Chancellor Philip Hammond has delivered his second Autumn Budget. The Chancellor was in bullish mood, asserting that the era of austerity is 'finally coming to an end' after a 'long, hard journey'.
Citing the latest economic forecasts from the Office for Budget Responsibility, Mr Hammond revealed that the UK growth forecast has been upgraded from 1.3% to 1.6% for 2019, while public borrowing in 2018/19 is set to be £11.6bn lower than previously forecast at the time of the Spring Statement.
With the Brexit negotiations ongoing, the Chancellor announced an additional £500m of departmental funding for Brexit preparations. He also raised the possibility of upgrading the 2019 Spring Statement to a 'full fiscal event' if no deal was agreed.
Below we have summarised some of the main points that may be of interest to you, your family or your business.
The Personal Allowance
The personal allowance is currently £11,850. Individual taxpayers are set to benefit from a bringing forward of the planned increase in the income tax personal allowance, which will rise by a further £650 in April 2019 to £12,500.
Tax bands and rates
The Chancellor announced that from 2019/20, the basic rate band will be increased to £37,500 so that the threshold at which the 40% band applies is £50,000 for those who are entitled to the full personal allowance.
The additional rate of tax of 45% remains payable on taxable income above £150,000.
Tax on dividends
In 2018/19 the first £2,000 of dividends are Chargeable to tax at 0% (the Dividend Allowance). The Dividend Allowance will remain at £2,000 for 2019/20. Dividends received above the allowance will continue to be taxed at the following rates.
VAT Registration
The VAT registration threshold was frozen at £85,000 in the last budget, and the Chancellor extended that until 1 April 2022.
Making Tax Digital for Business VAT
Regulations have now been issued which set out the requirements for MTD for VAT. Under the new rules, businesses with a turnover above the current VAT threshold of £85,000 must keep digital records for VAT purposes and provide their VAT return information to HMRC using MTD compatible functional compatible software.
The new rules have effect from 1 April 2019 where a taxpayer has a ‘prescribed accounting period’ which begins on that date, or otherwise from the first day of a taxpayers first accounting period beginning after 1 April 2019.
Keeping digital records for other taxes will not be mandatory before 2020.
Corporation tax rates
Corporation tax rates have already been enacted for periods up to 31 March 2021.
The main rate of corporation tax is 19% and will remain at this rate for next year. From 1 April 2020, the rate will fall to 17%.
Capital Gains Tax exemption
The CGT annual exemption is £11,700 for 2018/19 and will be increased to £12,000 for 2019/20.
Changes to Entrepreneurs' Relief
With immediate effect for disposals on or after 29 October 2018, two new tests are to be added to the definition of a 'personal company', requiring the claimant to have a 5% interest in both the distributable profits and the net assets of the company. The new tests must be met, in addition to the existing tests, throughout the specified period in order for relief to be due. The existing tests already require a 5% interest in the ordinary share capital and 5% of voting rights.
The government will legislate in Finance Bill 2018-19 to increase the minimum period throughout which certain conditions must be met to qualify for ER, from one year to two years. The measure will have effect for disposals on or after 6 April 2019 except where a business ceased before 29 October 2018. Where the claimant's business ceased, or their personal company ceased to be a trading company (or the holding company of a trading group) before 29 October 2018, the existing one year qualifying period will continue to apply.
Off Payroll working in the private sector (IR35)
Following extensive and prolonged consultation, the Government announced plans to reform off-payroll rules, known as IR35, in the private sector from April 2020.
Responsibility for operating the off-payroll working rules will move to the firm engaging the worker.
Only medium and large organisations will be subject to this change.
Employer provided cars
Most cars are taxed by reference to bands of CO2 emissions multiplied by the original list price of the vehicle. The maximum charge is capped at 37% of the list price of the car.
For this tax year there was generally a 2% increase in the percentage applied by each band. For 2019/20 the rates will increase by a further 3%.
