Today, Philip Hammond presented his last Budget before the UK’s scheduled exit from the EU on 29 March next year. While filled with positive announcements about the UK economy the speech also came with an early warning that, if required, the Spring Statement in March 2019 may turn into a further Budget.
What follows is a summary of the key tax changes announced in the speech that will affect many individuals and businesses. At the time of writing, many of the announcements are ‘headlines only’ and we eagerly await the finer details.
The Budget for individuals
For individuals the big announcement has to be the increase to the personal allowance to £12,500 from 6 April 2019, and an increase to the threshold for higher rate tax to £50,000. This is an acceleration of a party pledge that was originally planned for April 2020 and will present an income tax saving for many.
A less welcome announcement, however, is a reform to the relief from Capital Gains Tax for using a property as your main home commonly referred to as Principal Private Residence (PPR) Relief from April 2020. Generally, the last 18 months of ownership are exempt providing the property has been the main home at some point in time – that exemption period will reduce to nine months. Lettings relief will also be restricted so that it is only available where the landlord and tenant have shared occupation of the property. If you are considering the sale of a property you used to live in then it will be sensible to take advice first.
The Budget for business owners
Business owners have also seen a mixed outcome from this Budget.
The Annual Investment Allowance increases from £200k to £1m from 1 January 2019. This change will be effective for two years only and so the timing of capital expenditure for business owners will be key to ensuring they can maximise relief. As always speak to your adviser before completing a big purchase.
A new Structures and Buildings Allowance will also be introduced, providing relief for capital expenditure on new non-residential structures and buildings.
Entrepreneurs’ relief, which reduces the Capital Gains Tax rate to 10% when selling a business, will be altered. Typically a host of conditions must be met throughout the 12 months prior to disposal and it was announced that this will change to 24 months for sales on or after 6 April 2019. There are also immediate changes to the definition of a ‘personal company’ for shareholders looking to claim relief on the sale of their shares. Immediate advice may be needed by those in the midst of a transaction.
Finally, in April 2020 there is a planned change to the ‘off payroll working’ legislation for the private sector. This follows a change to the public sector in April 2017 and it will only apply to medium and large businesses. In short, the business will have to determine if a contractor should be taxed in the same way as an employee under legislation commonly known as IR35.
While tax legislation is constantly evolving, the golden rule of seeking professional advice before undertaking a transaction remains as true as ever. More information on today’s Budget will follow on our website and please speak to your usual contact at Price Bailey if you would like to discuss any of the Budget announcements in more detail.
This post was written by Michael Morter, a tax specialist at Price Bailey.
We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.