Posted by Nick Day on 01 Nov 2018
Budget 2018 Summary
On 29 October 2018, the Chancellor set out his budget to Parliament, stating that austerity is “finally coming to an end” as the economic outlook improves, and appearing to spread some of the potential benefits around. The budget offered little in the way of significant overhaul, largely focussing on adjustments to existing reliefs, but what were the actual changes to the UK tax environment?
Personal Taxation and Wages
- Planned increases to the income tax thresholds are being accelerated, bringing the personal tax-free allowance up to £12,500 and the higher rate threshold to £50,000 from April 2019, a year ahead of schedule. In future the two rates will rise in line with inflation.
- The lifetime allowance for pension savings will be £1,055,000 for 2019-20.
- The 0% starting rate for savings income remains at £5,000 for 2019-20.
- National Living Wage increasing by 4.9%, from £7.83 to £8.21 an hour, from April 2019.
- The benefit in kind charge for employer-provided vans will increase, through a rise in the flat-rate van benefit charge to £3,430, and the flat-rate van fuel benefit to £655. Employer-provided car fuel will also be hit through an increase in the multiplier for the car fuel benefit charge to £24,100.
Capital Gains Tax (CGT)
- The CGT annual exempt amount will increase to £12,000 for individuals and personal representatives and £6,000 for trustees of settlements for the period 2019/20 tax year.
- From April 2019, UK CGT will be extended to apply to non-residents holding any UK land (currently this only applies to UK residential land), and to disposals of entities deriving at least 75% of their value from UK land.
- The ‘Lettings Relief’ extension to Principal Private Residence (PPR) relief for periods where the property is let will be limited to properties and periods where the owner is in shared occupancy with the tenant from April 2019.
- In addition, the final 18 month period of deemed occupancy for PPR relief will also be reduced to the final 9 months of ownership.
- The qualification period for Entrepreneurs relief (which gives a reduced 10% rate of CGT on disposal of a business) will be doubled to 2 years.
- The budget also added 2 new tests to the definition of a ‘personal company’ for Entrepreneur’s Relief, requiring the claimant to have a 5% interest in both the distributable profits and the net assets of the company.
- Where a company ceases to be a ‘personal company’ for Entrepreneur’s Relief, a taxpayer can claim relief up to that date so that the gain deemed to relate to the period in which the company was a ‘personal company’ still receives relief when the company is sold in future.
- The extended IR35 off-payroll working rules, which have applied to the public sector since April 2017, were expected to be expanded to include the private sector. This expansion has been delayed until April 2020, and then will only apply to medium and large private companies that are engaging workers.
- Access to the £3,000 NICs Employment Allowance will be restricted from April 2020 to employers with an employer NICs liability below £100,000 in their previous tax year.
- The capital allowances Annual Investment Allowance is to be increased from £200,000 to £1m for two years from 1 January 2019.
- A new Structures and Buildings Allowance (SBA) will give 2% straight line (50 year) relief for costs incurred on or after 29 October 2018 for the construction, conversion and renovation of non-residential buildings for business purposes.
- From April 2019, the special rate of capital allowances will reduce from 8% to 6%.
- Profitable technology companies with global sales of more than £500m will be liable to a new 2% digital services tax on UK revenues from April 2020.
- Business rates for firms with a rateable value of £51,000 or less will be cut by third over two years. In addition, new 100% mandatory business rates relief were announced for all lavatories made available for public use.
- The rate of corporation tax remains 19%, and is still set to reduce to 17% from April 2020.
- The amount of R&D tax credits a loss-making company can receive will be capped at three times its total PAYE and National Insurance contributions liability from April 2020.
- The government also intends to make directors liable for business taxes owed, where there is a risk of a company deliberately entering insolvency to avoid or evade tax.
- The assessment time limit for ‘careless’ offshore tax non-compliance for income tax, capital gains tax (CGT) and inheritance tax (IHT) will increase to 12 years from April 2019. In cases where there is deliberate behaviour, the time limit remains set at 20 years.
- Legislation will be introduced to confirm that additions of assets by UK-domiciled (or deemed domiciled) individuals to trusts made when they were non-domiciled are not excluded property. This will apply to IHT charges arising on or after the date on which Finance Bill 2019-20 receives Royal Assent, whether or not the additions were made prior to this date.
Stamp Duty Land Tax (SDLT) and Other Changes
- First-time buyers purchasing shared equity homes of up to £500,000 will pay a reduced amount of SDLT as an extension of the relief introduced last year. This is backdated to the previous budget (22 November 2017), giving retrospective relief for recent first-time buyers of shared ownership properties, in line with other first time buyers.
- The filing deadline for SDLT returns and the payment of SDLT will be reduced from 30 days to 14 days after the effective date of the transaction for sales completed on and after from 1 March 2019.
- Overseas companies with a UK property business will be brought within the charge to UK corporation tax from April 2020. Currently these overseas companies need to pay income tax on the rental profits.
- The VAT registration threshold will remain at £85,000 until at least April 2022.
- No tax on takeaway coffee cups but to be reconsidered if the industry doesn’t make enough progress, plus a new tax on plastic packaging which does not contain 30% recyclable material is planned to take effect from 1 April 2022.
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