For an up-to-date summary please visit our Autumn Statement 2022 blog.
The end to austerity takes shape
Despite widespread predictions of potential tax rises and relief cuts, the Chancellor was able to deliver a Budget, on the back of the latest Office for Budget Responsibility forecasts, which continued the Government’s end of austerity message.
The Chancellor sought to throw a lifeline to the high street by announcing a cut in business rates for smaller retail businesses alongside a digital services tax targeted at the online tech retail giants. From April 2019, occupiers of retail property with a rateable value below £51,000 will see their bills cut by one third. Local newspapers will receive a further £1,500 discount and even public lavatories will have a new 100% relief.
To the surprise of many, the Chancellor brought forward earlier scheduled increases to both the personal allowance and basic rate band. From April 2019 the personal allowance will increase to £12,500 and the higher rate threshold will be raised to £50,000.
Key Points in Budget 2018
Some of the main announcements were:
- The personal allowance will be raised to £12,500 from April 2019, one year earlier than planned. The 40% income tax threshold will also rise to £50,000 from April 2019, also a year earlier than planned, and will remain at the same level in 2020/21.
- Pensions were top of many commentators’ list of potential areas that might have seen reliefs scaled back but this did not materialise. In fact, the lifetime allowance for pension savings will increase to £1,055,000 for 2019/20 in line with CPI.
- The national living wage will increase from £7.83 an hour to £8.21.The annual investment allowance (AIA) will increase to £1 million for all qualifying investments in plant and machinery made on or after 1 January 2019 until 31 December 2020. Businesses may wish to consider timing capital expenditure accordingly with this in mind.
- In a throw-back to the days of buildings allowances (available before changes introduced in 2008) we now have a new ‘Structures and Buildings Allowance’ (SBA), giving a straight-line 2% allowance for the cost of constructions, renovations and extensions to commercial buildings.
- Entrepreneurs relief, a very valuable relief for many business owners, saw a couple of notable modifications. For disposals after 6 April 2019, the minimum period throughout which the qualifying conditions for relief must be met will be extended from 12 months to 24 months. Taking effect immediately, there is also a tightening up of the specific criteria when individuals dispose of qualifying shareholdings (where the minimum 5% test has been widened to include voting, nominal value and now distribution entitlements and rights on windings-up).
- From 1 April 2020, companies will be subject to a 50% limit on the proportion of annual capital gains that can be relieved by brought-forward capital losses. This mirrors the changes to corporation tax ‘income’ losses which came into force in 2017. Companies will have unrestricted use of up to £5 million capital or income losses each year.
- Business rates bills will be cut by one-third for retail properties with a rateable value below £51,000 for two years from April 2019.
- A couple of changes have been earmarked from April 2020 onwards in relation to Private Residence Relief (PRR). PRR is a useful relief that exempts capital gains for individuals when selling their main residence. Where individuals dispose of their interest in a residence that at any time has been their main residence, ‘lettings relief’ was also potentially available to cover periods where the house was let. The changes proposed will only give lettings relief where the tenant co-habits the house with the householder. PRR calculations have always included an exempt period that is treated as being occupied for PRR purposes (whether or not the property is or isn’t occupied). Over time this exempt period has been gradually reduced to the current 18 months and from April 2020 this will be halved further to 9 months.
- The VAT registration threshold will be maintained at the current level of £85,000 until April 2022.
- From 1 April 2020, the amount of payable research and development (R&D) tax credits 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.
- From 6 April 2020, when a business enters insolvency, HMRC will be a preferred creditor for taxes collected by the business for the government such as VAT, PAYE income tax, employee NICs, and construction industry scheme deductions – but not such taxes as corporation tax and employer NICs.
- Large social media platforms, search engines and online marketplaces will pay a 2% tax on the revenues they earn which are linked to UK users from April 2020.
- Fuel duty was frozen, alongside beer and spirits.