- The personal allowance will be raised to £12,500 from April 2019, one year earlier than previously planned. At the same time, the higher rate threshold will rise to £50,000, also a year ahead of schedule. We will have to wait for the Scottish Budget later in the year to see if the same increase applies to Scottish taxpayers
- Both the personal allowance and higher rate threshold will then remain unchanged in 2020/21 before being increased in line with the consumer price index (CPI) thereafter.
- The pension lifetime allowance will increase to £1.055 million for 2019/20, with no change to the annual allowances.
- The annual investment allowance will increase to £1 million for all qualifying expenditure on plant and machinery made between 1 January 2019 and 31 December 2020.
- The minimum period throughout which the qualifying conditions for entrepreneurs’ relief must be met will be extended from 12 months to 24 months from 6 April 2019.
- The proposed shared occupancy test for rent-a-room relief has been abandoned and the existing tests will continue to apply.
- From April 2020, the final period capital gains tax (CGT) exemption for owner-occupied residential property will be reduced from 18 months to 9 months.
“…austerity is coming to an end – but discipline will remain” were the words the Chancellor, Philip Hammond, used to summarise his October Budget speech. That balance between continued cuts and excessive borrowing was evident in the measures announced today. The Office for Budget Responsibility (OBR) forecast that borrowing in 2018/19 will be £11.6 billion less than it forecast in March. But the Chancellor’s net tax giveaway for 2019/20 was only marginally higher at £15.1 billion, rising to over £30.5 billion by 2023/24. A large slice of that apparent generosity is down to increased NHS expenditure, which starts at £7.35 billion in 2019/20, rising to £27.6 billion by 2023/24.
Mr Hammond was helped by the OBR increasing growth forecasts for the next two years, although it left the 2018 figure unchanged at 1.3%. A good example of Mr Hammond’s balanced approach was bringing forward the £50,000 higher rate threshold and £12,500 personal allowance to 2019/20 rather than 2020/21, as originally promised in the 2017 Conservative manifesto. Accelerating these changes only gives rise to a one-year cost because the personal allowance and higher rate threshold will be frozen in 2020/21.
Several other headline-grabbing measures also have a temporary effect on closer examination. The one-third cut to business rates for some retail properties (in England) will last for just two years, as will the increase in the annual investment allowance (AIA) to £1 million. The rosier outlook from the OBR might change by the time the Chancellor is next due to present a fiscal set piece – his Spring Statement. As he said in his speech, he was “reserving the right to upgrade the Spring Statement to a full fiscal event” if “the economic or fiscal outlook changes materially in-year”.
The personal allowance will increase to £12,500 and the higher rate threshold will rise to £50,000 for 2019/20. From 2021/22, the personal allowance and higher rate threshold will increase in line with inflation. The Scottish tax bands and rates for non-savings, non-dividend income will be announced in the Scottish Budget, due on 12 December.
Off-payroll working in the private sector
Following consultation and the roll-out of reform in the public sector, responsibility for operating the off-payroll working rules in the private sector will move from individuals to the organisation, agency or other third party engaging the worker. The change will take effect from April 2020, with an exemption for small organisations.
Following consultation, there will be no new ‘shared occupancy test’ for rent-a-room relief and the existing qualifying test of letting in a main or only residence will remain.
National insurance contributions
As announced in September, Class 2 NICs will not be abolished during this Parliament. Reforms to the treatment of termination payments and income from sporting testimonials will be legislated for in the National Insurance Contributions Bill, with changes taking effect from April 2020.
Car benefit scale
The petrol car benefit charge for 2019/20 is based on CO2 emissions in grams per kilometre and the car’s list price when new. For diesel vehicles, add 3% to the scale up to 37% maximum.
From April 2020, the employment allowance of £3,000 a year will be restricted to employers with an employer national insurance contributions (NICs) bill below £100,000 in their previous tax year.
Individual savings account (ISA) subscription limits
The ISA annual subscription limit for 2019/20 will remain at £20,000. The annual subscription limit for junior ISAs (JISAs) and child trust funds (CTFs) for 2019/20 will rise to £4,368.
Lifetime allowance for pensions
The lifetime allowance for pension savings will increase to £1.055 million for 2019/20. There is no change to the annual allowances.
Venture capital trusts (VCTs) and enterprise investment schemes (EISs)
The rules for approved EIS funds will be amended to require approved funds to focus on knowledge-intensive companies with effect from April 2020. The funds will also have a longer period in which to invest capital. Investors in these funds will be allowed to set this income tax relief against their liabilities in the year before the fund closes.
Capital gains tax: annual exempt amount
The annual exempt amount for individuals and personal representatives will rise to £12,000 for 2019/20, while the amount for most trustees will increase to £6,000 (minimum £1,200).
From 6 April 2019, the minimum period throughout which the qualifying conditions for the relief must be met will increase from 12 to 24 months. From 29 October 2018, shareholders claiming entrepreneurs’ relief must be entitled to at least 5% of the distributable profits and net assets of a company, in addition to the current requirements on share capital and voting rights. As announced at the 2017 Autumn Budget, individuals can qualify for entrepreneurs’ relief where their shareholding is diluted below the 5% qualifying threshold by fund-raising events after 5 April 2019.
