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LBW - Autumn Budget 2018

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Philip Hammond today delivered his Autumn Budget.

As the Prime Minister had previously announced at the Conservative Conference, ‘Austerity is coming to an end’. Today’s budget speech included a multitude of plans to provide funding for the NHS, Counter-Terrorism, and Defence amongst others. The Chancellor also announced substantial sums to be spent on Education, Health and Housing in Scotland, Wales and Northern Ireland. 

The majority of the announcements in the Budget speech related to spending primarily for the matters referred to above and the tax raising matters where quite limited in number as you will see below. 

We are as usual detailing below some of the more salient taxation features which we believe will be of interest to you.

Personal Taxes, National Insurance and Pay

  • Due to improvements in the economy, personal allowances are to rise to £12,500 in 2019/2020 which is 12 months earlier than was originally planned. Furthermore, the threshold at which higher rate tax commences will increase to £50,000 by 2019/2020 again, 12 months earlier than originally anticipated.
  • The new National Living Wage for the over 25’s will rise to £8.21 from April 2019 whilst there will be increases in the National Minimum Wage as follows;
Year 21 to 24 18 to 20 Under 18 Apprentice
From April 2019 £7.70 £6.15 £4.35 £3.90
  • There were no specific announcements regarding any changes in National Insurance limits and levels and consultation on the reform of the National Insurance system is ongoing.
  • The restrictions that were announced in respect of the £3,000 Employment Allowance will only affect businesses with an Employer National Insurance liability in excess of £100,000 in the previous tax year. This change will come into effect from April 2020.
  • Whilst in the majority of cases, the disposal of a main domestic residence is exempt from Capital Gains Tax; there will be circumstances where the property in question has been let. The valuable additional relief granted by Lettings Relief will be restricted from April 2020 so that it only applies in circumstances where the owner of the property is in shared occupancy with the tenant. Furthermore, the exempted final 18 months of ownership for Private Residence Relief, where claimed, will now be reduced to 9 months.

Off-payroll Working Rules

  • As anticipated, the regulations introduced in April 2017 for individuals working for public sector bodies through their own Limited Company will now be mirrored in the Private Sector from April 2020. Small organisations will be exempt, minimising administrative burdens for the vast majority of engagers, and HMRC will provide support and guidance to medium and large organisations ahead of implementation.

Business Taxes

  • The Chancellor has made no changes in the rate of corporation tax which is currently at 19% and will reduce down to 17% by 2020.
  • The announcement regarding VAT was the freezing of the £85,000 VAT registration threshold for a further two years until 2022. 
  • The government will increase the Annual Investment Allowance to £1 million for all qualifying investment in plant and machinery made on or after 1 January 2019 until 31 December 2020, to help stimulate business investment.
  • A new non-residential structures and buildings allowance will be available for 2% of the cost of the structure providing all the contracts for the physical construction works are entered into on or after 29 October 2018. 
  • The Chancellor announced a technical change to Entrepreneurs Relief. To support longer-term business investments, from 6 April 2019 the minimum period throughout which the qualifying conditions for relief must be met will be extended from 12 months to 24 months.
  • From 1 April 2020, the amount of payable Research & Development tax credit that a qualifying loss-making company can receive in any tax year will be restricted to three times the company’s total PAYE and NICs liability for that year.

Digital Businesses and The High Street

  • 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 is reflective of the value they derive from their UK users.
  • This will provide a boost for small businesses to make them more competitive and they will also benefit from a reduction in business rate bills by up to a third for the two years from April 2019.

And finally...

As we have always maintained, with all matters referred to in the Chancellors announcements the “devil will be in the detail” and the full impact and understanding of all the announcements will not be made clear until the full parliamentary process has been undertaken and the proposals become law in the relevant finance act. We will issue further notices should any matters of significance be announced. 

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