November 2017 Budget – key highlights

Tuesday, December 12th, 2017

Welcome to Copia Wealth & Tax’s December digest on the recent Budget.

Chancellor focuses on “Building a Britain fit for the future”

This was the main theme of his second budget as he committed to spending more on infrastructure projects and stimulating the housing market, but overall there was very little good news on the tax front and some seemingly worrying economic figures, particularly around growth forecasts.

That said, here are some highlights!

Stamp Duty Land Tax (“SDLT”) relief for first time buyers

To help first time buyers get on the property ladder and to try and stimulate the housing market, the Chancellor announced changes for first time property purchases completed on or after 22 November 2017. Those claiming the relief will now pay no SDLT on the first £300,000 of the consideration and 5% on any remainder.

Note that where a property is bought in joint names it must be the first property owned by all purchasers and that no relief will be available where the total consideration is more than £500,000. It appears this will be a permanent measure rather than a temporary holiday.

Personal Allowance and Higher Rate limit increased

We were reminded that the government are still committed to increasing the personal allowance to £12,500 in 2020 and the higher rate tax threshold to £50,000. However, the personal allowance for 2018/19 was only increased in line with inflation to £11,850 and the higher rate threshold to £46,350.

It is worth noting that up to 10% of the personal allowance (£1,185) may be transferred from one spouse or civil partner to the other if unused and the transferee is a basic rate taxpayer. It was announced that this transfer will now be available on behalf of deceased spouses and civil partners, and the claim may now be backdated for up to four years where the entitlement conditions were met.

No changes in Tax or National Insurance Contributions (“NIC”) rates

The basic rate of income tax and higher rate remain at 20% and 40% respectively and the 45% additional rate continues to apply to income over £150,000. Although Class 2 NIC rates for the self-employed are being abolished from 6 April 2019 and “merged” with Class 4 contributions, the Chancellor backed off from an increase in the current 9% Class 4 rate after what happened last time!

There were also rumours that the dividend rate might be increased, but they continue to be taxed at 7.5%, 32.5% and then 38.1% depending upon whether they fall into the basic rate, higher rate or additional rate band.

The annual ISA investment limit increased to £20,000 from 6 April 2017 and remains at that level for 2018/19. Dividends on shares held within an ISA continue to be tax free.

IR35 “Off-Payroll” rules may be extended to the Private Sector

The government will consult in 2018 on how to tackle non-compliance with the intermediaries’ legislation (commonly known as IR35) in the private sector. The legislation which currently only applies in the public sector seeks to ensure that individuals who effectively work as employees are taxed as employees, even if they invoice for their work through a limited company.

Radical changes to Company Car Benefits in Kind

Company car benefits are currently based on CO2 emissions data and this has encouraged employees to choose diesel cars. With the Government now aiming to reduce the number of diesel cars on the roads, from 6 April 2018 the diesel supplement increases from 3% to 4%.

In 2020, some radical changes to company car benefit rules are being introduced. The benefit in kind for electric cars and hybrid cars with a range of 130 miles or more on the electric motor will be reduced to 2%. That means that the taxable benefit for such a car with a list price of £30,000 would be just £600 a year! Furthermore, where an employer allows staff to charge their own electric car at work, there will be no additional taxable benefit.

Enterprise Investment Scheme (“EIS”) Tax relief increased for investment in TECH Businesses

The Government will double the amount that an individual may invest under the EIS in a tax year from £1 million to £2 million, provided that any amount over £1 million is invested in one or more knowledge-intensive companies.

The annual investment limit for knowledge-intensive companies receiving investments under the EIS and from Venture Capital Trusts will be increased to £10 million from the current limit of £5 million. The lifetime limit raised by such companies will remain the same at £20 million.

Research & Development (“R&D”) Tax Relief increased

The rate of the R&D expenditure credit is being increased from 11% to 12%, to support business investment in R&D. This is the relief available to those companies that do not already qualify for the more generous relief available to SME’s.

VAT registration limit frozen

The VAT registration limit has been frozen at £85,000 until 1 April 2020; the deregistration limit also remains at £83,000. It is worth remembering that the introduction of Making Tax Digital for VAT in April 2019 will apply to those businesses above the registration limit – contact one of our specialists to find out how this could affect your business.

Business rates relief for small businesses

Despite much lobbying from the small business sector to reduce business rates, the Chancellor stated that 600,000 small businesses currently benefit from small business rates relief. However, to support the licensed trade from April 2017, pubs with a rateable value up to £100,000 can claim a £1,000 business rates discount for one year. This relief has now been extended until March 2019.

New mileage allowance for Buy to Let Landlords

Another measure amongst the small print was the proposal that as an alternative to claims for capital allowances and deductions for actual expenses incurred (such as fuel), buy to let landlords may claim 45p a mile for necessary visits to their rental properties.

And finally, don’t be afraid to pick up the phone!

Here at Wolverhampton Accountants Copia Wealth & Tax, we are always happy to help. All our clients benefit from free telephone access to our Copia team, so if you would like to know more, please call us today on 01902 783172 or alternatively complete our on-line contact form by clicking HERE and one of our specialists will get back to you.