Tax

Budget 2018

Peter Legge Peter Legge

In the last Budget before Brexit and the first on a Monday since 1962, The Chancellor Philip Hammond presented to Parliament on the afternoon of Monday 29 October a Budget which has signalled austerity coming to an end.

Whilst at a pivotal point in the Brexit negotiations, he has a pledged an additional £0.5bn (on top of the £3.7bn previously announced) to assist Britain to prepare for Brexit. He further indicated that an Emergency Budget in the Spring may be required subject to the outcome of the Brexit talks.

For Northern Ireland, we welcome today’s approval of the Belfast Region City Deal of £350 million that is to be matched by the six local councils and with additional contributions from the private sector. There were also pledges of £2 million to help Belfast’s city centre in the aftermath of the Bank Buildings fire and bringing forward the £300 million for shared and integrated education projects.

Key highlights include:

Individuals – Personal tax free allowance will rise a year early from £11,850 to £12,500 from April 2019, together with an increase in the higher rate tax threshold to £50,000. The National Living wage is to also increase form £7.83 to £8.21 per hour.

Capital Investment allowances - The increase of the annual investment allowance from £200,000 to £1 million for the next two tax years will assist with the cost of capital investment. For Commercial buildings (beginning today), businesses will be able to claim the new structures and buildings allowance (SBA) in relation to costs of construction, land alterations and improvements. The current writing down allowances for special rate pool assets (such as integral features and high emission cars) will be decreased from 8% to 6% per annum.

Capital Gains – The calls for Entrepreneurs’ Relief to be abolished was dismissed however the qualifying period were increased from one year to two years.

Pension Relief – Lifetime allowance has increased by CPI to £1,055,000 whilst the annual allowance remains static at £40,000 per annum.

Corporation Tax  - The Chancellor announced innovate measures to tax the ‘FAANGs’, being the multinational internet companies such as the Facebook, Apple, Amazon, Netflix and Google’s of this world. A 2% tax on the revenues based on the value derived by users in the UK. The amount of R&D tax credit that a qualifying loss-making company can receive will be restricted to three times the company’s total PAYE and NIC liabilities. Corporate capital tax losses will also be brought into line with the reformed corporate income loss regime from April 2020.

VAT – The threshold for registration will remain frozen at £85,000 until 2020. A new plastic tax will be introduced on packaging which has not been made from at least 30% recycled plastics.

Employment Status – The rules around the status of individuals paid using personal service companies have been contested in some high profile tax cases and the Chancellor has announced the introduction of provisions which align the IR35 rules for the private sector to the public sector from April 2020.