Following the delivery of the Autumn Budget earlier this week, we have summarised the key announcements below. If you would like to discuss any of the below and it’s practical implications for you and your business, please get in touch.
Personal Tax Bands & National Minimum Wage
Personal allowance – from 6 April 2019, the personal allowance will be raised to £12,500 (currently £11,850) and the higher rate tax threshold will increase to £50,000 (currently £46,350). These changes have been implemented 12 months earlier than originally planned.
The additional tax rate threshold will remain at £150,000.
Capital gains tax annual exemption will increase to £12,000 (from £11,700) in April 2019.
The National Living Wage for workers aged over 25 will rise to £8.21 from April 2019 (currently £7.83)
There were no specific announcements regarding any changes in National Insurance limits and levels and consultation on the reform of the National Insurance system is ongoing.
Personal Tax Reliefs
Principal Private Residency Relief (PPR) – Where a property has been an individual’s main residence at any time in the period of ownership, currently the final 18 months of ownership will qualify for PPR, even if the property was rented or unoccupied in this period. In April 2014, this was reduced from 36 months and from April 2020, this will reduce so that only the final 9 months can be claimed as PPR.
From April 2020, lettings relief will only be available in circumstances where the owner of the property is in shared occupancy with the tenant.
Entrepreneurs Relief – from 6 April 2019, individuals will need to meet the qualifying conditions for ER for a minimum of two years prior to disposal (currently 12 months).
The starting rate band for savings will remain at £5,000 for the 2019/20 tax year.
The overall annual ISA subscription limit will remain unchanged for 2019/20 at £20,000.
The main rate of Corporation Tax remains at 19% for 2019/2020, but it remains the intention to cut the rate to 17% from 2020/21 onwards.
From 1 April 2020, the amount of payable Research & Development tax credit that a qualifying loss-making company can receive in any tax year will be restricted to three times the company’s total PAYE and NICs liability for that year.
Other Business Taxes
VAT registration thresholds will remain at £85,000 and the de-registration threshold remains at £83,000 and these rates will remain until April 2022.
The Annual investment allowance is being increased for qualifying investment in plant and machinery from £200,000 to £1,000,000 from 1 January 2019 for two years.
From April 2019, the rate of the writing-down allowance on the special rate pool of plant and machinery will reduce from 8% to 6%.
Restrictions were announced in respect of the £3,000 Employment Allowance will only affect businesses with an Employer National Insurance liability over £100,000, coming into effect from April 2020.
HMRC have confirmed that directors or other persons involved in tax avoidance, evasion of ‘phoenixism’ (carrying on a single business via a succession of companies) will now be jointly and severally liability for unpaid company tax liabilities.
Making Tax Digital – Update
The Budget did not contain any new announcements on Making Tax Digital, and from April 2019, most VAT registered businesses with turnover in excess of the VAT threshold (£85k) will need to change the way in which they maintain their business records and submit VAT returns.
Businesses will need to maintain and submit their VAT returns digitally, which will not change the information provided, but it will have to be made using compatible software rather than through HMRC’s online portal.
The Government has yet to confirm when digital reporting will be extended to Corporation Tax and Income Tax for the Self-employed but they had previously announced that it would not be before April 2020.
Off-payroll Working Rules
As expected, the regulations introduced in April 2017 for individuals working for public sector bodies through their own Limited Company will now be extended to the Private Sector from April 2020.
However, many small businesses will be exempt and HMRC will provide support and guidance to medium and large organisations ahead of implementation.
In summary, the IR35 rules are as follows:
Businesses will be responsible for assessing an individual’s employment status.
The reform will not apply to the smallest 1.5 million businesses, and the large and medium businesses to which it will apply will be given longer to adjust, with the changes being introduced in April 2020.
From 6 April 2020, medium and large businesses will need to decide whether the IR35 rules apply to an engagement with individuals who work through their own company.
Where it is determined that the rules do apply, the business, agency or third party that pays the individual’s company will need to deduct income tax and employee NICs and pay employer NICs.
HMRC will not carry out targeted campaigns into previous years when individuals start paying employment taxes under IR35 for the first time following the reform, and businesses’ decisions about whether their workers fall within the IR35 rules will not automatically trigger an enquiry into earlier years.
A further consultation on the operation of the reform will be published by early 2019, and draft Finance Bill legislation is expected to be published in summer 2019.
Plans were announced to reduce business rates by one-third for many retail properties with a rateable value below £51,000 for two years from April 2019.
Stamp duty land tax abolished for first-time buyers of shared-ownership homes worth up to £500,000.