We watched our Chancellor Philip Hammond’s second budget, as he committed to spending more on infrastructure projects and stimulating the housing market. This time round, he had to put on a good performance to keep his job, after criticism following his Spring Budget. His jokes were better this time, but there was very little good news on the tax front and some worrying economic figures, particularly the growth forecasts. We already knew about a stamp duty holiday for first-time homebuyers, as this was hotly tipped prior to the Budget but, nevertheless, we were surprised that the duty for such buyers was abolished for purchases up to £300,000.
SDLT Relief For First-Time Buyers
If you are a first-time buyer, and to help you get onto the property ladder and stimulate the housing market, our chancellor announced that, for property purchases completed on or after 22 November 2017, there would be no SDLT payable if the purchase price is below £300,000. His will be a permanent measure rather than a temporary holiday, as if you are claiming the relief, you will pay no SDLT on the first £300,000 of the consideration and 5% on any remainder. No relief will be available to you where the total consideration is more than £500,000. And if you are buying a property in joint names, it must be the first property owned by all purchasers.
Personal Tax Allowance and Higher Rate Limit Increased
Our Chancellor reminded us that his government is committed to increasing your personal allowance to £12,500 in 2020 and the higher rate tax threshold to £50,000. However, your personal allowance for 2018/19 was only increased in line with inflation to £11,850 and the higher rate threshold to £46,350. Up to 10% of your personal allowance (£1,185) may be transferred to one spouse or civil partner, if unused and the transferee is a basic rate taxpayer. This transfer will now be available on behalf of deceased spouses and civil partners, and your claim may now be backdated for up to four years where the entitlement conditions were met.
No Changes in Tax or NIC Rates
Your basic rate of income tax and higher rate remain at 20% and 40% respectively and the 45% additional rate continues to apply to income over £150,000. Although Class 2 National Insurance contributions (NIC), if you are self-employed, are being abolished from 6 April 2019 and “merged” with Class 4 contributions. We note that the Chancellor did not dare mention an increase in the current 9% Class 4 rate this time! We had heard rumours that the dividend rate might be increased. But your dividends will continue to be taxed at 7.5%, 32.5% and then 38.1% depending upon whether they fall into the basic rate band, higher rate band or the additional rate. Your annual ISA investment limit increased to £20,000 from 6 April 2017 and will remain at that level for 2018/19. Your dividends on shares held within an ISA will continue to be tax free.
IR35 “OFF-Payroll” Rules May Be Extended to Private Sector
Although not mentioned in the Budget speech, we observed that the other documents released on Budget day mention the possible extension of the rules for personal service companies in the public sector to workers in the private sector. Our government will consult in 2018 on how to tackle non-compliance with the intermediaries’ legislation (commonly known as IR35) in the private sector. The legislation which currently only applies in the public sector ensures that individuals who effectively work as employees are taxed as employees, even if they choose to structure their work through a company.
Changes to Diesel Company Cars
Company car benefits are based on CO2 emissions data which has encouraged employees to choose diesel cars due to lower CO2 emissions. Our government is trying to reduce the number of diesel cars and will increase the current 3% diesel supplement to 4% from 6 April 2018. As previously announced radical changes to your company car benefit rules are being introduced in 2020. The benefit in kind, if you use electric and hybrid cars, with a range of 130 miles or more on the electric motor, is being reduced to just 2%. That means that your taxable benefit for such a car with a list price of £30,000 would be just £600 a year. Where, you, as an employer, allow staff to charge their own electric car at work, there will be no taxable benefit.
EIS Tax Relief Increased For Investment In Tech Businesses
Our Government will double the amount that you, as an individual, may invest under the EIS in a tax year to £2 million from the current limit of £1 million, provided any amount over £1 million is invested in one or more knowledge-intensive companies. Your annual investment limit for knowledge-intensive companies receiving investments under the EIS and from VCTs will be increased from the current limit of £5 million to £10 million. The lifetime limit raised by such companies will remain the same at £20 million.
R&D Tax Relief Increased
He further announced that the rate of the R&D expenditure credit is being increased from 11% to 12%, in order to support business investment in R&D. This relief is available to companies that do not qualify for the more generous relief available to SMEs.
VAT Registration Limit Frozen
As for the VAT registration, the limit normally increases in line with inflation each year, however it has now been frozen at £85,000 until 1 April 2020. At the same time, the deregistration limit remains at £83,000. We had heard rumours that the VAT threshold would be reduced, so more businesses would be required to charge VAT on their sales. Our country currently has the highest VAT registration threshold in Europe. The introduction of Making Tax Digital (MTD) for VAT in April 2019 will apply to businesses above the registration limit, and freezing or reducing the threshold will bring more businesses in the scope of MTD.
Business Rates Relief For Small Businesses
We know that there has been much lobbying from the small business sector to reduce business rates. Our Chancellor stated that 600,000 small businesses currently benefit from small business rates relief. In order to support the licensed trade from April 2017, pubs with a rateable value up to £100,000 are able to claim a £1,000 business rates discount for one year. This relief has now been extended until March 2019.
Mileage Allowance For Buy To Let Landlords
Another measure hidden away was the proposal that, if you are a buy-to-let landlord, you will be able to claim 45p a mile for necessary visits to your rental properties. This will be as an alternative to claims for capital allowances and deductions for actual expenses incurred, such as fuel.
Dates For Your Diary – Dec 2017 / Jan 2018
|Corporation tax for year to 28/02/2017 unless quarterly instalments apply.
|PAYE & NIC deductions, and CIS return and tax, for month to 5/12/17 (due 22/12 if you pay electronically).
|Deadline for filing 2016/17 tax return online in order to request that HMRC collect outstanding tax via the 2017/18 PAYE code
|Corporation tax for year to 31/03/17.
|PAYE & NIC deductions, and CIS return and tax, for month to 5/01/18 (due 22/01 if you pay electronically).
|Self-Assessment tax return for 2016/17 due, together with balancing payment and 50% payment on account of 2017/18 tax.