The Chancellor, Phillip Hammond, delivered the budget statement on a Monday with lots of ‘bits and pieces’ affair, with several measures buried in the red book.
Here is a summary of some of the main tax changes and business measures. We will provide further guidance on each measure over the next few days as more details emerge.
- Personal Allowance increases fast tracked: The amount of money that can be earned before paying income tax will rise next year to £12,500 – this was originally planned for April 2020.
- The Higher Rate Threshold for income tax – which currently stands at £46,350 – will also be increased to £50,000 from April 2019.
- National Living Wage to increase in April 2019
- The National Living Wage (NLW) will rise in April 2019 from £7.83 to £8.21 per hour for employees aged 25 and over.
- Small change for National Insurance: The planned abolition of Class 2 and Class 4 National Insurance will no longer go ahead. The self-employed will continue to pay these with Class 2 increasing to £3.00 per week from April 2019. Profit threshold for paying Class 4 will be set at £8,632.
- Employment Allowance restricted to small businesses: The government will be restricting the Employment Allowance as of April 2010. This is the allowance which exempts the first £3,000 of employers’ National Insurance contributions (NICs). The allowance will be restricted to small firms with employers’ NICs totalling less than £100,000 per annum.
- VAT threshold remains at £85,000 until April 2022: The current VAT registration threshold of £85,000 will be frozen until April 2022. It was thought that the Chancellor would reduce the threshold by as much as 50%.
- Business rates reduced for small and independent businesses: Small and independent retailers with commercial premises with a rateable value of £51,000 or less will have their business rates reduced by a third during the next two years. According to the Chancellor, this will result in annual savings of up to £8,000 per annum for up to 90% of small and independent businesses on the high street.
- Apprenticeship fees reduced by half for small firms: In supporting apprenticeships across the UK, small business owners will have their financial commitment reduced by up to 50% when takin on apprentices. Currently, small firms pay 10% towards the training of apprentices, but from April 2019 this will be halved to just 5%.
- Fuel Duty freeze to continue for ninth year: Fuel Duty will be frozen for a ninth year. The freeze on Fuel Duty will have saved the average car driver £1,000 and the average van driver £2,500 since 2010.
- Increase in the Annual Investment Allowance: The Annual Investment Allowance – which allows firms to deduct qualifying capital expenditure from its taxable profits – will be increased from £200,000 to £1 million for the next two years in a bid to encourage business investment.
- Lettings relief limited: From April 2020, the rules on private residence relief will be tightened limiting relief to properties where the owner is in shared occupancy with the tenant. Where the property has been let at any time, each owner can claim lettings relief to reduce the taxable capital gain. This relief can cover gains of up to £40,000 per owner, but it is only available if the property has been the owner’s main home for a period. The relief is also capped at the amount of PPR relief due for the period of actual occupation by the owner.
- R&D tax credit cap returns: Whilst confirming the government’s commitment to raise R&D investment by 2027, there will be PAYE restrictions on those making R&D tax credit claims. From April 2020, the amount a company will be able to receive in R&D tax credits will be capped at three times its total Pay As You Earn (PAYE) and National Insurance contributions (NICs) liability. This restriction will apply to loss-making companies seeking to claim R&D Tax credits.
- IR35 to include private sector from April 2020: As anticipated IR35 off-payroll working rules are to be extended to the private sector. Deferred until April 2020, the same changes which applied to the public sector in April 2017 will now be applied to the private sector. Engaging businesses will now become responsible for assessing an individual’s employment status, where the engager is a medium or large business.
If you would like to discuss issues arising from this article or to find out more on the applicable impacts, please contact Tobi Lab on 0330 311 2983 or send me an email to firstname.lastname@example.org.