In the last budget before Brexit the chancellor Philip Hammond scales to pave the way for a brighter future, whilst delivering tax rates for 2019/20. Hammond like the rest of the UK is waiting to see what will happen as a result of Brexit, he has previously stated that he will deliver a further budget post Brexit.
“Tough decisions of the past eight years were not driven by ideology – they were driven by necessity…the era of austerity is finally coming to an end.”
The personal allowance threshold will rise from £11,850 to £12,500 in April, a year earlier than anticipated. The 40% income tax threshold will also increase from £46,350 to £50,000. The national wage is also to increase by 4.9% to £8.21 per hour, however Class 2 NIC’s will continue for the self-employed.
At the moment stamp duty is paid on all property purchases over £125,00 and up to £250,000 at a rate of 2%. The rate of tax increases again to 5% on properties up £925,000 after which point stamp duty doubles to 10%. If the property is a buy to let there is an additional 3% tax. A new regime is being bought in for the taxation of buy to let income, it will mean that landlords can no longer deduct mortgage costs from rental income in order to reduce their tax payable.
There has been no change to the rent a room relief, the amount remains £7,500 tax free per annum.
Capital gains relief
Entrepreneurs’ Relief continues with tax rate of 10% for lifetime gains of £10 million per individual, however, the minimum holding period is being extended from 12 months to 24 months as of 6 April 2019. In addition from 29 October 2018 shareholders must also be entitled to at least 5% of distributable profits and net assets of the company to claim the relief.
Annual Investment Allowance (AIA)
Annual Investment Allowance (AIA) has increased from £200,000 to £1,000,000 for all businesses for 2 years. AIA is a form of capital allowance which offers tax relief on qualifying expenses such as the purchase of machinery. All businesses except mixed partnerships have the ability to claim on AIA.
Enhanced Capital Allowance
The abolition of Enhanced Capital Allowance (ECA) was also announced. ECA was introduced to encourage businesses to invest in energy efficient technology, the scheme allowed for 100% of the first year allowances to be claimed, meaning the full cost of the equipment could be placed against taxable profits for the year.
Corporation tax rates are due to fall from 19% down to 17% in April 2020. Shareholder loans are taxed at 32.5% of the loan must be paid to HMRC if the loan is still outstanding 9 months after the year end.
Structures and Buildings Allowance (SBA)
A 2% capital allowance is being introduced for the construction or renovation of commercial buildings. The deduction will apply to eligible construction that takes place on or after the 29 October 2018. The deduction will apply to both commercial landlords and trading businesses.
Business rates relief
The government also intend to offer business rates relief to small businesses, as well as funding the rejuvenation of the high street. A budget of £650m has been set aside with the intention of bring the high street back to life
It has been announced that the VAT registration limit will not increase in line with inflation, rather the limit will be frozen at £85,000 until April 2022. The deregistration limit will remain at £83,000.
IR35 “Off-Payroll” rules extended
The IR35 “off-payroll” rule that was applied to personal service companies in the private sector will be applied to those in the private sector from 2020. IR35 helps ensure that individuals who effectively work as employees are taxed as employees. The extension of the rule will have a great admin burden on large-medium sized businesses, as they will have decided whether the rule applies to some of their workers.