A new development for the current tax year is an increase in the diesel supplement from 3% to 4%. This applies to all diesel cars (unless the car is registered on or after 1 September 2017 and meets the Euro 6d emissions standard) but the maximum is still 37%.
Penalties for late submission of tax returns
Taxpayers are required to submit tax returns by specified dates. When taxpayers submit their returns late they generally incur a penalty. Draft legislation has been issued which sets out a new points-based penalty regime for regular submission obligations. Returns have to be submitted more frequently in some circumstances. Depending on the frequency of the return submission obligation, a defined number of penalty points will accrue to a threshold. Once this threshold has been reached, a fixed penalty will be charged to the taxpayer.
Penalties for late payment of tax
Draft legislation has been issued to harmonise the late payment penalty regimes for income tax, corporation tax and VAT. Late payment penalties are charged when customers do not pay, or make an agreement to pay, by the date they should, and do not have a reasonable excuse for the failure to do so.
The penalties will consist of two penalty charges, one charge based upon payments and agreements to pay in the first 30 days after the payment due date and another charge based upon how long the debt remains outstanding after the 30 days.
Elsewhere, the stamp duty relief for first-time homebuyers will be extended to shared equity purchases of up to £500,000, while the lifetime allowance for pension savings will increase to £1,055,000.
As widely anticipated, the Chancellor confirmed plans to introduce a new tax on the UK revenues of digital services companies from 2020, applying to those with global sales of more than £500m per annum. However, plans for a tax on takeaway coffee cups were overruled in favour of a new tax on plastic packaging containing less than 30% recycled material.
Turning to duties, tax on beer, most cider and spirits have been frozen. Wine duty will rise in line with inflation, while tobacco duty will continue to rise by inflation plus 2%.
Other announcements include confirmation of an extra £20.5bn for the NHS over the coming five years, together with additional funding to help welfare claimants transfer to Universal Credit. An additional £950m will be made available for the Scottish government, £550m for the Welsh government and £320m for the Northern Ireland Executive for the period to 2020/21.
Citing the latest economic forecasts from the Office for Budget Responsibility, Mr Hammond revealed that the UK growth forecast has been upgraded from 1.3% to 1.6% for 2019, while public borrowing in 2018/19 is set to be £11.6bn lower than previously forecast at the time of the Spring Statement.
With the Brexit negotiations ongoing, the Chancellor announced an additional £500m of departmental funding for Brexit preparations. He also raised the possibility of upgrading the 2019 Spring Statement to a 'full fiscal event' if no deal was agreed.
Below we have summarised some of the main points that may be of interest to you, your family or your business.
The Personal Allowance
The personal allowance is currently £11,850. Individual taxpayers are set to benefit from a bringing forward of the planned increase in the income tax personal allowance, which will rise by a further £650 in April 2019 to £12,500.
Tax bands and rates
The Chancellor announced that from 2019/20, the basic rate band will be increased to £37,500 so that the threshold at which the 40% band applies is £50,000 for those who are entitled to the full personal allowance.
The additional rate of tax of 45% remains payable on taxable income above £150,000.
Tax on dividends
In 2018/19 the first £2,000 of dividends are Chargeable to tax at 0% (the Dividend Allowance). The Dividend Allowance will remain at £2,000 for 2019/20. Dividends received above the allowance will continue to be taxed at the following rates.
- 7.5% for basic rate tax payers
- 32.5% for higher rate taxpayers
- 38.1% for additional taxpayers
VAT Registration
The VAT registration threshold was frozen at £85,000 in the last budget, and the Chancellor extended that until 1 April 2022.
Making Tax Digital for Business VAT
Regulations have now been issued which set out the requirements for MTD for VAT. Under the new rules, businesses with a turnover above the current VAT threshold of £85,000 must keep digital records for VAT purposes and provide their VAT return information to HMRC using MTD compatible functional compatible software.
