The headline measure in Monday’s Budget , was the increase in both the personal allowance and higher rate tax threshold, and that both these increases will take effect from 6 April 2019, one year earlier than planned. Those earning less than £100,000 will benefit from a higher personal allowance of £12,500 and increased basic rate tax band of £37,500 – and so will not pay 40% tax until earnings reach £50,000. An individual basic rate taxpayer will be £130 better off as a result of the higher personal allowance.
As expected there was also confirmation that reforms to the IR35 rules already in place with the public sector shall extend to the private sector; although not until April 2020. The reforms put the onus on the customer to decide whether to operate PAYE and NIC on services provided via a personal services company. – although there appears to be an exemption for small businesses who engage contractors.
For businesses, the Government confirmed its commitment to lower corporation tax rates which will reduce to 17% as planned in 2020. The Chancellor announced that if no progress was made on a multi-national approach to the taxation of digital services then he would introduce a digital services tax from April 2020. Interestingly, this is limited in scope applying only to search engines, social media and online marketplaces, and not to the supply of goods and services digitally. Two further proposals of note for businesses was the announcement that the Annual Investment Allowance will be increased to £1 million from £200,000 for all qualifying investment in plant and machinery made on or after 1 January 2019 until 31 December 2020, and in respect of entrepreneurs’ relief the minimum period throughout which the qualifying conditions for relief must be met will be extended from 12 months to 24 months.
Key Tax points – in summary
Personal Tax
- From 6 April 2019, the personal allowance will increase from £11,850 to £12,500,
- Also the higher rate threshold will increase from £46,350 to £50,000.
- From 6 April 2020, the off-payroll working rules (IR35) in the private sector will be reformed to bring in line with the public sector.
- The abolition of Class 2 National Insurance has been delayed, with the intended date of reform now from 6 April 2020.
- Lifetime Allowance for pensions will increase from 6 April 2019 to £1,055,000.
Business Tax
- The Annual Investment Allowance will increase to £1,000,000 per year for the period 1 January 2019 to 31 December 2020.
- From 6 April 2019, the capital allowances special rate will reduce from 8% to 6%.
Capital Gains Tax
- The Capital Gains Tax annual exempt amount will increase to £12,000 from 6 April 2019
- From 29 October 2018, to qualify for Entrepreneurs’ Relief, the individual must also have a 5% interest in the distributable profits and net assets of the company.
- From 6 April 2019, the minimum qualifying period for Entrepreneurs’ Relief will be extended from 12months to 24months.
- Non-UK residents will be subject to UK Capital Gains Tax on all UK land from 6 April 2019, not just residential land.
- From 6 April 2020, for principle private residence relief, the government plans to reform lettings relief so that it only applies when the owner of the property is in shared occupancy with the tenant. They also plan on reducing the final period exemption from 18 months to 9months. Both of these changes are to be consulted on.
Stamp Duty
- The government will publish a consultation in January 2019 on a SDLT surcharge of 1% for non-residents buying residential property in England and Northern Ireland.
- extension of the stamp duty land tax relief for first time buyers so that all qualifying shared ownership property purchasers can benefit