The Autumn 2018 Budget – What did it deliver?
The chancellor, Phillip Hammond, presented his Autumn Budget on Monday of this week, what were the highlights, benefits and was it trick or treat? If there is a no deal on Brexit then there is likely to be a further Budget in the Spring.
The personal tax allowance previously announced increased from £11,850 to £12,500 and the higher rate threshold at £50,000 (being the allowance of £12,500 plus the basic rate band of £37,500) were both brought forward a year to April 2019 rather than 2020. The recent increases to the personal allowance will have almost doubled it by 2010/11.
The 0% starting rate for savings remains at £5,000 for 2019/20.
There is good and bad news on property. First time buyers’ relief from Stamp Duty Land Tax (SDLT) will be extended to £500,000 for shared ownership properties and backdated to 22 November 2017. The government will consult on an SDLT surcharge of 1% for non-residents buying residential property in England and Northern Ireland.
From Budget day, the time limit for making a claim for repayment of the higher rate of SDLT will be extended for those who pay the higher rate on the purchase of a property that they intend to use as a main residence and who then sell their previous residence. A claim must be made within 12 months of the sale of the previous main residence, or within 12 months of the filing date of the SDLT return for the new residence, on which higher rate duty was paid, whichever comes later.
The time limit for filing and paying SDLT will reduce from 30 days to 14 days from 1 March 2019.
On the sale of a main residence, which has also been rented out, the relief for lettings which has been up to £40,000 per individual (so £80,000 for joint owners) will be restricted from April 2020 so that it only applies where the landlord is in occupation too. The final period capital gains tax exemption for principal private residences will be reduced from 18 months to 9 months. This relief was designed to protect homeowners who were unable to sell their previous home after having moved out. It will remain to be seen if the housing market lives up to this!
Business rates will be reduced by a third for retail properties with a rateable value below £51,000. The government is to consult on the rule surrounding business rates rather than council tax for holiday lettings in order to prevent abuse.
A capital allowance will be introduced for non-residential construction contracts entered into from Budget day. The new structures and buildings allowance will be at the rate of 2% and addresses a significant gap in the UK’s current capital allowances regime and will improve the international competitiveness of the UK tax system.
The government will increase the Annual Investment Allowance to £1 million for all qualifying investment in plant and machinery made on or after 1 January 2019 until 31 December 2020, to help stimulate business investment.
Following a consultation on the tax and administrative treatment of Short Term Business Visitors (STBVs) from overseas branches of UK headquartered companies, the government will widen eligibility for the STBV Pay As You Earn (PAYE) special arrangement and extend its deadlines for reporting and paying tax. This will reduce administrative burdens on UK employers with effect from April 2020.
To nobody’s surprise the off-payroll working rules that currently apply in the public sector will be extended from 2020 to the private sector but they will apply only if the end user is a large or medium-sized business.
There were no significant changes to inheritance tax, so business property relief remains available but there was an announcement in the Budget to clarify the downsizing rules in respect of the increased inheritance tax nil rate band for residential property. Families whose main asset is the parental home will be able to transfer its value on death even if the house has been sold in advance.
There was no increase to the rate of income tax, capital gains tax or corporation tax which remains at 19% but which reduces to 17% in April 2020. However, the annual exemption for capital gains tax will increase from April 2019 to £12,000 for individuals and personal representatives, and £6,000 for trustees of settlements.
Capital gains tax entrepreneurs’ relief also remains at 10% but the minimum period throughout which certain qualifying conditions must be met for an individual to be able to claim the relief is to be extended from 12 to 24 months. Measures will be included to protect entrepreneurs whose businesses have already ceased by preserving the 12 months qualifying period for such businesses where cessation was before 29 October 2018. The definition of personal company will be expanded to add a requirement that the shareholder must have a 5% interest in the distributable profits and net assets of the company for the relief to be available with immediate effect.
This is in addition to the existing requirements that the shareholder holds at least 5% of the share capital and that shareholding entitles them to at least 5% of the voting rights and that the individual is an employee or office holder of the company.
As previously announced, non- residents’ capital gains tax on property gains to be paid within 30 days of completion will be extended to UK residents effective from April 2020. A CGT return must also be filed within 30 days.
From 6 April 2019 capital gains tax for non- UK residents for individuals and companies will extend to all UK real estate, commercial as well as residential property, and non-resident landlord companies will pay corporation rather than income tax.
UK residents will not need to file a return or make a payment if the gain on the disposal is not chargeable to CGT; or it arises from the disposal of a foreign residential property in a country covered by a CGT double taxation agreement; or it is foreign property and the gain arises to a person taxed on the remittance basis.
The VAT threshold will remain the same for the next two years. The chancellor gave a broad hint that he would like to reduce it significantly so this may be high on the priority list for post-Brexit.
Trusts consultation - As announced at Autumn Budget 2017, the government will publish a consultation on the taxation of trusts, to make the taxation of trusts simpler, fairer and more transparent.
Finally, pensions tax relief is unchanged, although the lifetime allowance will increase in line with CPI to £1,050,000. Almost every year there is a threat to the abolition or reduction to the higher rate relief for pension contributions but it has survived another year!