A Budget to help families?

The Chancellor Philip Hammond says the Budget will "help families to cope with the cost of living."

So what does this mean for individuals?

Personal allowance and tax rates

For the tax year 2017/2018 the personal allowance for an individual is £11,500 and the basic rate tax limit is £33,500. The additional higher rate is 45% on income over £150,000 and the saving rate is £5,000.

In line with the government’s objective to raise the personal allowance and the higher rate threshold to £12,500 and £50,000 respectively by the end of this parliament, it was announced that the personal allowance for individuals will be increased to £11,850 with the basic rate band being increased to £46,350, with effect from 6 April 2018.

The additional higher rate of 45% remains unchanged from 2017/2018 and will be operated all income over £150,000.

The savings rate remains unchanged from 2017/2018.

As previously announced the dividend nil rate allowance will be reduced from £5,000 to £2,000 from 6 April 2018.

“No real surprises here with fairly modest increases. However, the reduction in the dividend nil rate allowance will adversely affect family company shareholders and individuals with investment portfolios.”

Marriage Allowance extended

There is a small increase in this allowance to £1,185 from April 2018. This is the amount of unused personal tax allowance that can be transferred between spouses, or civil partners, if the person receiving the transfer is not a higher rate tax payer.

From 29 November 2017, the Government will also allow Marriage Allowance claims on behalf of deceased spouses and civil partners, and for the claim to be back dated four years in appropriate cases.

Capital gains tax allowance

For the 2017/18 tax year, the CGT annual exemption for individuals and personal representatives equalled £11,300 and £5,650 for trustees of a settlement.

As of 6 April 2018, these annual exemptions will increase in line with inflation to £11,700 and £5,850 respectively.

Individuals making disposals after 5 April 2018 will be able to use these increased amounts.

Capital gains tax payment window

The government will defer the introduction of the 30-day payment window for gains on residential property disposals until April 2020.

Entrepreneurs’ relief - relief after dilution of holdings

The government will consult in spring 2018 on how access to the relief might be given to entrepreneurs whose holding in their company is reduced below the normal 5% qualifying level as a result of raising funds for commercial purposes by means of issues of new shares.

Abolishing Stamp Duty Land Tax for certain first-time buyers

With immediate effect, first-time buyers will pay no stamp duty on homes costing no more than £300,000.

First-time buyers of homes worth between £300,000 and £500,000 will not pay stamp duty on the first £300,000. They will pay the normal rates of stamp duty on the price above that. This will save £1,660‎ on the average first-time buyer property.

80% of people buying their first home will pay no stamp duty, but there will be no relief for those buying properties over £500,000.

“It will be interesting to see whether the change will help as many commentators are forecasting that it will only serve to push up house prices.”

Pension lifetime allowance increased

The lifetime allowance will increase to £1,030,000 from April 2018.

Individual Savings Account (ISA) annual subscription limits

The ISA annual subscription limit for 2018-19 will remain unchanged at £20,000. The annual subscription limit for Junior ISAs and Child Trust Funds for 2018-19 has been increased in line with CPI to £4,260.

Taxation of trusts

The government has announced that it will publish a consultation in 2018 on the taxation of trusts. It has stated it wants trust taxation to be “simpler, fairer, and more transparent”.

Offshore trusts

Changes will be made to ensure that payments from an offshore trust intended for a UK resident individual do not escape tax when they are made via an overseas beneficiary or a remittance basis user. This will take effect from April 2018.

Requirement to notify HMRC of offshore structures

A consultation response will be published on the proposed requirement for designers of certain offshore structures, that could be misused to evade taxes, to notify HMRC of these structures and the clients using them.

Extending offshore time limits

There will be a consultation in spring 2018 regarding the assessment time limits for non-deliberate offshore tax non-compliance. These will be extended so that HMRC can always assess at least 12 years of back taxes without needing to establish deliberate non-compliance.

The current time limits are usually 4, 6 or 20 years depending on the behaviour that led to the non-compliance. It can take longer to establish the facts where offshore non-compliance is involved but, at the moment, time limits for onshore and offshore cases are the same.

For offshore non-compliance, the time limit will be extended to at least 12 years, whatever the behaviour, to give more time to investigate offshore non-compliance. Where there is deliberate behaviour, the time limit for both onshore and offshore cases remains 20 years.

Making Tax Digital (MTD)

As legislated for in the Finance (No. 2) Act 2017, no business will be mandated to use MTD until April 2019. Only those with turnover above the VAT threshold will be mandated at that point, and then only for VAT obligations. The scope of MTD will not be widened before the system has been shown to work well, and not before April 2020 at the earliest.

Late Submission Penalties and Late Payment Interest

The government will reform the penalty system for late or missing tax returns, adopting a new points-based approach. It will also consult on whether to simplify and harmonise penalties and interest due on late payments and repayments.

Closure of Certificate of Tax Deposit scheme

The government will close the Certificate of Tax Deposit scheme for new certificates on and after 23 November 2017. Existing certificates will continue to be honoured for 6 years.

Faster recovery of Self-Assessment debt

From 6 April 2019 HMRC will use new technology to recover additional Self Assessment debts in closer to real-time by adjusting the tax codes of individuals with Pay As You Earn (PAYE) income.