Is austerity finally coming to an end?

Introduction

Going into Budget 2018, between leaks and political instability, few expected Chancellor Philip Hammond would have surprises left to spring....

How wrong we were.

Under pressure to support No 10's 'end of austerity' message, bolstered by revised growth forecasts from the Office of Budget Responsibility, and safe in the knowledge that it could all go out of the window in the event of a no-deal Brexit, the Chancellor gave the most eventful Budget speech of recent years.

There were commitments to increased public spending on emotive issues such as schools, high streets, hospitals, village halls, potholes and public toilets.

There was a crowd-pleasing swing at global tech giants in the form of a new UK digital services tax, coupled with a two-year cut in business rates for some independent shops, cafes and pubs.

Minimum wages are to be increased, stamp duty relief for first-time buyers is extended, fuel duty remains frozen, as do duties on beer, some ciders and spirits - all gestures intended to signal that sacrifices made by the British public have paid off.

There were also many specific technical changes in both businesses and personal tax, including the headline measure of an increase to the personal allowance and the higher-rate tax threshold from April 2019, in line with last year's Conservative manifesto pledge, but delivered a year early.

But there are hidden thorns too.  For example, as long expected, reforms to IR35 in the public sector will be extended into the private sector, while entrepreneurs and lettings reliefs are being tightened up.

To understand how announcements made in the Budget on 29th October 2018 will affect your financial situation, read on....

Important Information The way in which tax charges (or tax relief, as appropriate) are applied depends on individual circumstances and may be subject to future change. The information in this report is based on our understanding of the Budget 2018, in respect of which specific implementation details may change when the final legislation and supporting documentation are published. This document has been prepared on 29th October 2018, before the Scottish and Welsh budgets, and so may not reflect forthcoming rates and allowances for those countries. This document is solely for information purposes and nothing in it is intended to constitute advice or a recommendation.  You should not make any investment decisions based on its content. While considerable care has been taken to ensure the information contained in this document is accurate and up-to-date, no warranty is given as to the accuracy or completeness of any information.

 

At A Glance....

Business

Small retail businesses in England will see business rates reduced by a third.

The annual investment allowance is to rise five-fold from £200,000 to £1 million for two years.

Reforms to individuals working under IR35 are to be extended to the private sector from April 2020.

 

Personal

The personal allowance is to rise to £12,000, higher-rate threshold up to £50,000.

A 4.9% increase will see the national living wage set at £8.21 an hour for over-25s.

Stamp duty land tax abolished for first-time buyers or shared-ownership homes worth up to £500,000.

 

Duties

Fuel duty unchanged at £57.95 per litre of petrol, diesel, biodiesel or bioenthanol.

Duties on beer, most ciders and spirits remain unchanged for 2019/20.

Cost of a bottle of wine to rise by 8p, in line with inflation, in February 2019.

 

VAT

The VAT-registration threshold is to stay at £85,000 until April 2022.

The Government will revisit options for reforming VAT once final terms of the UKs exit from the EU have been agreed.

 

Other Announcements

Qualifying conditions for entrepreneurs' relief extended from 12 months to two years.

Some employers to pay half of what they paid towards the apprenticeship levy - 10% down to 5%.

Lettings relief limited to properties where the owner is in shared occupancy with the tenant.

 

Further, more detailed articles about Budget 2018 will follow on our Blog shortly.  In the meantime, if you want further information or need to talk to us about your business or circumstance, please contact Elpizo immediately.