Taxaccount; views from the village.

BUDGET SUMMARY 29.10.18

• Hammond said austerity is “finally coming to an end”
• Growth forecast for 2018 was downgraded to 1.3% from 1.5% in March
• Growth forecast for 2019 raised from 1.3% to 1.6% and annual forecasts raised to 1.4%, 1.4%, 1.5% and 1.6% in 2020, 2021, 2022 and 2023 respectively.
• Most economic commentators describe these figures as anything from “poor” to “woeful”

There is much Budget news online. Some of the aspects impacting on individuals and small companies listed below in bullet points.

Remember …other new tax legislation was already planned to come into effect so what’s mentioned below is the new stuff from yesterday.

Hammond had plenty of “will be”, “in the future” and so on. Very little “now”.

Budget plans dependent on a Brexit deal. If no deal then who knows what will happen? Most likely some sort of “emergency” Budget speech next March.

For now …….

Personal tax

• The tax free personal allowance threshold increases from £11,850 to £12,500 in April 2019 (a year earlier than planned).
• The 40% higher rate income tax threshold also increases from £46,350 to £50,000 in April 2019.
• Both rise in line with inflation thereafter.
• Starting tax rate for savings remains kept at £5,000 for 2019/20.

Comment …these tax changes put more in the hands of the higher paid than the basic rate taxpayer though this is mitigated somewhat by increases in National Insurance.

Good examples of that the Budget may mean in individual situations……

https://www.theguardian.com/money/2018/oct/30/budget-2018-what-it-means-for-you

• National Living Wage increasing by 4.9%, to £8.21 an hour, from April 2019.

Capital Gains Tax

• “Lettings relief” can reduce the CGT on the sale of a property that was, at some point, used as your main home but which you have since rented out as residential accommodation.
• In future this relief will only apply where the owner of the sold property was in shared occupancy with their tenant.
• This means that landlords will probably no longer be able to claim the £40,000 lettings relief on their Capital Gains Tax (CGT) bill when selling a qualifying property.
• The change will apply from April 2020.
• In a further tax hike, from April 2020, the 18 months’ “PPR main residence relief” exemption period, on sale of your main home, is to be reduced further to 9 months.

(No changes to the 36-month final period exemption available to disabled people or those in a care home.)

Pensions and ISAs

• The maximum lifetime investment into pensions – the “lifetime allowance” – increases 2019/20 in line with CPI to £1.055 million.
• (no changes to pensions tax relief)
• Individual Savings Account (ISA) annual investment limits remain unchanged at £20,000.

Business equipment investment

• The “Annual investment allowance” (AIA) increases for two years to £1 million for qualifying expenditure on plant and machinery between 1^st January 2019 and 31^st December 2020.

VAT

• VAT registration threshold frozen for a further two years meaning it will remain at £85,000 until 2022.

Other business note

• Reforms too on business rates and the apprenticeship levy.

Stamp duty and housing

• All first-time buyers purchasing shared equity homes of up to £500,000 are to be exempt from stamp duty.
• £500m to be provided for the Housing Infrastructure Fund designed to enable a further 650,000 homes to be built.
• New partnerships with housing associations in England intended to deliver 13,000 homes.
• Guarantees of up to £1bn for smaller house-builders.

Universal Credit

• Work allowances for universal credit to be increased by £1.7bn.
• Hammond says “2.4 million working families with children to benefit by £630 a year”.
• An extra £1bn to be provided to help welfare claimants transfer to the new benefit.
• Chancellor insists this controversial system is “here to stay”.

Other general Budget notes …..

