Here is a brief summary of the 2018 Budget.
The VAT Registration threshold remains at £85,000 and will be held until 2022.
The tax free personal allowance (PA) will increase by £650 from £11,850 to £12,500 from April 2019. A basic rate taxpayer will pay £130 less tax from 2019.
Higher rate tax
The point at which you start to pay higher rate tax (at 40%) will be increased from the current level of £46,350 to £50,000 as from 6 April 2019. The additional rate band uplift to 45% remains at £150,000.
Because the PA has increased, the Marriage Allowance will be worth £250.00 per couple (an extra £13 per year).
No changes were announced to Dividend Tax. The zero rate band remains at £2,000 and rates of 7½%, 32½% and 38.1% apply to basic rate, higher rate and additional rate taxpayers as appropriate.
The corporation tax rate remains at 19% for 2018/19 (this tax year) and 2019/20 (next tax year). It is scheduled to fall to 17% from 1 April 2020.
Annual Investment Allowance
The AIA limit is currently £200,000. This will be increased to £1m for a two year window from 1 January 2019 until 31 December 2020. Anyone considering extensive capital investment may need to plan to take advantage of this window.
In addition the lower rate of capital allowances will reduce from 8% to 6% from April 2019.
Making Tax Digital (MTD)
No new announcements were made regarding MTD. Therefore, MTD will affect VAT registered traders with a turnover exceeding £ 85,000 as from 1 April 2019. MTD means that from 1 April 2019 your VAT Returns must be submitted from within your accounting software, you will no longer be able to use the existing HMRC portal to record your VAT Return online.
The Government has launched “Our Plan for the High Street”, which will reduce business rates by 1/3rd for retail properties with a rateable value below £51,000. This is a short-lived policy running for two years from April 2019.
As expected, the changes made to the IR35 rules in the public sector will now be extended to those engaged in the private sector (large and medium sized businesses). The change is scheduled to come into force in April 2020. This will mean that the agency or business that you work for will be responsible for deducting PAYE and NI from the amount they pay your company. The onus is on the paying business to “assess” whether the contract is one of true self-employment or not.
National Living Wage
The NLW will increase from £7.83 ph to £8.21 ph from April 2019.
From April 2020 the final exemption period is being reduced from 18 months to 9 months (it used to be three years). From that date, lettings relief will only apply when the owner shares occupancy with the tenant.
Currently all employers can reduce their employer’s NI bill by up to £3,000 pa. From April 2020 this relief is restricted to those employers with a NI charge of less than £100,000.
Class 2 NI for the self-employed was scheduled to be abolished from 6 April 2018 but continues.
Some reforms of NI relating to termination payments (redundancy etc) are to be enacted from April 2020.
Vehicle Excise Duty (“Road Tax”)
The rates of VED will increase from April 2019 in line with the CPI rate of inflation.
Company Car Tax (CCT)
The Government will be reviewing the impact of the Worldwide harmonised Light vehicles Test Procedure (WLTP) on VED and CCT so that CO2 emissions are more closely aligned to real-world fuel consumption.
Tax abuse and insolvency
Directors and other persons involved in tax avoidance, evasion or phoenixism will be jointly and severally held liable for company tax liabilities where there is a risk that the company may deliberately enter insolvency.
Research & Development Tax Credits
Refunds arising from R&D tax credits will be restricted to the amount of PAYE paid by the company.
There is a possibility that the Spring Statement (in March 2019) will be transformed into a full Budget, depending on the outcome of the Brexit negotiations.