Phil Hammond began his budget 2018 stating that the “era of austerity is finally coming to an end…” and whilst there was much welcome news, there were also some less positive, many which are subject to consultation.

 

Personal Tax

• The rise in income tax allowances have been brought forward a year so that from April 2019 the personal allowance will be £12,500 (currently £11,850) and the higher rate threshold will rise to £50,000 (currently £46,350).
• Capital Gains annual exemption increases to £12k from April 2019 (currently £11,700) for individuals and to £6k (currently £5,850) for trustees.
• Main residence relief is further restricted from April 2020. Currently the last 18 months is deemed as a qualifying period of ownership but this will be reduced to 9 months of deemed occupancy. Until April 2014 it had been 36 months.
• PPR Lettings relief – consultations will be put in place to discuss shared occupancy tests for the lettings relief which property owners now receive. Currently the relief of up to £40k is available for owners who have both lived and rented out the property. The proposal is to limit the lettings relief to properties where the owner is in shared occupancy with the tenant.
• Rent a room scheme – there is still £7.5k available tax free from letting out a spare room but from April there are discussions about whether it will only be available to those living in the property for some of the letting period (see our separate post about this)
• First time buyers – no stamp duty for first time buyers of shared ownership homes worth up to £500k. This will be backdated to purchases since the last Budget.
• Help to buy – this scheme has been extended to 2023 (previously planned to cease in 2021)

 

Business Tax

• Entrepreneurs Relief – this valuable relief reduces the CGT paid on business disposals to 10% for individuals owning at least 5% of a business. From 29 October 2018 individuals must have a 5% interest in distributable profits and the net assets of the company, and from April 2019 must have owned their shares for 24 months, instead of the current 12 months.
• Annual Investment Allowance – this is increasing from £200k to £1m for the 2 years beginning January 2019, which will encourage capital investment in businesses.
• IR35 for the private sector – unfortunately this proposal is going ahead, but not until April 2020; and will only affect medium and large businesses. It is not yet known what the definition of this is, and whether there are any restrictions on the small business exemption. We understand that there will be a “further consultation on the detailed operation of the reform” which will “inform the Draft Finance Bill legislation expected to be published in Summer 2019”. Moore Accountancy will be keenly watching this area as many of our clients may fall under this.
• Employment Allowance – currently the first £3k of employers NICs is offset with an allowance, but from April 2020 this will only be available to SMEs with a NIC bill of less than £100k.
• National Living Wage – this will rise from April 2019 to £8.21 (currently £7.83) which will have an impact on our small business clients, especially those in the hospitality sector.
• Business rates could reduce by 1/3rd for retailers with a rateable value of £51k or less
• VAT threshold – this remains at £85k until March 2022, despite predictions that Phil Hammond would reduce it.

 

Other points

• Potholes – an extra £420m promised to repair these
• Fuel duty has been frozen, as has duty on beer, cider and spirits
• Potential new tax on manufacturer and import of plastic packaging which contains less than 30% recycled plastic
• £60m funding for planting trees in England
• Extra £20.5bn for the NHS over the next 5 years

The finance bill will be published on 7 November 2018, so we will revise this blog if necessary at that time.

In the meantime please contact us if there are any issues which you believe will affect you from this budget.