As the Government’s last Autumn Budget before the UK’s scheduled exit from the EU in March 2019, the Chancellor framed his announcement as reflecting an end to the era of austerity. The budget includes the commitment to provide an additional £20.5bn to the NHS over the next five years, and a variety of measures designed to protect or stimulate business growth. Here we outline the budget highlights and as always there will be winners and losers. We encourage you to discuss the impact of the budget with the team at HB Accountants. If you need an update on current tax rates, allowances and duties please get in touch.
Small shops business rates cut by one third
Business rates for small retail properties in England with a rateable value below £51,000 will be cut by a third from April 2019 for two years, which the Treasury estimates will save these businesses a total of £900m altogether.
Higher personal allowance & raised higher rate tax threshold
The planned increase in the personal allowance has been brought forward and the threshold for higher rate tax has been raised.
- The personal allowance, which is the amount someone can earn before they pay any tax, will be increased by £650 from 11,850 currently to 12,500 from 6 April 2019.
- The threshold for paying higher rate tax at 40% has been increased by £3,650 from £46,350 to £50,000 from 6 April 2019.
From 2021, personal allowance and tax thresholds will rise in line with inflation measured by the Consumer Price Index.
£1m Annual Investment Allowance
In a move regarded as an incentive to invest, businesses can claim an Annual Investment Allowance (AIA) for capital expenditure incurred on most plant and machinery items. This allowance currently gives 100% capital allowances on expenditure up to £200,000 a year, in other words the full amount spent can be deducted from profits before tax. The AIA will be increased from £200,000 to £1m for a limited period of two years. This change relates to qualifying expenditure incurred from 1 January 2019 to 31 December 2020.
New Digital Services Tax
A new 2% tax will apply to annual ‘UK’ revenues over £25m of specific digital services businesses with global sales of more than £500m per annum, from April 2020. The move is designed to harness tax revenues from the new generation of large, successful digital businesses, such as Google. The tax will apply to profitable businesses involved with online marketplaces, search engines and social media platforms. The tax will be introduced following consultation, with legislation in the Finance Act 2020.
Further Stamp Duty concessions
Stamp Duty Land Tax is paid on properties and land in England and Northern Ireland purchased for over £125,000. Since 22 November 2017 first-time homebuyers in England and Northern Ireland qualify for a 100% relief if they buy a property for £300,000 or less, so that they don’t pay Stamp Duty. First time buyers also only start to pay 5% Stamp Duty on residential properties from £300,000 to £500,000, on the price over £300,000. Now first-time buyers’ relief will be extended to qualifying shared ownership purchases of up to £500,000 from 29 October 2018. The change will be backdated to 22 November 2017 to enable taxpayers that haven’t yet claimed first-time buyer’s relief to do so.
New non-recycled plastic packaging tax
The Chancellor has announced a new tax on the manufacture and import of plastic packaging which is comprised of under 30% cent recycled plastic. At the same time, a tax on takeaway plastic cups which had been mooted in the media, has been ruled out. The new tax is intended to reduce single use plastics and will be in place from April 2022 following consultation.
VAT threshold unchanged
The threshold for VAT registration remains unchanged at £85,000 until April 2022. The rates of VAT also remain the same with a standard rate of 20% and a reduced rate of 5%.
Employment Allowance for smaller businesses only
From April 2020 eligibility for the Employment Allowance will be restricted to employers with National Insurance Contributions NICs) below £100,000 in the previous tax year. This allowance lets employers claim back Class 1 NICs of up to £3,000 each year. The new restriction is aimed at targeting support to smaller employers, with 93% of small businesses still being eligible for the allowance, according to the Treasury.
Looking ahead to the Chancellor’s Spring Statement in March 2019, uncertainty over the final Brexit agreement means that the Chancellor has advised this may become a full budget announcement if necessary.
Tell me more
For further details of the 2018 Budget just ask us for a copy of our 2018 Budget Report.
Should you want to discuss ways to manage the implications of the budget for your business please get in touch. Contact HB Accountants by calling 01992 444466 or you can email directors@hbaccountants.co.uk
