Budget 2018: What it means for YOU
There’s been a lot of headlines and news stories about the recent budget announcement, so we thought we would break it down and provide a bit of a commentary. This is probably a bit more useful than just listing out all the changes without addressing what this actually means to businesses and real people. So, what was the consensus?
Overall, it was quite a calm budget, with a lot staying the same. There were a few larger ticket items for big businesses, but it was more tweaking round the edges than wholescale change. It gave a little to most people, especially at the individual and SME level, like focusing on increased allowances for individuals, removing tax burdens from SME’s, and allowing many people to enjoy their drink of choice without additional tax and duty.
However, the government also seemed to listen to public concerns, which was good to see. For example, they brought forward the increase in personal allowance to £12,500 and increased the higher rate tax band to £50,000, though they sneakily also moved up the NI thresholds. Still an overall gain, but less tax and more NI. Also to come was a more comprehensive digital tax for multinational businesses. We all know that many large multinational corporations were able to shift taxable profits into lower tax jurisdictions, but with the proposals to tax income generated in the UK and not profits remaining we will see the UK tax take increasing.
Interestingly, the Chancellor did reserve the right to upgrade his spring statement into a ‘full fiscal event,’ if deemed necessary. What this means in layman’s terms is that: ‘This is how things stand now, but I could change my mind and adjust the budget.’
One of the key reasons is undoubtedly the uncertainty surrounding Brexit. With key decisions due to fall between now and springtime, and all sorts of options (No deal Brexit, customs agreements, etc) still on the table, he obviously wants to keep his options open and be able to anticipate and react to important development. We will have to wait until the spring to see whether the Chancellor will actually stick to what was in the budget. However, it’s very possible that there will be a new set of rules, along with a new budget, given that we will be post-Brexit at that point.
Some of the decisions also sparked a bit of speculation (at least on our part). For example, the change to property and letting relief could potentially cause some short-term shifts in the property market.
Previously, anyone who rents out a property that was once their home knew that there was some capital gains tax relief available whenever they did decide to sell in the form of Letting’s Relief. However, under the new budget, from April 2020, they’ll no longer get the same tax relief. Does this mean that people may deciding to sell their rental property while the relief is still available? And will this cause an increase in properties on the market? The loss of the relief might outweigh any profit that future sellers they could make on a potential sale, so it could incentivise these people to sell their property now, before the change is implemented.
Here’s a short list of what moved and what changed for anyone that wants to know more specifics:
Staying the same
VAT thresholds frozen at £85k until 2022
Corporation tax remains at 19%
Entrepreneurs relief retained but time conditions increased to 2 years
Air passenger duty on short flight frozen
Additional/ extended reliefs
increase of personal allowance to £12,500 and Higher Rate tax banding of £50,000 brought forward by a year
Apprenticeship levy halved for small business
First year allowances for electric charge points extended
Stamp duty relief extended for first time buyers
AIA increased for £250k to £1m for 2 years
Business rates to be cut for SME’s
Removals / retractions/ additional taxes
Tax on plastic packaging that is < 30% recyclable
IR35 to be extended to Private sector from April 2020
Changes to Property letting relief from April 2020
Final period exemption for CGT on PPR reduced to 9 months from 2020
Introduction of a tax on digital services for multinationals
Want to know more?
There are lots of resources out there about the recent budget and what changes were made. If you need more details or you want to talk through these and how it could affect your business, then get in touch with us.