The pre-BREXIT budget has come with the message that the era of austerity is finally coming to an end. With many of the key Budget spending promises already announced prior to today’s speech we were left with a raft of tax changes none of which were really expected.
The Chancellor announced a package of measures to stimulate growth in the UK with the increase in the annual investment allowance which provides tax relief to business on spending on plant, machinery and equipment from £200k to £1m for 2 years from 1st January 2019. However, for those businesses that claim a writing down allowance on long life plant and machinery and integral features this relief will drop from 8% to 6% per annum in line with accounting treatment. There was also an announcement that a new capital allowance for new non residential structures and buildings on eligible construction costs incurred immediately at an annual rate of 2%. Research and Development tax relief will now be subject to a PAYE restriction for the SME scheme to reduce abuse.
Smaller firms taking on apprentices from April 2019 will now only have to contribute 5% with the Government contributing the remaining 95% of costs. National living wage is set to increase from April 2019 to £8.21 per hour and there will be an above inflation rise to the National Minimum wage as well. From April 2020 will be a restriction for larger employer’s claiming the employment allowance where the National Insurance bill is over £100k per annum.
For companies the Chancellor announced that the measures introduced in the public sector to ensure all workers pay a fair amount of tax when they work via a limited company will be rolled out to the private sector in April 2020 with smaller organisations being exempt.
In order to provide smaller business with come clarity it has been confirmed that the VAT threshold will remain frozen for the 2 years at £85k. Whilst capital losses for Companies will be restricted going forward in line with income losses. HM Revenue & Customs (HMRC) will also now become a preferential creditor when a business becomes insolvent.
For Charities who trade the primary purpose trading threshold has been increased from £50k to £80k which will save some smaller charities corporation tax and the administrative burden of reporting to HMRC.
There were also a number of changes to capital gains tax with principal private residence relief available when you sell your home now being restricted further from April 2020. Currently, a taxpayer who has rented out their house that they previously occupied can claim lettings relief of up to £40,000 this will only be available where they co-occupy the property with the tenant. The final period of ownership where occupation is not required will also be reduced from 18 months to 9 months. For non-residents individuals and businesses on disposals on or after 6 April 2019 they will be liable for tax on any interest on the sale of any UK land.
We were expecting changes to Entrepreneurs’ Relief and I am relieved that this was maintained, however, the holding period that a business interest or shares need to be held for has been extended from 12 months to 2 years. There has also been a change to the definition of a personal company with an individual required to have a right to not only 5% of the voting rights but 5% of the income and 5% of the net assets.
Finally, personal tax payers have had a welcomed boost to their income from April 2019 with the Government delivering on their manifesto pledge 12 months early. The personal allowance will be increased to £12,500 and the basic rate band will increase to £50,000.
With the raft of spending measures announced that will mainly impact on England it will be interesting to see how Welsh Government allocate their annual £18bn budget together with their £550m of additional funding over the next 3 years. There was also an announcement that there will be backing for the North Wales Growth Deal worth £120m. The UK Government has also vowed to look at giving Welsh Ministers powers to borrow money to support the M4 relief road.
Although this budget contained more spending and tax announcements than expected who knows whether I will be writing you another summary in spring next year if the next statement is upgraded to a Budget in light of BREXIT.