The first standalone November Budget given by the Chancellor Philip Hammond on Wednesday 22nd November 2017 has received mixed reviews but for our small business and personal clients, there are a number of measures that should be helpful – in particular the anticipated change in the VAT registration threshold not materialising.
The Chancellor described this budget as preparing the economy for post-Brexit life and making the economy ‘fit for the future’. You decide if you think this is the case!
Key changes affecting our clients are as follows:
- Stamp duty has been abolished for first time buyers for residential properties costing under £300,000 giving savings of up £5,000. Furthermore, again for first time buyers, the first £300,000 of residential properties worth up to £500,000 will also be exempt
- £44 billion housing investment: while not all in cash, these various measures should help the building industries move forward
- The feared VAT review that was expected to result in many micro businesses having to register for VAT has been deferred for the next two years meaning that the VAT registration threshold remains at £85,000
- The Personal Allowance for tax increases to £11,850 and the Higher Rate threshold moves to £46,350 from April 2018
- Fuel duty rises are held again and vans are going to be explicitly excluded from the planned increase in vehicle excise duty for diesel vehicles
- Business rates will now increase in line with the consumer price index and the so-called ‘staircase tax’ has been abolished. More frequent valuations should also help and a large number of pubs will continue to benefit from a £1,000 discount for a further year
- There will be a new consultation into ‘off-payroll working in the private sector’ that will also assess the impact of this IR35 tax avoidance legislation on the public sector
- The National Living Wage increases by 4.4% from £7.50 per hour to £7.83 an hour from April 2018
Please see below for further details
The Personal Allowance for 2018/19 will rise to £11,850 and the basic rate band of 20% increases to £34,500. This means the 40% band will start on income above £46,350. The Government still intends to increase these to £12,500 and £37,500 respectively by 2020, meaning an individual can earn up to £50,000 before paying tax at 40%.
As previously announced, the tax-free dividend allowance will reduce from £5,000 to £2,000 from April 2018 for director shareholders.
Duties on beer, wines and spirits is frozen however the government is looking to clamp down on low cost booze like white cider by introducing a new duty band on still cider and perry with alcohol content between 6.9% and 7.5% from April 2019. This will however likely inadvertently impact traditional cider makers.
Vehicle excise duty on the most polluting cars will go up by one band from April 2018. The diesel supplement on cars will increase by 1% but vans are specifically excluded from this. Obviously the definition of 'most polluting' has changed significantly recently. There will also be an investment of £550 million in electric vehicles including funding for research and development
Tobacco minimum excise tax
The new minimum excise tax is £280.15 per 1000 cigarettes taking effect from 6pm on 22nd November 2017 putting up the costs of a packet of 20 by around 49p to average now £10.40 a packet
Tobacco product duty rates
With effect from 6pm on 22nd November 2017, tobacco rate increases applied that will increase by 2% above RPI each year until the end of the parliament and there will be further additional 1-3% above RPI on hand-rolling tobacco
Further new anti-avoidance measures relating to the taxation of income and capital gains accruing to offshore trusts are to be introduced. This will means payments from an offshore trust intended for a UK resident do not escape tax when they are made through an overseas beneficiary or on a remittance basis. These changes will have effect from April 2018
Double taxation relief
This measure makes 2 changes to the double taxation relief (DTR) targeted anti-avoidance rule. The first will remove the need for HMRC to give a counteraction notice before the DTR targeted anti-avoidance rule (TAAR) applies and the second change will extend the scope of one of the categories of prescribed schemes to which the TAAR applies, to include tax payable by any connected persons.
The first change will have effect for returns with a filing date on and after 1 April 2018 while the second change will have effect for payments of foreign tax made on and after 22 November 2017.
There were no further changes announced to Corporation Tax rates but the indexation allowance for capital gains tax will be frozen. Companies will still be able to get relief for inflation until January 2018
The change to using the CPI measure of inflation instead of the RPI will start from April 2018 which is 2 years earlier than previously proposed. Revaluations will also take place every 3 years after the next revaluation
Value Added Tax
After much anticipation of a major change to reduce the VAT threshold to be more in line with Europorean counterparts, the VAT registration threshold of £85,000 will be maintained for the next 2 years. However, a full scale review of this threshold will be undertaken and we expect major changes to be implemented which will probably coincide with the implementation of Making Tax Digital.
R&D tax credits
Research and development tax credit will increase to 12% from April 2018 to encourage more research and development
The National Living Wage
The National Living Wage from April 2018 will rise from £7.50 to £7.83 per hour for those aged 25 or over. The Government’s aim is still to increase this to over £9 an hour by 2020.
Enterprise Investment Allowance
Investment limits for knowledge-intensive companies is to be doubled again to try and encourage further growth.
There were no major giveaways or big surprises but some of the economic data was quite stark:
Raising productivity will be key to boosting economic growth and wages, but growth has 'remained stubbornly flat' and continues to be an issue.
In light of this, the Office for Budget Responsibility has revised down its forecasts for growth now expecting GDP to grow by 1.5% in 2017 (down from 2% predicted at the Spring Budget in March) and 1.4% in 2018 (down from 1.6%).
To help address this problem, the National Productivity Investment Fund, which supports innovation and infrastructure, will be extended by a year and expanded to more than £31bn.
The chancellor also announced a range of investments, including:
- £3bn over 2 years to prepare for Brexit
- £30m to develop digital skills distance learning courses
- funding to support building 300,000 new homes a year by the mid-2020s