Please read our Autumn 2018 Budget summary to see the key announcements that we feel most affect our clients:
- The Government are no longer planning to scrap Class 2 National Insurance Contributions (a separate flat rate contribution paid by self-employed workers making a profit of more than £6,365 a year). The rate for 2019/20 is £3 per week collected through self-assessment payments.
- No changes to National Insurance rates paid by the employed and employers or to Income Tax rates.
- Class 1 National Insurance threshold is rising from £8,424 for 2018/19 to £8,632 in 2019/20.
- Personal Tax-free Allowance to rise earlier than planned to £12,500 from £11,850.
- Basic Rate Tax Band to increase from £46,350 to £50,000.
- Marriage Allowance (which allows 10% of unused personal allowance to be transferred to your spouse) will increase in line with the increase in personal allowance to £1,250 for 2019/20. This claim can be backdated for up to 4 years.
Capital Gains Tax
- Capital Gains Tax annual exempt amount for individuals is rising from £11,700 to £12,000.
- From 6 April 2020, the deadline for Capital Gains Tax due on UK property disposal and the resultant tax return will be shortened to 30 days after the property completion date. This could be a whole 18 months earlier than the current deadline.
- From April 2020, the Principal Private Residence final exemption period will decrease from 18 months to 9 months and there are also substantial changes to letting relief. If you are considering selling a let property which has been your main home at some point, please contact us as soon as possible to plan the disposal.
- Entrepreneurs’ Relief (ER) is being updated so shareholders must be entitled to at least 5% of the company’s distributable profits and assets for distribution. From 6 April 2019, shares must be held for a minimum of 2 years (currently 12 months). However, some anti-dilution measures are being put in place to prevent loss of ER when further investment in the company is sought in the future.
Making Tax Digital (MTD)
- From April 2019, MTD will be mandatory for businesses with a turnover above the VAT threshold (£85,000), but only for VAT obligations. Those who fall within MTD will have to keep digital records and update HMRC quarterly. If you are using online software, your VAT returns will operate in a very similar way to the current method.
- MTD will not be rolled out to all businesses and individuals until April 2020 at the earliest and the scope for MTD will not be widened until the system has proved to be effective.
- Retail premises with a rateable value of £51k or below, will receive business rate relief of 30% for the next 2 years.
- From 1 April 2020, the amount of payable tax credit that can be claimed under the R&D SME tax relief scheme will be limited to three times the company’s total PAYE and NIC payments for the period.
- Following Royal Assent of the 2019/20 Finance Bill, HMRC can make directors jointly and severally liable for unpaid company tax liabilities, where there is a risk that the company deliberately entered into insolvency.
- Annual Investment Allowance will increase to £1m from £200k for purchases of business assets for the next 2 years.
- A new Structures and Buildings Allowance will be introduced at a rate of 2% annually on capital expenditure on new commercial buildings for contracts entered into on or after 29 October 2018.
- The rate of Writing Down Allowance on certain polluting cars will reduce from 8% to 6%. The main pollution rate of 18% will remain.
- The VAT registration threshold will now be maintained at £85k until 31 March 2022, a further 2 years than was previously announced.
- The Government are considering imposing a 1% surcharge when a residential property is purchased by a non-UK resident.
- The Government has announced that from April 2020 it will be extending the off-payroll working rules (IR35) which affect the public sector into the private sector too, for medium and large businesses.
Note to our Contractor clients: This announcement will affect a large number of our contracting clients, so we will be holding a seminar to discuss these rules once the implementation details have been announced.