The chancellor’s third Autumn Budget and the last one before Britain leaves the EU in March didn’t fail to disappoint, with Philip Hammond pledging numerous changes during his 72-minute speech to boost living standards across the country and help work towards ending austerity once and for all – an underlying message throughout his speech.
Many of the giveaways were more generous than most expected, with stronger taxation receipts and improved Government borrowing giving the chancellor more freedom to spend. He opened his speech by saying that it would be ‘a Budget for hardworking families… the strivers, the grafters and the carers who are the backbone of our economy’. With the Autumn Budget covering everything from beer duty to business rates, we’ve examined the document in full and extracted the headline announcements below as those most likely to affect you and your business.
From April 2019, the tax free personal allowance will increase to £12,500 for basic rate taxpayers and to £50,000 for those in the higher rate tax band.
Businesses with a rateable value of £51,000 or below will see their rates bill decrease by a third over a two-year period, which for some, could equal up to £8,000 in savings.
High street stores
Bricks and mortar retailers may benefit from the chancellor’s proposed Future High Streets Fund that will pledge £675m in co-funding for local councils to plan the future of their high streets and work to reverse the impact of online shopping habits. One of the suggested ways that the funding could be used is converting commercial premises into residential to increase footfall locally.
Digital Services Tax
A new 2% tax on the revenues of certain digital businesses will provide a future windfall to the Treasury. Yet most digital companies needn’t worry as the tax will only apply to those which generate £500million in UK sales.
IR35 goes private
Reforms to the off-payroll working rules that were first introduced to the public sector in 2017 will now be rolled out to the private sector from April 2020. The changes will only affect private sector contracts within businesses that have 50+ employees, with the responsibility for identifying IR35 status now sitting with the employer rather than the contractor.
The cost for a small business taking on an apprentice will be halved, giving companies a greater incentive to offer high quality apprenticeships and build the pipeline of up and coming talent. Coming into force in 2019, the change will see the 10% fee that some firms face to cover training costs fall to 5%.
Annual Investment Allowance (AIA)
AIA will increase from £200,000 to £1m for two years from January 2019, providing a huge boost to businesses investing in qualifying plant and machinery.
Research & Development (R&D) Tax Relief remains intact to continue providing businesses with a major incentive to invest. However, one amend from April 2020 will see the payable R&D tax credit for qualifying loss making companies limited to three times their total PAYE and NIC liability.
Entrepreneurs’ Relief (ER)
Rumours about the relief were circulating pre-Budget and the chancellor did not disappoint, by extending the minimum qualifying period from 12 months to two years, as of April 2019 and extending the qualifying criteria that must now be considered when looking at whether a shareholding qualifies for ER .
From 2020, the government will restrict access to the £3,000 Employment Allowance to employers with employer NIC liabilities under £100,000 in the previous tax year.
A ‘green’ tax
In a bid to reduce plastic packaging that is harmful to the environment and provide a big enough incentive to use recyclable plastic, a tax will be introduced on companies that manufacture and import plastic packaging that is less than 30% recycled.
The chancellor did also consider a plastic cup tax, yet decided this would not deliver substantial change.
Limiting lettings relief
From April 2020, lettings relief on Capital Gains Tax will be limited to properties where the owner is in shared occupancy with the tenant, whilst reducing the final period exemption from 18 months to 9.
Other key considerations
- PFI (Private Finance Initiative) and PR2 contracts have been scrapped, which came under heavy scrutiny earlier this year following Carillion’s collapse. All existing contracts will be honoured, but no new ones will be signed
- The VAT threshold remains at £85,000 until April 2022
- Highways England will receive £25.5bn of additional funding to boost major road upgrades, whilst local councils get £3.5bn to improve local roads
- From April 2019, the Capital Allowances special rate allowance will decrease from 8% to 6%
- The national living wage will increase to £8.21
- Fuel duty remains frozen for the ninth year in a row.
Full analysis of the Autumn Budget 2018 can be found in our handy, downloadable guide here.
As always, we will keep you updated with the latest news and changing legislation as it happens, delving into the detail of how it affects our client base and the wider UK; but to discuss how any of the announcements made in the Autumn Budget 2018 may affect you and your business, then contact your local Champion office today.