Chancellor Philip Hammond delivered his Budget speech and amongst disagreeing with Jeremy Clarkson that electric cars and then driverless cars are the future (so Jeremy being snubbed by May and Hammond) the Chancellor aimed to deliver his vision of a prosperous, modern outlooking Britain.
However, not a budget for business as very few announcements were made that will have a significant impact on businesses.
This is the first Budget in the new annual tax policy making cycle. It is the government’s aim to provide greater tax certainty for households and businesses by consulting with taxpayers further in advance of changes and changing taxes less frequently.
So what do today’s announcements mean for you and your business?
Budget update for individuals
Personal Allowance and higher rate threshold increase
The income tax personal allowance; the amount you can earn before paying tax will increase from the current level of £11,500 to £11,850 in 2018/2019 – £227.88 per week.
The higher rate threshold will also increase from the current level of £43,000 to £46,350 in 2018/2019 – £891.35 per week.
The Chancellor has previously pledged the government is committed to increasing the personal allowance to £12,500 and the higher rate threshold to £50,000 by 2020.
Finance costs restriction for landlords
No mention was made of any changes to the current phased introduction of finance cost restrictions for landlords introduced from 6 April 2017. Therefore, this is anticipated to be introduced as planned with the current 25% restriction increasing to 50% in 2018/2019.
Mileage rates for landlords
The government will extend the option to use mileage rates to individuals operating property businesses.
Marriage Allowance
The government will now allow claims for the marriage allowance in cases where a partner has died before the claim was made. These claims will be able to be backdated by up to 4 years.
The Marriage Allowance allows taxpayers to transfer up to 10% of their unused personal allowance to their partner, reducing their tax bill by up to £237 a year in 2018/2019.
Capital Gains Tax
The introduction of the 30-day payment window between a capital gain arising on a residential property and payment previously announced will be deferred until April 2020.
Individual Savings Accounts (ISAs)
The ISA annual subscription limit for 2018/2019 will remain unchanged at £20,000. The annual subscription limit for Junior ISAs and Child Trust Funds for 2018/2019 will be increased from £4,128 to £4,260.
Lifetime allowance for pensions
The lifetime allowance for pension savings will increase in line with Consumer Price Index (CPI), rising to £1,030,000 from £1,000,000 for 2018/2019.
Budget update for those in business
Self-employed:
National Insurance contributions (NICs)
The abolition of Class 2 NICs as previously announced is to be delayed by one year to April 2019. Class 2 NIC will therefore increase from £2.85 to £2.95 per week for those with profits over £6,205 for 2018/2019.
In addition, as previously announced, the government no longer intends to increase the main rate of Class 4 NICs from 9% to 10% in April 2018 and to 11% in April 2019.
Limited companies:
Corporation tax to 17% in 2020
No mention was made of a change to the Corporation Tax rates. The current Corporation Tax rate is 19% and the government has previously pledged to reduce this to 17% from 1 April 2020.
Corporation tax: chargeable gains
The Corporate Indexation Allowance will be frozen from 1 January 2018. Accordingly, no relief will be available for inflation accruing after this date in calculating chargeable gains made by companies.
Dividends tax
No mention was made in the budget about dividends. It has been previously announced that the Dividend Allowance currently £5,000 a year will reduce to £2,000 from April 2018.
Research & Development (R&D)
R&D expenditure credit will increase for large companies from 11% to 12% from April 2018.
Business Rates
The £1,000 business rate discount available to public houses with a rateable value of up to £100,000 in 2017/2018 will be extended to 2018/2019.
Future increases in business rates to be determined using CPI measure of inflation, not higher Retail Price Index (RPI).
Stamp Duty Land Tax (SDLT)
SDLT will be abolished immediately for first-time buyers purchasing properties worth up to £300,000. To help those in London and other expensive areas, the first £300,000 of the cost of a £500,000 purchase by all first-time buyers will also be exempt from SDLT.
This will not apply in Scotland unless the Scottish Government decides to follow the UK Government.
Council Tax
A 100% Council Tax Premium to be levied on empty residential properties.
Alcohol Duty
Duty on beer, wine, spirits and most ciders will be frozen, equating to 12p off a pint of beer and £1.15 off a bottle of whisky by April 2018.
But duty on high-strength “white ciders” will be increased via new legislation.
Fuel duty
The main rate of fuel duty for petrol and diesel will remain frozen at 57.95 pence per litre in 2018/2019. (The eighth year the duty has been frozen).
Vehicle Excise Duty
Vehicle excise duty for diesel cars that do not meet latest standards to rise by one band in April 2018.
Company cars
The Fuel Benefit Charge and the Van Benefit Charge will both increase by RPI from 6 April 2018.
National Minimum Wage rates
The National Minimum Wage rates will increase from April 2018. This includes:
- a 4.7% increase in the rate for 21 to 24 year olds (from £7.05 to £7.38 per hour)
- a 5.4% increase in the rate for 18 to 20 year olds (from £5.60 to £5.90 per hour)
- a 3.7% increase in the rate for 16 to 17 year olds (from £4.05 to £4.20 per hour)
- a 5.7% increase in the rate for apprentices (from £3.50 to £3.70 per hour)
The National Living Wage applies to workers over 25. This will increase by 4.4% from £7.50 to £7.83 an hour from April 2018.
VAT Registration Threshold
The VAT registration threshold will maintain it at the current level of £85,000 for two years from April 2018.
The Office of Tax Simplification has suggested a reduction in the threshold. In comparison Germany’s equivalent to VAT has a registration threshold of £15,600.
Other
IR35 or Off Payroll Workers
The government is to consult on potential reforms to the private sector to ensure individuals who effectively work as employees are taxed as employees even if they choose to structure their work through a limited company.
Making Tax Digital (MTD)
No business will be required to use MTD until April 2019. Only businesses with a turnover above the VAT threshold will be mandated at that point and then only for VAT obligations. The scope of MTD will not be widened before the system has been shown to work well and not before April 2020 at the earliest.
Late Submission Penalties and Late Payment Interest
The penalty system is to be reformed for late or missing tax returns, adopting a new points based approach. This however is only in consultation.
Tax Avoidance
The government has identified several areas of potential tax avoidance and abuse and will review these areas. This includes the NICs Employment Allowance, Disguised Remuneration Avoidance Schemes used by Close Companies, Profit Fragmentation, Double Taxation Relief to name a few.
