Our Thoughts on the Autumn Budget 2018

On Monday 29 October 2018 Philip Hammond delivered his 3rd Budget as chancellor, he stated the "era of austerity is finally coming to an end".

In his speech lasting more than 80 minutes, Mr Hammond said "we have reached a defining moment on this long, hard journey" after repairing the damage to the public finances.

Budget Breakdown

Corporate Tax:

  • The Annual Investment Allowance (‘AIA’) will increase from £200,00 to £1 million for plant and machinery purchased from 1 January 2019 until 31 December 2020
  • New non-residential structures and buildings will be eligible for a 2% capital allowance
  • Special rate capital allowances for qualifying plant and machinery assets will be reduced to 6% from 8%
  • Enhanced capital allowances will be abolished from April 2020
  • A digital services tax of 2% on revenue will be introduced from April 2020 for larger corporates
  • Corporate capital loss restriction will be introduced for larger corporates
  • R&D tax relief for small and medium sized companies - From 1 April 2020, the amount of payable R&D tax credit that a loss making company can receive is restricted to three time the company’s total PAYE and NICs liability for that year

Employment Services:

James Hunt, said: "Apart from the up-front giveaway for employees in respect of increases to personal allowance and basic rate tax band the Budget was more about what didn’t happen in the employment tax sphere.

The implementation of off-payroll working into the private sector will happen although not until April 2020, with small companies exempt from the regime. This will allow those impacted more time to make essential and significant changes to policies and procedures for the consideration and management of contractor engagements. There was no obvious commentary in relation to the Employment Status consultation issued in February 2018 on the back of high profile cases such as Uber, other than a comment hidden away that “the Government will publish its response to the consultation in due course”, so watch this space."

Other changes announced: 

  • NLW/NMW – rates from April 2019:

Band

Current Rate

New Rate - for pay reference periods beginning on or after 1 April 2019

25 and above

£7.83

£8.21

21 – 24

£7.38

£7.70

18-20

£5.90

£6.15

16-17

£4.20

£4.35

Apprentices (under 19 or in first year)

£3.70

£3.90

Accommodation offset (daily rate)

£7.00

£7.55

 

  • Employment allowance – from April 2010, restricted to companies with employer NIC of less than £100,000 in the previous tax year
  • Van and fuel benefit – from April 2019, increase to £3,430 and £655 respectively (from £3,350 and £633)
  • Anti-avoidance – several measures announced or clarified:
    • Short Term Business Visitors – from April 2020, eligibility to be widened and deadline for reporting and paying tax extended
    • Car fuel benefit – from April 2019, private fuel multiplier will increase to £24,100 (from £23,400)
    • Tax abuse and insolvency - directors and other persons involved in tax avoidance, evasion or phoenixism will be jointly and severally liable for company tax liabilities, where there is a risk the company may deliberately enter insolvency (from Royal Assent of Finance Bill 2019-20)
    • International tax enforcement: disclosable arrangements – new legislation to be enacted to allow the introduction of international disclosure rules about offshore structures that could avoid tax, or could be misused to evade tax
    • Protecting your taxes in insolvency – From 6 April 2020, when a business enters insolvency, more of the taxes paid in good faith by its employees and customers, and temporarily held in trust by the business, will go to fund public services rather than being distributed to other creditors.

Personal Tax:

  • Personal Allowance to increase to £12,500 from April 2019, then frozen for 2020/21 tax year. Thereafter scheduled to increase by CPI
  • Higher Rate (40%) Tax threshold to increase to £50,000 from April 2019, then frozen for 2020/21 tax year
  • Entrepreneur’s Relief rules amended to require, from April 2019 the qualifying criteria will need to have been met throughout 24 months compared to 12 months at present
  • Entrepreneur’s Relief anti avoidance rule with immediate effect from 29 October 2018 requires that shareholders must also be entitled to at least 5% of the distributable profits and net assets of a company to claim the relief
  • Capital Gains Tax Private Residence Relief period of ‘deemed occupation’ prior to sale is reduced from 18 months to 9 months from April 2020. Lettings relief will be restricted to properties where the owner is in shared occupancy with the tenant
  • SDLT relief for first time buyers of shared ownership properties up to £500,000, with effect from 29 October 2018 and also backdated to 22 November 2017 for qualifying buyers since then

Kevin Lloyd-James, Senior Tax Manager said: "Anti avoidance measures remain an important priority with an intention to raise £2bn over the next five years. Changes to Entrepreneur’s Relief were announced but also in the detail a further amendment with immediate effect is that smaller shareholdings which do not qualify the holder for 5% of the company’s profits and net assets will not qualify for the relief."

Need further assistance?

Give us a call if you would like to discuss this further on 0800 298 3899 or complete our enquiry form

comments powered by Disqus