Following the announcement of the first Autumn Budget yesterday, we have summarised the key points for business owners and individuals
Personal Allowance increases accelerated
The Chancellor committed to increasing the Personal Allowance from £11,850 to £12,500 from April 2019. This was a pledge in the Government’s election manifesto and was planned to reach this amount in April 2020.
The increase in Personal Allowance will mean that a basic rate taxpayer will pay £130 less in income tax in 2019/20
The higher rate of income tax which is currently £46,350 will also be increased to £50,000 from April 2019.
National Living Wage increase
The National Living Wage will rise by almost 5% in April 2019 from £7.83 to £8.21 per hour for employees aged 25 and over.
Employment Allowance retained for small businesses
From April 2020, the Government will be limiting the Employers Allowance to small firm’s with Employers National Insurance Contributions totalling less than £100,000 per annum.
The current exemption means that employers do not pay the first £3,000 of Employers National Insurance Contributions. It is believed that this decision will ensure the majority of small businesses can retain this exemption.
VAT threshold frozen
The current VAT threshold of £85,000 has been frozen for an additional two years.
There has been fears that the VAT threshold could be cut by as much as 50% prior to the budget but in the leadup to Making Tax Digital together with the Government agreeing trading terms with the EU following Brexit, it is a relief to all that the threshold has been frozen.
Increases in the Annual Investment Allowance
The Annual Investment Allowance has increased from £200,000 to £1 million for the next two years in an attempt to stimulate business investment. This comes into effect from 1 January 2019.
The Annual Investment Allowance allows firms to deduct qualifying capital expenditure from its taxable profits.
Business rates but by a third for smaller retailers
Independent and small retailers with commercial premises with a rateable value of £51,000 or less will have their business rates reduced by a third during the next two years.
Apprenticeship fees halved for small firms
Small first currently pay 10% towards the training of apprentices but from April 2019, this will be halved to 5%.
Entrepreneurs Relief retained
There had been fears that Entrepreneurs relief would be abolished or reduced prior to the budget. These fears were proved unfounded but the qualifying period for the relief has been extended from 12 months to two years in a move to support longer-term investments in fast growing businesses.
In addition to this, the definition of a “personal company” for Entrepreneurs Relief has changed and now an individual must have a real material stake in the company. Simply having 5% of shares (in terms of voting rights) will no longer be sufficient as this was felt to be a misuse and abuse of the rules.
Changes to taxation of the main residence
From April 2020, the rules on private residence relief will be tightened limiting relief to properties where the owner is in shared occupancy with the tenant.
This relief is used to minimise the capital gains tax payable on the sale of a property which has been used as a landlords sole or primary residence and for letting as private residential accommodation.
In addition to this, the final exempt period has been reduced from 18 months to 9 months on the sale of UK properties for main residence relief.
Research and Development
New restrictions on small companies from April 2020 will mean that cash credits instead of being unlimited will be capped. This will be restricted to the PAYE paid by the company and will therefore restrict the benefit of research and development claims by companies that do not have any employees.
IR35 to include private sector from April 2020
The Government confirmed that following the changes to changes to the public sector, it would consult on plans to tackle non-compliance with IR35 off-payroll working rules in the private sector.
Fuel Duty frozen for ninth successive year
The Prime Minister had already confirmed that Fuel Duty would be frozen for a ninth consecutive year earlier this year.
Should you require any further information, please do not hesitate to contact us on 0161 952 4244.