2018 Budget Highlights – How will it impact business owners?

On 29th October 2018 the Chancellor of the Exchequer Philip Hammond delivered his budget. If you’ve had time to read through the 120+ pages, you’ll already know what’s coming. If not, here are the main takeaways from the announcement and how this will impact UK businesses.

In the shadows of a ‘no-deal’ Brexit, there has been a lot of uncertainty surrounding Britain’s economic growth and how the Budget might play out. Prior to the announcement, the Chancellor repeatedly mentioned that this year’s Budget would be for hard-working families, prioritising rising wages, driving growth and increasing employment. He also make claims that the ‘age of austerity’ was coming to an end, confirming additional funding for the NHS.

The Budget in brief

  • IR35 extended to the private sector
  • Personal Tax Rates, Thresholds and Allowances increased early
  • ‘National Living Wage’ increased
  • Business Taxes and Relief – extension on some reliefs
  • Fuel Duty frozen
  • Stamp Duty Land Tax – relief for first time buyers
  • Capital Gains Tax – letting relief changes
  • Digital Tech Tax – revenue tax on ‘largest digital platforms’

IR35 changes

  • Businesses will be responsible for assessing an individual’s employment status.
  • Large and medium businesses will be given longer to adjust, with the changes being introduced in April 2020.
  • From 6th April 2020, medium and large businesses will need to decide whether the IR35 rules apply to an engagement with individuals who work through their own company.
  • Where it’s determined that the rules do apply, the business, agency or third party that pays the individual’s company will need to deduct income tax and employee NICs and pay employer NICs.
  • HMRC continues to work with stakeholders to identify improvements to checking employment status for tax and issuing wider guidance to ensure the reform meets the needs of the private sector. Enhancements will be tested with stakeholders, and operational and legal experts before implementation.

A further consultation on the detailed operation of the reform will be published in the coming months, and will inform the draft Finance Bill legislation that is expected to be published in summer 2019.

Personal Tax Rates, Thresholds and Allowances

  • Dividend allowance – unchanged at £2,000
  • National Insurance – no changes, expect this to be revisited
  • Personal tax allowance – raised from £11,850 to £12,500
  • Higher rate tax threshold – raised from £46,350 to £50,000
  • Earning over £100,000 – personal tax allowance reduce by £1 for every £2 over the £100,00 limit

Pensions and Savings:

  • Lifetime allowance for pensions rising to £1,055,000 2019/20
  • Starting rates for savings – unchanged
  • Individual Savings Accounts (ISA) – Junior ISA subscription limit increased to £4,368
  • Child Trust Funds – Annual subscription limit for child trust funds increased to £4,368

National Living Wage

The National Living Wage will rise by 4.9% to £8.21

Business Taxes and Relief

Corporation Tax – Financial year 2019 (commencing 1st April 2019) = 19% Financial year 2020 (commencing 1st April 2020) = 17%

Entrepreneurs’ relief – From 6th April 2019, the minimum period throughout which the qualifying conditions for Entrepreneurs Relief (ER) must be met will be extended from 12 months to 24 months.

It was also announced that in addition to existing rules on share capital and voting rights, from 29th October 2018 shareholders must also be entitled to at least 5% of the distributable profits and net assets of a company to claim.

R&D Relief – No changes

Business Rates – Business rates for companies with a rateable value of £51,000 or less will be reduced by a third over two years.

Duties and Allowances

    • Fuel Duty – Frozen for ninth consecutive year
    • Stamp Duty Land Tax – Relief up to the value of £500,000 back-dating from 22nd November 2017
    • Capital Gains Tax: Letting Relief – From April 2020 the government will reform lettings relief so that it only applies in circumstances where the owner of the property is in shared occupancy with the tenant.

The final period exemption will also be reduced from 18 months to nine months. The government will consult on these changes.

There will be no changes to the 36 months final period exemption available to disabled people or those in a care home.

Digital Tech Tax

New Digital Technology Tax on UK revenues from the big tech companies like Google, Apple, and Facebook. This will extend to profitable companies with sales of more than £500 million globally.

FLB