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October 2018 Budget highlights

This week Philip Hammond delivered his Autumn 2018 budget.  We would like to share with you the key points arising that are likely to impact our clients.

Personal and property taxes

  • From April 2019, a year earlier than planned, the personal allowance will increase from £11,850 to £12,500, and the higher rate tax threshold from £46,350 to £50,000.
  • From April 2019 the upper limit for national insurance contributions will increase from £46,350 to £50,000. That means that the 20% saved from the increase in the higher rate income tax threshold, will be reduced by this change.
  • Entrepreneur’s relief: The minimum period throughout which the qualifying conditions for this relief must be met is being extended from 12 months to 24 months from April 2019.
  • Lettings relief is applied to capital gains tax arising on the sale of buy-to-let properties that were previously occupied by the owner at any point. From April 2020 this relief will be restricted and will only be available to those sellers who are in shared occupancy with a tenant at the time of sale.
  • Principal private residence relief will be restricted from April 2020. It can currently be claimed on the final 18 months of ownership regardless of whether the property was still occupied by the owner.  This period is being reduced to 9 months.

Business taxes

  • Contractors – IR35. The rules for off-payroll working that were introduced to the public sector in 2017 will be extended to the private sector from April 2020.  This means that medium-sized and large companies will become responsible for determining whether contracts fall inside or outside IR35.
  • From April 2020 the £3,000 Employment Allowance is being restricted so as to apply to only those employers with an employers national insurance bill of less than £100,000.
  • From 1 April 2020, the amount of payable R&D 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.
  • The Annual Investment Allowance will be increased from £200,000 to £1 million for 2 years from April 2019.
  • From 29 October 2018, new non-residential buildings and structures will be eligible for a 2% capital allowance. This applies to construction projects where all contracts for works are entered into on or after 29 October 2018.
  • The special rate for capital allowances (includes the rate applied to higher emission cars) will be reduced from 8% to 6% from April 2019.
  • Small retail business with a rateable value below £51,000 will see their rates bill reduced by a third from April 2019. This is intended to benefit 90% of independent shops, pubs and restaurants.

VAT

  • The VAT registration threshold has been frozen at £85,000 until April 2022. The Chancellor has announced that they will be consulting on reforming the threshold rules with a view to introducing a “smoothing mechanism” for businesses approaching the threshold.

If you have any queries arising from any of the changes announced, please do not hesitate to get in touch.  Call us on 01257 263015.

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