30 October 2018

The Autumn Budget Statement 2018: An overview

Philip Hammond’s second Autumn Budget, took place amongst the uncertainty of Brexit, yet had some positives for taxpayers and signalled the first signs of an end to the 'era of austerity'.

The Chancellor announced a series of tax measures that will have mixed implications for individuals and businesses. 

How will the Autumn 2018 Budget affect you and your business? 

Our overview concentrates on the main Budget tax measures, which include:

  • increases to the personal allowance and basic rate band
  • extending off-payroll working to medium/large organisations in the private sector 
  • a temporary increase to the Annual Investment Allowance
  • freezing the VAT registration threshold for a further two years 
  • changes to Entrepreneurs’ Relief and private residence relief 
  • increases in car benefits
  • plans for Making Tax Digital for Business
  • extending the charge to gains on non-UK residents of non-residential UK property

It is important to note, some Budget proposals may be subject to amendment in the 2019 Spring Statement and subsequent Finance Act.

A few key highlights are below. For a full overview of all the changes download our October 2018 Budget Statement pdf here.

  • Personal Tax: The personal allowance is currently £11,850. The personal allowance for 2019/20 will be £12,500.The government has announced that for 2019/20 the basic rate band will be increased to £37,500 so that the threshold at which the 40% band applies is £50,000 for those who are entitled to the full personal allowance. The additional rate of tax of 45% remains payable on taxable income above £150,000.
  • Tax on dividends: In 2018/19 the first £2,000 of dividends are chargeable to tax at 0% (the Dividend Allowance). The Dividend Allowance will remain at £2,000 for 2019/20. Dividends received above the allowance are taxed at the following rates: • 7.5% for basic rate taxpayers • 32.5% for higher rate taxpayers • 38.1% for additional rate taxpayers.
  • VAT threshold freeze: The government had previously announced that the VAT registration and deregistration thresholds would be frozen at £85,000 and £83,000 respectively until April 2020. The government has now announced that this freeze will continue for a further two years from 1 April 2020. 
  • Capital Gains Tax (CGT): The current rates of CGT are 10%, to the extent that any income tax basic rate band is available, and 20% thereafter. Higher rates of 18% and 28% apply for certain gains; mainly chargeable gains on residential properties with the exception of any element that qualifies for private residence relief. The CGT annual exemption is £11,700 for 2018/19 and will be increased to £12,000 for 2019/20.
  • Entrepreneurs’ Relief: With immediate effect for disposals on or after 29 October 2018, two new tests are to be added to the definition of a ‘personal company’, requiring the claimant to have a 5% interest in both the distributable profits and the net assets of the company. The new tests must be met, in addition to the existing tests, throughout the specified period in order for relief to be due. The existing tests already require a 5% interest in the ordinary share capital and 5% of voting rights.
  • Inheritance Tax (nil rate bands): The nil rate band has remained at £325,000 since April 2009 and is set to remain frozen at this amount until April 2021. IHT residence nil rate band From 6 April 2017 a new nil rate band, called the ‘residence nil rate band’ (RNRB), has been introduced, meaning that the family home can be passed more easily to direct descendants on death. The RNRB is being phased in. For deaths in 2018/19 it is £125,000, rising to £150,000 in 2019/20 and £175,000 in 2020/21. Thereafter it will rise in line with the Consumer Price Index.
  • Making Tax Digital (MTD): HMRC is phasing in its landmark Making Tax Digital (MTD) regime, which will ultimately require taxpayers to move to a fully digital tax system. The new rules have effect from 1 April 2019 where a taxpayer has a ‘prescribed accounting period’ which begins on that date, or otherwise from the first day of a taxpayer’s first prescribed accounting period beginning after 1 April 2019. HMRC has recently announced that the rules will have effect for some VAT-registered businesses with more complex requirements from 1 October 2019. Included in the deferred start date category are VAT divisions, VAT groups and businesses using the annual accounting scheme. We can help you make your accounting and tax digital. 

Download our in-depth summary of the new tax measures announced in the Autumn 2018 Budget. This includes a breakdown of proposed rates and allowances for the next tax year. 

Taxing questions?

If you have questions about how the Budget could affect you and your business, contact our expert tax advisors on 0115 964 8860 or email enquiries@rwbca.co.uk for an informal chat. 

The views provided in this article are for general information purposes only. Nothing in this article represents advice of any nature whatsoever. Accordingly, RWB CA Limited does not accept any liability or responsibility for the information contained in this article or any decision or other action that may be taken in reliance upon the information contained within it. RWB CA Limited accepts no responsibility for any errors of fact or opinion and assumes no obligation to provide you with any changes to its assumptions.