Autumn Budget 2018.

Philip Hammond announced that the “era of austerity is finally coming to an end but discipline will remain”. There was welcome news for many businesses in his second Autumn Budget. 

We have highlighted below some of the main headlines.

Personal tax 

  • Increase personal allowances to £12,500, and the higher rate threshold to £50,000 will be implemented from April 2019, which is one year earlier than proposed. 
  • The government has announced that for 2019/20 the basic rate band will be increased to £37,500 so that the threshold at which the 40% band applies is £50,000 for those who are entitled to the full personal allowance. The additional rate of tax of 45% remains payable on taxable income above £150,000.

Tax on dividends

In 2018/19 the first £2,000 of dividends are chargeable to tax at 0% (the Dividend Allowance). The Dividend Allowance will remain at £2,000 for 2019/20. Dividends received above the allowance are taxed at the following rates:

  • 7.5% for basic rate taxpayers
  • 32.5% for higher rate taxpayers
  • 38.1% for additional rate taxpayers.

Dividends within the allowance still count towards an individual's basic or higher rate band and so may affect the rate of tax paid on dividends above the Dividend Allowance.

National Living Wage (NLW) and National Minimum Wage (NMW)

Following the recommendations of the independent Low Pay Commission (LPC), the government will increase the NLW by 4.9% from £7.83 to £8.21 from April 2019.

BUINESS TAX

HMRC is phasing in its landmark Making Tax Digital (MTD) regime, which will ultimately require taxpayers to move to a fully digital tax system. Regulations have now been issued which set out the requirements for MTD for VAT. Under the new rules, businesses with a turnover above the VAT threshold (currently £85,000) must keep digital records for VAT purposes and provide their VAT return information to HMRC using MTD functional compatible software.

Corporation tax rates

Corporation tax rates have already been enacted for periods up to 31 March 2021.

The main rate of corporation tax is currently 19% and will remain at this rate for next year. The rate will fall to 17% for the Financial Year beginning on 1 April 2020.

  • Entrepreneurs’ relief 
    Qualifying ownership period has been extended from 12 months to two years. Transitional rules will apply where the claimant’s business ceased before 30 October 2018. 

    Annual investment allowance

  • Businesses will now enjoy a higher AIA of £1,000,000 for the two years beginning January 2019, this should encourage capital investment. 
     
  • Research and development
    Refunds arising from research and development claims will be restricted to the PAYE paid by the company. This will restrict the benefit of R&D claims by companies that do not have employees. 
     

Protecting taxes in insolvency

  • From April 2020, HMRC will have greater priority to recover taxes paid by employees and customers. The changes appear to be mainly targeted at the distribution of funds to financial institutions as creditors. The rules will remain unchanged for taxes owed by the business and HMRC will remain below other preferential creditors such as the Redundancy Payment Service

IR35
The new IR35 rules will not be introduced to the private sector until April 2020 and it will only affect large and medium sized businesses. This will bring the private sector into line with the current public sectors rules.

Property tax
The main residence relief will be restricted. The final qualifying period of ownership will be reduced to nine months.

SDLT
Extension of SDLT exemption for joint first time buyers acquiring a property of up to £500,000. This measure is retrospective and first time buyers in this position may be able to claim a refund.

VAT
The VAT registration threshold will be maintained until 2022.