What did “Spreadsheet Phil” have for you in his November Budget?

Wednesday, November 28th, 2018

Welcome to Copia Wealth & Tax’s November digest on the recent Budget.
As Wolverhampton’s leading accountants we break down some of the main highlights that could affect either you an/or your business.

The Chancellor focuses on “the ending of Austerity”

This was the main theme of this budget as he indicated Austerity measures were coming to an end (although, not over yet). It seems that while unexpected higher tax receipts had provided an opportunity for him to commit to a bit of a “spending spree” (rather than continuing to tackle the deficit), there remains an element given the continuing uncertainty surrounding Brexit.

Personal Allowance and 20p tax band increased

For 2019/20, the personal allowance will be increased from £11,850 to £12,500 and the basic rate limit from £34,500 to £37,500, so the level of income at which an individual comes within the 40p tax band is extended from £46,350 in 2018/19 to £50,000 in 2019/20. The 2019/20 figures will remain the same for 2020/21 and thereafter will rise with the annual increase in the Consumer Price Index.

The higher rate limit and the personal allowance income limit remain unchanged at £150,000 and £100,000 respectively for 2019/20.

The income tax rates are all unchanged, as are the rates on dividends and savings income.

The transferable tax allowance for married persons becomes £1,250 for 2019/20 which may be transferred from one spouse or civil partner to the other if unused and the transferee is a basic rate taxpayer.

Other income tax personal reliefs will increase in line with inflation, including the capital gains tax annual exempt amount which rises to £12,000 from 6 April 2019. Rates of capital gains tax remain the same.

Benefits in kind – cars and vans

The amount to which the appropriate percentage is applied in calculating the taxable benefit of company car fuel will be £24,100 for 2019/20 (£23,400 for 2018/19). The cash equivalent of the benefit of a company van for 2019/20 is £3,430 (£3,350 for 2018/19) and for van fuel for 2019/20 is £655 (£633 for 2018/19).

Tax on pensions

There were concerns that there would be some tax-raising changes around pensions (e.g. a potential reduction of annual allowance/taper limit or restriction of tax relief to basic rate tax), but thankfully, this has not happened – yet! The lifetime pension allowance will be increased in line with inflation to £1,055,000.

Principal private residence relief rules are being amended

From April 2020, there will be two key changes to private residence relief. Firstly, the last period of ownership that is exempt from capital gains tax is being reduced from 18 months to 9 months – this becomes relevant where the property owner has not resided in the property for the whole period of ownership. Where the property has at any time in the period of ownership been let as residential accommodation, there is the potential to claim lettings relief against the element of the gain arising during the period of letting. This lettings relief is to be reformed so that it only applies where the property owner is in shared occupancy with a tenant.

Capital gains tax payments on residential property

Following on from an announcement in the Autumn Budget 2017, the Finance Bill 2019 will introduce a requirement from 6 April 2020 for UK residents to make a payment on account of capital gains tax within 30 days of the disposal of a residential property.

Capital allowances – increase in Annual Investment Allowance

The annual investment allowance will temporarily increase from £200,000 to £1 million for the two years from 1 January 2019 to 31 December 2020. This means there will once again be complicated rules for accounting periods spanning those dates – make sure you speak to us if your cap-ex is likely to exceed £200,000 to ensure you do not inadvertently spend too much at the wrong time in the accounting period.

The special rate of writing-down allowance will reduce from 8% to 6% from 6 April 2019. This applies to cars (other than certain low emission cars), long-life assets, thermal insulation and integral features.

A new Structures and Buildings Allowance is to be introduced for new commercial buildings. Relief is available on eligible construction costs incurred on or after 29 October 2018 at an annual rate of 2% straight-line. On subsequent disposal, there will be no balancing charges or balancing allowances, but the purchaser will continue to claim the annual allowance of 2% of original cost.

Changes to employment allowance

Most employers claim an annual employment allowance of up to £3,000 to offset against their liability to employer Class 1 NICs. From 2020, the allowance will now be restricted to employers with an employer NICs liability of less than £100,000 in the preceding tax year. For companies that are connected, the £100,000 threshold will apply to their aggregated liability.

Increase in charities small trading exemption limits

From April 2019, there will be an increase in the charities’ small trading exemption limits which apply to trading that does not relate to the charities’ primary purpose. The main limit is 25% of a charity’s income, but it is currently £5,000 if total income is under £20,000 and is £50,000 if total income is over £200,000. The limits are being increased to £8,000 if total income is under £32,000 and £80,000 if total income is over £320,000.

Changes to Entrepreneurs’ Relief

The minimum period for which certain conditions must be met to qualify for Entrepreneurs’ Relief, e.g. the period a business must be carried on immediately prior to a disposal, is to be increased from one year to two years. This will apply to disposals on or after 6 April 2019, except that where the claimant’s business ceased before 29 October 2018.

VAT registration and deregistration thresholds

There were rumours that the VAT registration threshold was going to be significantly reduced. However, the Chancellor confirmed that the current VAT registration threshold of £85,000 and the deregistration threshold of £83,000 will be maintained until April

Finally, do call Copia Wealth & Tax if you need advice

It’s important to understand how these areas may impact you and/or your business. Here at Wolverhampton Accountants Copia Wealth & Tax, we are always available to provide support and guidance. All our clients benefit from free telephone access to the Copia team.

If you need to talk then call us today on 01902 783172 or complete the contact form on our website HERE and one of our specialists will get back in touch with you.