The Chancellor, Philip Hammond, delivered the UK 2018 Autumn Budget speech on Monday afternoon. So what exactly did the Chancellor say and, more importantly, what did it actually mean?
There were a few key tax measures of interest, which are summarised below:
- The Chancellor brought forward the manifesto promise to increase personal allowances to £12,500 and the Higher Rate threshold to £50,000 by one year. These changes will now be implemented from 6th April 2019 (although Scottish taxpayers will need to wait until the Scottish Budget in December 2018 to see whether the increased Higher Rate threshold will be passed on by the Scottish Government).
- There are no changes announced to the dividend starting rate or the savings starting rate.
- Tax rates applicable to dividend income remain unchanged.
- Changes were announced to Private Residence Relief, with effect from April 2020, to reduce the final period exemption from 18 months to nine months. In addition lettings relief will be reformed so that it only applies where the owner is in shared-occupancy with the tenant. HMRC will consult on the detail of these changes.
- Entrepreneurs’ relief has been amended to require a minimum holding period of a qualifying interest of two years. In addition, the ”personal company” tests have been extended to ensure a shareholder is entitled to at least a 5% interest in the distributable profits and the net assets of the company (this is an additional test to the current requirement to hold 5% of the ordinary share capital and voting rights).
- As previously announced, this Budget will introduce draft legislation, effective from April 2020, to require UK residents to make a return and make a payment on account in relation to a residential property disposal (situated anywhere in the world) within 30 days of the completion date. These rules do not apply where the gain is not chargeable to CGT (for example where private residence relief applies).
- The IHT nil rate threshold will remain frozen at £325,000 until April 2021. Minor changes are proposed to the residence nil rate band.
- The current plans to reduce Corporation Tax to 17% from 2020 remains in place.
- A temporary extension to the annual investment allowance limit was announced. This extends the limit to £1m for a period of two years for expenditure incurred from 1st January 2019.
- The writing down allowance for certain plant and machinery pools will be reduced from 8% to 6% from April 2019.
- A new capital allowances regime will be introduced from Budget Day for new non-residential structures and buildings. Known as Structures and Buildings Allowance, it will provide relief for construction costs at an annual rate of 2% per annum on a strsaight line basis.
- The so called “off-payroll” working arrangements that apply to the public sector will be extended to medium/large organisations who “employ” people outwith payroll with effect from April 2020. This essentially passes the burden of responsibility in determining employment status for tax purposes to the end user in these circumstances. This is the latest of HMRC’s measure to address perceived tax avoidance in the personal service company space.