Main points from the budget (29 October 2018)

Posted on by Samantha Nicholson

Here are some of the key points from the budget of 29 October 2018:

Savings

  • The ISA allowance is held at £20,000.
  • The Junior ISAs annual allowance and Child Trust Funds for 2019/20 will be increased in line with CPI to £4,368.
  • National Savings and Investments (NS&I) have announced the minimum investment for premium bonds will be reduced from £100 to £25, effect of the end of March 2019. Furthermore, adults other than parents and grandparents will be able to purchase premium bonds for children under 16.
  • The Lifetime Allowance for pension savings will increase in line with CPI for 2019-20, rising to £1,055,000.

Personal Tax

Please note that tax on income is different for taxpayers who are resident in Scotland, the information does not include Scotland figures.

Personal Allowance

  • The personal allowance will increase from £11,850 to £12,500 for 2019/20.
  • The reduction in the Personal Allowance for those with ‘adjusted net income’ over £100,000 will continue. The reduction is £1 for every £2 of income above £100,000, so for 2019/20 this allowance ceased when adjusted net income exceeds £125,000.

Tax Bands and Rates for 2019/20

  • The basic rate of tax still remains at 20% and applies on taxable income up to £37,500
  • The 40% tax band applies from £37,500 up to £150,000
  • The additional tax band of 45% applies on income over £150,001

National Living Wages (NLW) and National Minimum wage (NMW)

  • NLW will increase by 4.9% (£7.83 to £8.21) from April 2019, for those aged 25 years and over, following the recommendation from the independent low pay commission.
  • NMW will increase from April 2019 as follows:
    • 21 to 24 years old by 4.3% from £7.36 to £7.70 per hour
    • 18 to 20 years old by 4.2% from £5.90 to £6.15 per hour
    • 16 to 17 years old by 43.6% from £4.20 to £4.35 per hour
    • apprentices by 5.4% from £3.70 to £3.90 per hour

Class 2 and 4 National Insurance Contributions

  • The government has recently announced that class 2 NICs will not be abolished for the duration of this Parliament.
  • It was confirmed by the Chancellor in March 2017 that there will be no increased to class 4 NICS during this Parliament.

Dividends

  • The dividends allowance for 2019/20 will remain at £2,000
  • Dividends received above the allowance will be taxed at the following rates:
    • 7.5% for basic rate taxpayers
    • 32.5% for higher rate taxpayers
    • 38.1% for additional rate taxpayers
  • Dividends within the allowance still count towards an individuals basic or higher rate and so may affect the rate at which tax is paid on dividends above the dividends allowance. To determine which tax band dividends will fall into, dividends are treated as the last type of income to be taxed.

Savings

  • The Saving allowance, which was first introduced in the 2016/17 tax year, applies to savings income and the allowance depends on the individuals marginal rate of income tax.
  • Individuals tax at the basic rate will have an allowance of £1,000 (broadly).
  • For higher rate tax payers the allowance is £500.
  • No allowance is available to additional rate tax payers.
  •  Some individuals qualify for a 0% starting tax on savings up to £5,000. However, the rate is not available if taxable non-savings income exceeds £5,000.

Marriage allowance

  • Introduced in April 2015, married couples and civil partners are eligible to transfer some of their personal allowance to there spouse/civil partner. The option is only available to couples where neither pays taxes at the higher or additional rate.
  • The allowance still remains at 10% of their personal allowance.

Rent-a-room relief

  • The relief still remains at £7,500
  • Rent-a-room relief is available to individuals who let furnished accommodation in their only or main residence.

Gift Aid

  • Draft legalisation has been issued to simplify the donor benefits rules that applies to charities who claim gift aid tax relief on the donations made by individuals.
  • From 6 April 2019, the benefits threshold for the first £100 f the donation will remain at 25% of the amount, for gifts exceeding £100, charities can offer benefits up to £25 and 5% if the amount if the donation that exceeds £100.
  • The maximum value of the donor benefit still remains at £2,500.
  • The limit on The Gift Aid Small Donations Scheme (GASDS) will increase from £20 to £30 from 6 April 2019. GASDS applies to small charitable donations where it is impractical to obtain a gift aid declaration and where donations are made by individuals via cash or contactless.

