The end of austerity?

As the UK economy continues to grow, with debt levels and unemployment falling, a better than expected windfall from tax receipts meant the Chancellor could spend, spend, spend.

An increased budget of £20.5 billion to the NHS by 2023/24, an extra £1 billion on defence, £30 billion for the roads, £1.7 billion to increase work allowances in Universal Credit, and £1.5 billion to help the High Street were some of the spending measures announced.

With so much spending you would have thought that taxes would have had to rise but that did not really happen. However, there were quite a surprising number of tax tweaks to digest.

Here are a few of the stand out tax points so far:

Income Tax

  • Personal tax free allowance for income tax increased a year earlier than planned to £12,500 from April 2019.
  • Higher rate income tax threshold to rise to £50,000 from April 2019.

Capital Gains Tax and Property

  • Principal private residence relief on your main home tightened further, with the final period ownership exemption halved from 18 months to 9 months. This means vendors will have to sell their homes quicker if they move out whilst still owning.
  • Buy-to-lets get a further bashing with landlords no longer able to claim the £40,000 lettings relief on their capital gains tax liability when they sell a property.

Capital Gains Tax and Businesses

  • Entrepreneurs relief conditions made stricter. The minimum qualifying period for eligibility for the relief increased from 1 to 2 years from 6th April 2019.
  • The definition of “personal company” for entrepreneur's relief tweaked with immediate effect. The change means that disposal of shares on or after 29th October 2018 will only qualify for entrepreneur's relief if the shareholder is entitled to at least 5% of the assets available on a winding up and has a 5% interest in the distributable profits of the company.

Business Tax

  • Annual Investment Allowance, which provides 100% tax relief on capital expenditure, will increase from £200,000 per annum to £1 million per annum for a 2 year period from 1st January 2019.
  • A new capital allowance is being introduced to give a 2% allowance for expenditure on buildings and structures. The allowance takes effect immediately and is similar to the old industrial buildings allowance.
  • New intangibles relief to provide some form of tax relief on the acquisition of goodwill.
  • R&D tax credits reforms for Small and Medium Enterprises. From April 2020 the amount of “payable credit” that a company receives will be capped to three times the company’s PAYE/NIC liability for that year.

Stamp Duty Land Tax

  • First time buyers purchasing shared equity homes of up to £500,000 to be exempt from stamp duty.
  • The time limit for claiming the refund of higher rate of stamp duty where a previous residence is sold after a new one has been purchased to be extended to 12 months.

VAT

  • Once the terms of EU exit are clear the Government will continue to consider ways of easing the impact of VAT registration once the threshold is reached. In the meantime, though the current threshold level of £85,000 to remain in place until April 2022.
  • No new announcements on MTD – Making Tax Digital, so most VAT registered businesses must continue to plan for its introduction from 1st April 2019 with trusts, charities, VAT groups joining from 1st October 2019.

This is only a brief summary of some of the stand out points, so please feel free to get in touch to discuss further.