Whilst last week’s Budget was a tad short on big announcements, the Chancellor’s Autumn Budget was full of small changes; but as always the devil is in the detail. So now that all of the finer details have been published, it’s now time for an updated 2018 budget summary of the main business and personal tax measures.
Business Tax
New IR35 regime for private sector
The Chancellor said that early indications are that public sector compliance is increasing as a result of introducing IR35 rules last April and that a consultation will now take place to with a view to extending the regime to the private sector.
Businesses rates reprieve
In his speech, the Chancellor yielded to calls from business lobbies to hasten the planned switch from using RPI to CPI, with the switch coming in on April 5th 2018, 2 years earlier than planned. The change represents a £2.3bn reprieve for the UK’s rate-paying businesses.
R&D help
Hammond announced he was putting several billion towards increasing the R&D tax relief rate from 11% to 12%, with the new rate taking effect on expenditure from 1 January 2018.
VAT changes
Despite speculation that the VAT registration threshold would be cut from £85k to £26k, it will now be frozen at the current figure of £85,000 until at least 1st April 2020.
Also, measures are to be introduced in 2018, to tackle the avoidance of VAT by sellers that trade through an online marketplace and will apply to all online sales, and not just those relevant to overseas businesses. This is good news for bona fide UK traders who have suffered a competitive VAT disadvantage because of non-complaint online sellers.
VED hike for some diesel cars
Diesel cars will have to comply with the RDE test, designed to ensure cars deliver low emissions in the real world, rather than just in a laboratory setting. If not, from April 2018, the VED rate for diesel cars will go up by one band, which for the average diesel car will mean an increase of around £40, but small businesses can relax as the changes will not affect vans.
Micro companies and profit extraction
The tax-free Dividend Allowance will reduce from £5,000 to £2,000 from 6th April 2018, with further dividends of up to £32,500 taxed at 7.5%.
Personal Tax
National Insurance
The percentage rates under PAYE will not change except that the threshold will rise with inflation. The changes expected for the self-employed have been delayed for at least a year. Consequently, for 2018/19 the self-employed will pay Class 2 NIC at £2.95 per week on profits above £6,205 and Class 4 NIC on profits between £8,424 and £46,350, plus 2% on profits in excess of £46,350.
SDLT help for first-time buyers
There will be a 0% rate of SDLT on the first £300k of the purchase price of a home, as long as it doesn’t cost more £500k. If it does, SDLT is payable above £125k as now.
Overseas property owners
Property owners who are not UK residents for tax purposes would normally escape tax on the gains they make on selling UK properties but in future they will be required to pay non-resident capital gains tax (NRCGT) on the gains they make. And for overseas commercial property owners, they will be subject to UK tax from April 6th 2019.
Pension changes
The lifetime allowance, which places a cap on tax-relieved pension savings, is increased in line with CPI to £1,030,000 for 2018/19.
The basic state pension for individuals who achieved state pension age before 6th April 2016 is increased by 3% to £125.95 per week and retirees after 6th April 2016, the single-tier state pension will also increase by 3% and will now be £164.25 per week.
Tax avoidance by individuals
The Chancellor is hoping that legislation currently going through Parliament will be in place by 6th April 2018, to catch individuals who use offshore structures for tax evasion; the legislation also targets the “enablers” who benefit financially from creating schemes or by enabling others to implement tax avoidance arrangements.
If you would like more detailed information on some aspect of UK Tax, send me an e-mail and I’ll be pleased to advise further.
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