Business Tax

Corporation Tax

  • The current rate of corporation tax is 19% and will remain for 2019/20
  • Corporation tax is planed to fall to 17% for the year beginning 1 April 2020.

Capital Allowances

  • The Annual Investment Allowance will be increased to £1 million in relation to qualifying expenditure incurred from 1 January 2019.
  • A reduction in the rate of writing down allowance on the special rate pool from 8% t 6%.
  • The 100% first year allowance and first year tax credit for products on the energy technology list and water technology list will come to an end from April 2020.
  • The 100% first year allowance for expenditure incurred on electric charger-pint equipment will continue until 2023.

Research and Development (R&D)

  • To help prevent abuse of the R&D by artificial corporate structures, the amount that a loss making company can receive in R&D tax credits will be capped at three times its total PAYE and NICs liability from April 2020.

VAT

  • The registration threshold has been frozen at £85,000 until April 2020.
  • The de-registration threshold has been frozen at £83,000 until April 2020.

Making Tax Digital (MTD) – VAT

  • HMRC is phasing in MTD, which requires taxpayers to move to a fully digital tax system. Regulations have now been issued which set out the requirements for MTD for VAT.
  • Under the new rules, businesses with a turnover above the VAT threshold (currently £85,000), must keep digital records for the purposes of VAT and provided there VAT returns to HMRC using functional compatible software.
  • The Making Tax Digital for VAT will be mandatory from April 2020.
  • For more information, why note read our post on Making Tax Digital – VAT update

Employment Tax

Employment Allowance

  • The employers allowance is £3,000.
  • From April 2020 the allowance will only be available to those employers whose employers NICs bill was below £100,000 in the previous tax year.

Exemption for travel expenses

  • Draft legalisation has been issued which removed the requirement for employers to check receipts when making payments to employees for subsistence using benchmark scales rates.
  • This will apply to standard meal allowances paid in respect of qualifying travel and overseas scale rates. Employers will only be asked to ensure that employees are undertaking qualifying travel. This will come into effect from April 2019.

Off-payroll working (Private sector)

  • The changes to IR35 which came into effect in April 2017 for the public sector will be extended to the private sector from April 2020.
  • Only medium ad large organisation will be subject to this change
  • Responsibility for operating the off-payroll rule will be transferred from the individual to the organisation, agency or third party engaging the worker.

Mileage allowance:

  • Mileage allowance remains the same at:
    • Cars and Vans up to 10,000 miles – 45p
    • Over 10,000 miles – 25p
    • Bicycles – 20p
    • Motorcycles – 24p

Capital Tax

  • Capital Gains Tax remains the same at 10% for any income taxed at the basic rate band and 20% thereafter. Higher rates of 18% and 28% apply for certain gains, such as disposals of certain residential property.
  • Entrepreneur’s relief remains at 10% with a lifetime limit of £10 million for each individual.
  • Capital Gains Tax annual exemption will increase from £11,700 to £12,00 for 2019/20.
  • The Inheritance Tax nil rate band remains frozen at £325,000 and is set to remain frozen until April 2021.

Other

  • Plastic – Single use plastics will be addressed in the resource and waste strategy later in the year. The issue of excess and harmful packaging will be addressed with a tax n the production and importation of plastic packaging which does not contain at least 30% recycled plastic. This tax will be implemented in April 2022.
  • Disposable Cups – The resource and waste strategy will also consider ways of reducing the environment impact of disposable cups. The government does not believe that a levy would be effective at this time but will return to the issue if insufficient progress has been made by businesses already taking steps to address the matter.

This is meant as guidance only. No responsibility for loss occurred by any persons acting/refraining from action as a result of this information can be accepted by the Nicholson & Co (Sheffield) Ltd. It is always advisable to seek advice first.