On 29 October 2018 the Chancellor presented the Autumn 2018 budget.
Businesses
Annual Investment Allowance (AIA)
The Annual Investment Allowance (AIA) provides 100% tax relief on certain capital expenditure. From January 2019 the AIA will increase from £200,000 per year to £1,000,000 per year for the next two years.
Structures and Buildings Allowance (SBA)
For any non-residential buildings and structures acquired on or after 29 October 2018 a business will be able to claim relief at 2% per annum on a straight line basis.
Employment allowance
The employment allowance entitles employers to a reduction in their Employer’s National Insurance bill of up to £3,000 per year. From April 2020 this will be restricted to employers paying less than £100,000 Employer’s NIC.
IR35
In April 2017 the government introduced new rules in relation to public sector employers and workers to deter them from using off-payroll working to reduce their tax liability.
The new rules meant that public sector employers had to determine whether income tax and National Insurance Contributions applied to the self-employed contractors working for them.
The Chancellor has confirmed that these changes will be extended to the private sector from April 2020 and will only apply to medium and large sized employers. They have not yet confirmed what is meant by a medium or large employer.
VAT
The existing VAT threshold of £85,000 will be frozen until April 2022. The deregistration threshold will remain at £83,000.
Business rates
Businesses with retail premises with a rateable value of £51,000 or less will have their business rates cut by one third from April 2019 for a two year period.
R&D tax credits
Currently, a loss making company can claim a ‘payable credit’ from HMRC in exchange for its R&D tax losses instead of carrying them forward to set against future taxable profits. From April 2020 the ‘payable credit’ will be restricted to three times the Company’s total PAYE and NIC liability for the tax year.
National Living Wage
From April 2019 the National Living Wage will increase by 4.9% to £8.21 per hour.
Individuals
Personal allowance and higher rate band
From April 2019 the personal allowance will be £12,500 and the higher rate tax threshold will be increased to £37,500. This means that an individual can earn £50,000 before they have to pay the higher rate tax band. This is one year earlier than the government pledged in their 2015 and 2017 election manifestoes.
Pensions
From April 2019 the lifetime allowance for pension savings will increase to £1,055,000.
Entrepreneurs’ relief
Entrepreneurs’ relief reduces the amount of capital gains tax paid on disposals of businesses or shares in a personal company. An individual pays capital gains tax at 10% on up to £10 million worth of lifetime gains.
Currently the qualifying conditions have to be met for 1 year but from 6 April 2019 this will be increased to 2 years.
A disposal of shares in a personal company on or after 29 October 2018 will only qualify for Entrepreneurs’ relief if the shareholder is beneficially entitled to at least 5% of the distributable profits of the company and at least 5% of the assets available for distribution in a winding up. This will be in addition to the current rules of holding 5% of the share capital and voting rights.
Principal Private Residents (PPR) relief
Currently where an individual sells a property that is or has been their main residence they can claim Principal Private Residence (PPR) relief and the final 18 months of ownership will be exempt from capital gains tax even if they have moved out. From April 2020 this will be reduced to 9 months.
In addition, where a property which has been someone’s main residence at some point is rented out that individual can currently claim lettings relief of up to £40,000 per person (£80,000 for a couple) to further reduce any capital gains tax liability. From April 2020 this lettings relief will only be available for those who are in shared occupancy with a tenant
Stamp Duty Land Tax (SDLT)
There is an extension to the First Time Buyers Relief to those purchasing a shared ownership property. This allows individuals buying their first home to be exempt from SDLT on residential properties up to £500,000. This will be applied retrospectively to those purchases made since the last budget on 22 November 2017.
There is also an extension to the time limit to claim a refund where a higher rate of SDLT has been paid where a previous residence is sold after a new one is purchased. This extension is to the later of 12 months from selling the old home and a year from the filing date for the SDLT return for the new home.
If you would like more information on how the budget will impact on you or your business send us an email to [email protected] or call us on 01452 260960.