• Beer, cider and spirits duties to be frozen.
• Wine duty to rise by inflation, 8p, in February 2019.
• Tobacco duty will continue to rise by inflation plus 2%.
• A packet of 20 cigarettes up by 33p at 18.00 GMT on Budget day.
• A 10g pack of cigars goes up by 17p.
• Fuel duty frozen for ninth year.
• Remote Gaming Duty increases to 21% for online gambling on “games of chance” from 2019.
• New 2% “digital services tax” from April 2020 on UK revenues of profitable companies with global sales of more than £500m.
• Private finance initiative (PFI) contracts to be abolished in future. New centre of excellence to manage existing deals “in the taxpayer’s interest”.
• An extra £160m for counter-terrorism police.
• An extra £1bn for armed forces, for cyber-capabilities and the UK’s new nuclear submarine programme.
• £10m for mental health care for veterans, to mark the centenary of the Armistice which brought World War One to an end.
• £1m to fund school trips to World War one battlefields.
• £1.7m in Holocaust education programmes to mark the 75th anniversary of the liberation of Bergen-Belsen concentration camp in northern Germany.

• Confirmation of an extra £20.5bn for the NHS over the next five years.
• A minimum extra £2bn a year for mental health. New mental health crisis centres, providing support in every accident and emergency unit in the country. More mental health ambulances and a 24-hour mental health crisis hotline.
• All ONLY if the UK leaves the EU with a deal.
• £10m for air ambulances.
• A £30bn package for England’s roads, including repairs to motorways and potholes BUT ONLY a one-off £400m “bonus” to help schools buy “the little extras they need” “this year”.
• NO announcement of extra funding for main school issues such as staff salaries/recruitment/retention, building repairs or for front line policing.
• Opening the use of e-passport gates at airports, currently available to people from Europe, to those from the USA, Canada, New Zealand, Australia and Japan.
• Air Passenger Duty to be indexed in line with inflation.
• A new tax will be introduced on certain plastic packaging.
• £60m will be provided for planting trees in England.
• £10m will be provided to deal with abandoned waste sites.
• Extra £500m will be provided for preparations for leaving the EU.

Lastly ….a new commemorative 50p coin to be issued to mark the UK’s departure from the EU. No comment.

This is another Making Tax Digital (“MTD”) update  …..the taxman has FINALLY agreed what a good idea it would be to contact all VAT registered taxpayers, advisors and others to warn them about the upcoming start of MTD.

Only 6 months to go before kick off but, hey, better late than never I suppose. I know some will say “too little, too late”.

Their tweet said …”VAT registered businesses with a taxable turnover above the VAT threshold (£85,000) will need to keep digital VAT records and send returns using #MTD compatible software from April 2019.”

There are exceptions and workarounds to make this MTD journey simpler than it sounds but the main issue is that the necessary software to do the job is STILL not available. Many software companies say their products will be “ready” for launch day but who knows what will happen between now and then?

For example Jon Thompson (Chief Exec and Permanent Secretary of HMRC) says that HMRC will make a decision, at their October board meeting, as to whether or not MTD for VAT goes ahead as planned next April.

It might not even happen. (Gets my vote)

 Amongst a raft of “consultation documents” published by HMRC for discussion is this >> new powers enabling HMRC to get your personal financial information without telling you.

No notification would be provided and there would be no right of appeal to the data access.

The bank or any other third party possessing the data to be accessed (including building societies, solicitors, accountants, estate agents and more) would be legally prohibited from telling you that HMRC requested and was given access to your private data.

These powers are not just for tax assessment but also proposed for debt collection purposes and other (unnamed) functions.

These proposals are at the consultation stage before implementation. Any responses from “stakeholders” will be accepted until October 2018.

Interested in the detail? It’s here……
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/724048/Amending_HMRC_s_Civil_Information_Powers_consultation_document.pdf

Might be a good idea to lobby your MP if you don’t agree with this.

…..for those if you who have – or are going to get – a Personal Tax Account be VERY CAREFUL and AVOID the Capital Gains Tax add-on for voluntary “Real time reporting”.

This add-on has NO legal standing, it makes you pay Capital Gains Tax earlier than necessary and causes utter confusion with the Self Assessment Tax Return system.

I could continue listing many more things wrong with this barking mad idea but, hey, that’s put simple enough.

