Budget – November 2017
The First Autumn Budget for many years was announced yesterday and there were several headline grabbing changes. As is always the case, the details and probably less popular items are found in the Treasury Budget Reports. I will deal with the changes as I see them relevant to the majority of my clients.
Prior to the Budget, many commentators were speculating that the VAT Registration threshold would be reduced to as low as £ 20,000. Many EU countries have very low (or even zero) registration thresholds and the Chancellor commented on this during his speech. It was pleasing to note that the VAT Registration Threshold will not be reduced, but will be frozen at the current level of £ 85,000 for the next two years. This two year period will take us to the first programmed Budget to occur after Brexit.
The tax free personal allowance (PA) will increase by £ 350 from £ 11,500 currently to £ 11,850 from April 2018. The Chancellor made great comments about how much tax this saves but be aware that the figures he used relate to the tax saving since 2010. The £ 350 increase in the PA will save £ 70 in tax next year compared with the current year.
Higher rate tax
The point at which you start to pay higher rate tax (at 40%) will be increased from the current level of £ 45,000 to £ 46,350. The additional rate band uplift to 45% remains at £ 150,000.
The Marriage Allowance (MA) enables one party to transfer 10% of their PA to his/her spouse thus saving the spouse income tax – £ 220 in the current year and £ 227 from April 2018. The MA transfer can only occur if the donor is earning less than the PA and the recipient is a basic rate taxpayer (i.e. earning less that £ 45,000 this year and £ 46,350 next year).
The new announcement means that the MA transfer can be made in respect of a deceased spouse and may be backdated 4 years (from 29 November 2017).
As expected, the £ 5,000 dividend allowance has been reduced to £ 2,000 – effective from April 2018. This means that extra tax will be payable – £ 225 for basic rate taxpayers, £ 975 for higher rate taxpayers and £ 1,143 for additional rate taxpayers.
The corporation tax rate remains at 19% for 2017/18 (this tax year) and 2018/19 (next tax year).
Annual Investment Allowance
The AIA remains at £ 200,000 for next tax year.
Making Tax Digital (MTD)
Whilst MTD was delayed in the last Budget, it will continue to be rolled out for VAT reporting (VAT Returns) from April 2019.
This means that all VAT Registered businesses will have to maintain their records in a “digital format” and that accounting package will be used to file the VAT Returns. Excel spreadsheets on their own will not be adequate as they are not capable of uploading the relevant information to HMRC. My software provider has already prepared a suitable product which can be used by clients so this can be rolled out for use before April 2019.
Business rates currently increase with RPI, but this is to be changed to CPI from April 2018 and revaluations to be every three years rather than every five years.
The changes to IR35 rules that affect workers engaged in the public sector started in April 2017. It is still expected that these changes will be extended to all businesses once an evaluation has been undertaken.
The annual ISA investment limit has been increased to £ 20,000.
The headline grabbing announcement yesterday was that SDLT (Stamp Duty Land Tax) won’t apply to first-time buyers on properties up to £ 300,000 (properties up to £ 500,000 in London but relief on first £ 300,000).
Class 2 NI (for the self-employed) was to be abolished from April 2018, this has been delayed until April 2019). Class 2 contributions will increase by 10p to £ 2.95 per week.
The rates of NI remain the same, but the point at which Class 4 is payable has been increased from £ 8,164 to £ 8,424 from April 2018.
Capital Gains Tax
The annual exemption for CGT is to increase from £ 11,300 to £ 11,700 from April 2018.
The benefit in kind (BIK) charge for diesel company cars is to change slightly – the 3% supplement is being increased to 4% but the upper limit of 37% is retained.
National Living Wage
The NLW is to be increased from £ 7.50ph to £ 7.83ph