The new rules have effect from 1 April 2019 where a taxpayer has a ‘prescribed accounting period’ which begins on that date, or otherwise from the first day of a taxpayers first accounting period beginning after 1 April 2019.
Keeping digital records for other taxes will not be mandatory before 2020.
Corporation tax rates
Corporation tax rates have already been enacted for periods up to 31 March 2021.
The main rate of corporation tax is 19% and will remain at this rate for next year. From 1 April 2020, the rate will fall to 17%.
Capital Gains Tax exemption
The CGT annual exemption is £11,700 for 2018/19 and will be increased to £12,000 for 2019/20.
Changes to Entrepreneurs' Relief
With immediate effect for disposals on or after 29 October 2018, two new tests are to be added to the definition of a 'personal company', requiring the claimant to have a 5% interest in both the distributable profits and the net assets of the company. The new tests must be met, in addition to the existing tests, throughout the specified period in order for relief to be due. The existing tests already require a 5% interest in the ordinary share capital and 5% of voting rights.
The government will legislate in Finance Bill 2018-19 to increase the minimum period throughout which certain conditions must be met to qualify for ER, from one year to two years. The measure will have effect for disposals on or after 6 April 2019 except where a business ceased before 29 October 2018. Where the claimant's business ceased, or their personal company ceased to be a trading company (or the holding company of a trading group) before 29 October 2018, the existing one year qualifying period will continue to apply.
Off Payroll working in the private sector (IR35)
Following extensive and prolonged consultation, the Government announced plans to reform off-payroll rules, known as IR35, in the private sector from April 2020.
Responsibility for operating the off-payroll working rules will move to the firm engaging the worker.
Only medium and large organisations will be subject to this change.
Employer provided cars
Most cars are taxed by reference to bands of CO2 emissions multiplied by the original list price of the vehicle. The maximum charge is capped at 37% of the list price of the car.
For this tax year there was generally a 2% increase in the percentage applied by each band. For 2019/20 the rates will increase by a further 3%.
A new development for the current tax year is an increase in the diesel supplement from 3% to 4%. This applies to all diesel cars (unless the car is registered on or after 1 September 2017 and meets the Euro 6d emissions standard) but the maximum is still 37%.
Penalties for late submission of tax returns
Taxpayers are required to submit tax returns by specified dates. When taxpayers submit their returns late they generally incur a penalty. Draft legislation has been issued which sets out a new points-based penalty regime for regular submission obligations. Returns have to be submitted more frequently in some circumstances. Depending on the frequency of the return submission obligation, a defined number of penalty points will accrue to a threshold. Once this threshold has been reached, a fixed penalty will be charged to the taxpayer.
Penalties for late payment of tax
Draft legislation has been issued to harmonise the late payment penalty regimes for income tax, corporation tax and VAT. Late payment penalties are charged when customers do not pay, or make an agreement to pay, by the date they should, and do not have a reasonable excuse for the failure to do so.
The penalties will consist of two penalty charges, one charge based upon payments and agreements to pay in the first 30 days after the payment due date and another charge based upon how long the debt remains outstanding after the 30 days.
Elsewhere, the stamp duty relief for first-time homebuyers will be extended to shared equity purchases of up to £500,000, while the lifetime allowance for pension savings will increase to £1,055,000.
As widely anticipated, the Chancellor confirmed plans to introduce a new tax on the UK revenues of digital services companies from 2020, applying to those with global sales of more than £500m per annum. However, plans for a tax on takeaway coffee cups were overruled in favour of a new tax on plastic packaging containing less than 30% recycled material.
Turning to duties, tax on beer, most cider and spirits have been frozen. Wine duty will rise in line with inflation, while tobacco duty will continue to rise by inflation plus 2%.
Other announcements include confirmation of an extra £20.5bn for the NHS over the coming five years, together with additional funding to help welfare claimants transfer to Universal Credit. An additional £950m will be made available for the Scottish government, £550m for the Welsh government and £320m for the Northern Ireland Executive for the period to 2020/21.