Mr Hammond didn’t announce any new tax measures in his Spring Statement yesterday, 13th March 2018, as, under his new system, such changes will wait till the Autumn Budget.

That said, he did announce 13 consultation documents on a variety of topics including international corporate tax issues, cash and the gig economy, business rates, resolving an Entrepreneur’s Relief share problem, some aspects of VAT and steps to tackle the problem of plastic waste.

Two other issues that may be of direct interest to our readers are outlined below.

ENSURING TAX COMPLIANCE

HMRC feel that people who sell online via platforms such as eBay are not filing Tax Returns or paying tax as they should because of deliberate evasion or lack of knowledge.

Either way HMRC is considering how to change this and encourage/compel everyone to file whatever Tax Returns are due and pay their share of tax and Natioanl Insurance.

Watch out for new laws on that with attendant increases in HMRC powers and more interest, fines and penalty charges for defaulters.

TAX RELIEF FOR SELF FUNDED TRAINING

Costs of training to gain new knowledge are rarely tax deductible. We all know this.

For self employed people IF training merely maintains or updates existing knowledge, WITHOUT acquiring new skills,then tax relief is often available.

For employees their costs of training are usually paid by the employer but, sometimes, that isn’t the case. Ocassionally it is the employees who pay to train themselves.

Where this happens, generally speaking, the employee cannot claim tax relief for the cost of the training.

HMRC estimate that around 860,000 employees self-funded their own training in 2016 and the vast majority of them would not have received any tax relief.

HMRC is considering how more relief can be given for training costs so, hopefully, this is good news on the horizon.

Employers can make small gifts to employees WITHOUT paying tax or National Insurance on the money involved.

The basic rule is that an employer can now provide what are termed “trivial benefits” (e.g. a bunch of flowers, a box of chocolates, a meal out) without having to declare them on the expenses/benefits declaration form P11D and without any tax or National Insurance for either employer or employee.

The employer will also be entitled to claim income tax or corporation tax relief on the cost.

The three key conditions are:

• the trivial benefit must cost no more than £50
• the benefit must not be a reward for services or in any way contractual
• the benefit must not be cash or a cash voucher

You are now asking “Can directors/shareholders in their own company enjoy trivial benefits themselves?”

Yes they can but the new rules impose an exemption limit of £300 if such benefits are provided to a director or “office-holder” of a close* company or to members of their family/household.

* “close” = 5 or fewer shareholders/participators

Maybe get your company to fund your Christmas meal or summer outing? Could do but make sure all rules are followed so HMRC cannot challenge.

As always – discuss with us if you want more advice  but, whatever your plans, we wish you all the best of times in this festive season.

So….that was it. A Budget.

Skipping over all the macro technical stuff, getting down to things that affect people at the sharp end, most personal and company tax rates etc were already set by previous Budgets.

However, the personal allowance will increase in April 2018 to £11,850 and the 40% higher tax rate threshold rises to £46,350. (NOT in Scotland)

One change of note is the Capital Gains “indexation allowance” for companies will be frozen as at January 2018.

The VAT registration threshold is the highest in Europe at £85,000. It remains at that figure for two years.

Enterprise investment Scheme incentives are to be increased for tech start up companies.

Further improvements announced to business rates including steps to mitigate the colloquially named “Staircase” charge. That said there was no announcement about how management of the so-called rates relief already in place will improved.

With effect from April 2019 digital businesses paying royalties to a low tax jurisdiction will be subject to income tax on those payments here in the UK.

On housing there was an announcement to “increase the supply of land” to build more homes, some figures proposed on future building but I sort of switched off there for a moment with a feeling of déjà vu. Previous similar pledges have all failed abysmally so why this one should be any different is beyond me.

Anyway, apparently, the government wants 5 new “garden towns” to be built. No doubt after long research, one or more feasibility studies etc. so don’t hold your breath.

Also on housing first time property buyers will pay NO Stamp Duty Land Tax on purchases up to £300,000 and nothing on the first £300,000 of any property costing up to £500,000.