn increase for the NHS over the next 5 years.

So, what were the main Tax announcements?

Off-payroll workers (IR35)

The government will extend the rules introduced in the public sector to the private sector as from April 2020. Responsibility for operating off-payroll working rules will move from individuals to the organisation, agency or other party engaging the worker.

Small organisations will be exempt (but we wonder if eventually this will be extended too), and HMRC have said they will provide support and guidance to medium and large organisations.

There is no confirmation of what is a medium or large business, so please watch this space as we will update once the consultation has taken place.

Income Tax / National Insurance

Personal Allowance

The personal allowance will rise to £12,500 in April 2019, and the higher rate threshold will increase to £50,000.

This is a year earlier than anticipated, and will be maintained at that level in 2020/21, and increase in line with CPI thereafter.

Those with earnings over £100,000 will continue to lose £1 of their personal allowance for every £2 of earnings over £100,000 (effectively taxing the income at 60%).

Scottish tax rates and allowances will be announced in the Scottish Budget in December.

National Insurance

As previously announced in September, the government will not abolish Class 2 NIC.

Capital Gains Tax

Annual Exemption

The annual exemption will increase to £12,000 from 6 April 2019.

Entrepreneur’s Relief

The minimum period throughout which the qualifying conditions must be met will be increased from 12 months to 24 months, as from April 2019.

Principle Private Residence

The government will consult on the reform of lettings relief (worth up to £40,000) so that it only applies in circumstances where the owner of the property is in shared occupancy with the tenant. The final period exemption will be reduced from 18 months to 9 months. Any implementation of this will happen in April 2020.

Corporation Tax

Digital Services Tax

Clearly aimed at businesses such as Google, Facebook, etc, as from April 2020, the government will introduce a new 2% tax on the revenues of certain digital businesses, to ensure that the amount of tax paid in the UK reflects the value they derive from the UK people.

The tax will apply to revenues:

  • Generated from the provision of search engines, social media platforms, and online market places.

  • Apply to revenues from those activities, subject to a £25 million per annum allowance

  • Only apply to groups that generate global revenue from these activities in excess of £500m per annum

The Government is to consult on the design and implementation of the new system.

Corporate Capital Loss Restriction

To ensure large companies pay tax when they make significant capital gains, the government will bring the tax treatment of capital losses into line with the treatment of income losses. From 1 April 2020, the government will restrict the proportion of the annual capital gains that can be relieved by brought forward losses to 50% (with an allowance that gives companies unrestricted use of losses up to £5m).

Research & Development

As from 1 April 2020, the amount of R&D tax credit that a loss making company can receive will be restricted to 3 times the company’s total PAYE and NIC liability for the year, effectively capping the potential relief. This is due to the fact HMRC are of the opinion that SME’s are abusing the current system, with companies being set up to claim the cash but having no legitimate R&D.

Employment Tax

National Living Wage

The National Minimum and Living wage will increase from April 2019, as follows:

  • £8.21 per hour 25yrs and over

  • £7.70 per hour 21-24 yrs old

  • £6.15 per hour 18-20 yrs old

  • £4.35 per hour 16-17 yrs old

  • £3.90 per hour apprentices under 19, or in first year of employment

Employment Allowance

In his opinion, the Chancellor stated that the £3,000 employment allowance provides no incentive to large employers to recruit staff. As a result, as from April 2020, the £3,000 allowance will be available to those employers with an NIC bill of £100,000 or less.

Van & Car Benefits

The flat-rate van benefit charge will increase to £3,430 as from April 2019.

The flat rate van fuel multiplier will increase to £655.

The multiplier for the car fuel benefit charge will increase to £24,100.

Employers NIC on Termination Payments

Changes to employer’s NIC on termination payments in excess of £30,000 will be delayed again, until April 2020.

Business Rates

In order to help the high street, the government is cutting the business rates of retail properties with a rateable value of £51,000 by one-third, for 2 years as from April 2019.

A 100% business rate relief for all public lavatories will also be introduced as from 2020/21 in a bid to keep local amenities open.

VAT

The VAT registration turnover threshold will remain at £85,000 until April 2022.

The possible use of VAT groups will also be extended from April 2019, to include certain non-corporate entities such as partnerships, sole traders, etc.

Capital Allowances

Annual Investment Allowance

In a bid to support business investment, the Annual Investment Allowance will be increased for 2 years, from £200,000 to £1m. This increase will take place as from 1 January 2019.

As was the case with previous increases, the AIA will be apportioned for accounting periods straddling the 1 January 2019, with possible restrictions that may apply to the unwary.

Structures and Buildings Allowances (SBA)

New non-resident structures and buildings will be eligible for a 2% (i.e. over 50 years) capital allowance where all the contracts for the construction works are entered into on or after 29 October 2018, aimed at addressing a significant gap in the capital allowance regime.

In order to make a claim, the claimant must have an interest in the land on which the structure/building is.

Claims for integral features and fixtures are unaffected and will continue to qualify for AIA.

Special Rate Reduction

From April 2019, the capital allowances special rate for qualifying plant & machinery, cars with co2 emissions over 110g/km, long life assets will be reduced from 8% to 6%. Please note however that they will continue to qualify for AIA.

Stamp Duty Land Tax

In another move to help first time buyers, the government will extend first time buyers relief so that all qualifying shared ownership property purchasers can benefit. This relief will be backdated for any qualifying transactions since 22 November 2017.

The government will also consult on introducing a surcharge of 1% on non-residents purchasing residential property in England and Wales.

Welfare

Universal Credit

“Universal Credit is here to stay” announced the Chancellor, and will continue to be rolled out, replacing existing benefits such as Tax Credits, Housing Benefit, Employment & Support Allowance, etc.

In a response to well documented issues, an additional £1bn funding has been made available to aid the transition.

It was also announced claimants will be able to earn an extra £1,000 per annum before their benefit is restricted,

Worried how the Budget will affect you? Then why not get in touch with one of our tax specialists?

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