Private residence relief
From April 2020, lettings relief will only apply where the owner of the property is in shared occupancy with the tenant. The final period exemption will be reduced from 18 months to 9 months. There will be no changes to the 36-month final period exemption available to disabled individuals or to those in a care home.
Inheritance tax (IHT)
The IHT nil rate band remains at £325,000 for 2019/20. The residence nil rate band (RNRB) will increase to £150,000 from 6 April 2019 as already legislated. From 29 October 2018, minor technical amendments to the RNRB will take effect relating to downsizing provisions and the definition of ‘inherited’ for RNRB purposes
Corporation tax rate
The government has confirmed that the rate of corporation tax will fall to 17% in 2020.
Annual investment allowance
The AIA will be increased from £200,000 to £1 million for all qualifying investments in plant and machinery from 1 January 2019 until 31 December 2020.
Special rate writing down allowance
The capital allowances special rate for qualifying plant and machinery, such as long-life assets, will be reduced from 8% to 6% from April 2019.
Structures and buildings allowance
A 2% capital allowance will apply to qualifying capital expenditure on new non-residential buildings and structures where all the contracts for the physical construction works are entered into on or after 29 October 2018. Relief will not be available for the costs of land or dwellings.
The tax treatment of corporate capital losses will be brought into line with the treatment of income losses from 1 April 2020. The proportion of annual capital gains that can be relieved by brought-forward capital losses will be limited to 50%. However, companies will have unrestricted use of up to £5 million capital or income losses each year. Amendments will be made to the existing loss relief legislation to ensure that it works as intended and prevents relief being claimed for excessive carried-forward losses.
Digital services tax
A new 2% tax will be charged from April 2020 on the revenues of certain digital businesses that derive value from their UK users. The tax will apply to revenues generated from the provision of search engines, social media platforms and online market places where those activities are linked to the participation of UK users, subject to an annual allowance of £25 million. The tax will only apply to groups that generate global revenues from in-scope business activities of more than £500 million a year. It will include a safe harbour provision that will exempt loss-makers and reduce the effective rate of tax on businesses with very low profit margins.
Fuel benefit charges will increase in line with the retail prices index (RPI) and the van benefit charge will increase in line with the CPI from 6 April 2019. The fuel multiplier for 2019/20 will be £24,100 for cars. For vans, the fuel chargeable amount will be £655.
Intangible fixed assets regime
A targeted relief will be introduced from April 2019 for the cost of goodwill in the acquisition of businesses with eligible intangible property. With effect from 7 November 2018, a de-grouping charge will not arise where the de-grouping is the result of a share disposal that qualifies for the substantial shareholding exemption.
Offshore receipts in respect of intangible property
From April 2019, income from intangible property held in low-tax jurisdictions will be taxed to the extent that it can be referred to UK sales. The tax will be collected by directly taxing offshore entities that realise intangible property income in low-tax jurisdictions. There will be a de minimis UK sales threshold of £10 million and exemptions for income that is taxed at appropriate levels or supported by sufficient local substance.
Enhanced capital allowances (ECAs)
The ECA for companies investing in electric vehicle charge points will be extended to 31 March 2023. ECAs and first-year tax credits for technologies on the Energy Technology List and Water Technology List will end in April 2020. The savings will be reinvested in an Industrial Energy Transformation fund to support significant energy users to cut their energy bills and move UK industry to a low-carbon future.
Business rates – retail (Not Scotland)
Business rates bills will be reduced for two years from April 2019 by one-third for retail properties with a rateable value below £51,000, subject to state aid limits. This will benefit up to 90% of retail properties.
Business rates – self-catering and holiday let accommodation
The government will consult on the criteria under which self-catering and holiday lets become chargeable to business rates rather than council tax.
Business rates – public lavatories
A 100% business rates relief will be introduced for all public lavatories to help keep these amenities open.
Stamp duty land tax (SDLT)
First-time buyers’ relief in England and Northern Ireland will be extended so that all qualifying shared ownership property purchasers can benefit, whether or not the purchaser elects to pay SDLT on the market value of the property. The change will apply to transactions with an effective date of 29 October 2018 and will also be backdated to 22 November 2017. The government will publish a consultation in January 2019 on an SDLT surcharge of 1% for non-residents buying residential property in England and Northern Ireland.
Non-UK residents’ gains
Gains that accrue to non-UK residents on non-residential property will be subject to tax. Non-UK residents will also be subject to tax on gains in diversely held companies, those widely-held funds not previously included, and life assurance companies.
Registration and deregistration thresholds
The taxable turnover threshold for registration for value added tax (VAT) will remain at £85,000 until April 2022, two years longer than previously announced. The deregistration threshold will stay at £83,000 for the same period. The government will look again at the possibility of introducing a smoothing mechanism once the terms of Brexit are clear.
R&D tax relief for small and medium-sized enterprises
From 1 April 2020, the amount of payable R&D tax credit that a qualifying loss-making company can receive in any tax year will be restricted to three times the company’s total PAYE and NICs liability for that year.
Please note that our website www.ah-ltd.co.uk and app (for Android and iPhone) will have the current tax tables and rates.
Should you have any queries on the above please do not hesitate to contact us.
Sarah and Paul
AH & Co Ltd, Chartered Accountants