Trick or Treat | The Autumn 2018 Budget
In this Budget to "end austerity", the government aims to "deliver a more competitive tax regime for businesses" and create a "fair and sustainable tax system". In Philip Hammond's speech he joked that he avoided a Halloween Budget so it wouldn't be labelled as '"Hammo's House of Horrors".
Let's weigh up the treats and tricks, and take a closer look at the 2018 Budget. We will cover the key changes in the Chancellors’ speech and outline the main tax implications for you.
WITH IMMEDIATE EFFECT FROM 29 OCTOBER 2018
Effective, and back dated to 22 November 2017, there is a Stamp Duty Land Tax exemption for first time buyers of qualifying shared ownership property worth up to £500,000. Separately, there will be a consultation on an SDLT surcharge of 1% for non-residents buying residential property, no doubt to recover the loss.
A new Structures and Buildings Capital Allowance has been introduced at a rate of 2% per annum on new commercial structures and buildings where contracts for physical construction are entered into on or after 29 October 2018.
To qualify for Capital Gains Tax Entrepreneurs’ Relief shareholders must now be entitled to at least 5% of the distributable profits and net assets of the business. This is in addition to the current requirement of 5% of the share capital and voting rights.
FROM 1 JANUARY 2019
The maximum that can be claimed under the Annual Investment Capital Allowance is to increase from £200,000 to £1,000,000 per annum for two years. You may consider delaying major works until this date to gain 100% write off against your business profits in the accounting period of acquisition if you anticipate spending more than £200,000 on qualifying expenditure.
FROM APRIL 2019
The tax free personal allowance for individuals is to rise by £650 to £12,500 and the higher rate threshold is to increase to £50,00 from 6 April 2019. This will result in more income being taxed at the basic rate, including dividends, thus saving tax.
There will be a reduction in the rate of the special pool writing down allowance from 8% to 6% for businesses claiming Capital Allowances. The most common impact will be to reduce the tax relief available on many cars.
The minimum qualifying holding period for investments eligible for Capital Gains Tax Entrepreneurs’ Relief is to increase to 24 months from 12 months, in addition to the existing rules.
The National Minimum Wage will increase from £7.83 to £8.21.
The Lifetime Allowance on pensions is increasing to £1.055m in line with inflation.
The Capital Gains Tax allowance will increase by £300 to £12,000.
FROM APRIL 2020
Landlords will suffer again. The Capital Gains Tax Lettings Relief is to be reformed such that it only available to those who are in shared occupancy with a tenant. Lettings relief currently provides up to £40,000 of relief per person to those who let out a property that is, or has been, their main residence.
In addition, for Capital Gains Tax Principal Private Residence relief, if a property has at some point been owner occupied and is subject to CGT, the final period of exemption available will reduce from 18 months to 9 months.
The IR35 rules are to be applied to workers who provide services through their own personal service company to another business. If they would otherwise be deemed as an employee, the engager will be responsible for deducting income tax and Class 1 national insurance at 12%, as if they were paying an employee. The new policy will only apply to medium and large company engagers in the private sector, as this already applies in the public sector.
OTHER KEY POINTS
The VAT registration threshold will remain at £85,000 and is frozen until 2022.
The Corporation tax rate reduction to 17% will remain in place from 2020.
No change to pensions tax relief allowances.
If you have any questions, please get in touch with the team here at FUSE.