Philip Hammond delivered his first Autumn Budget last Wednesday. With slow progress on the Brexit negotiations, the Budget concentrated mainly on the economy with little specific tax content.
Some of the more relevant announcements were;
- The increase in the personal allowance in 2017/18 to £11,820 with the 40% rate of tax (the Higher Rate Band) starting at £46,350. The Higher Rate Band had previously started at a much lower level over the past few years and this new level for 2018/19 is effectively putting the Higher Rate band back in line with the Consumer Price Index rate of inflation.
- The removal of indexation allowance on assets sold by companies. From 1 January 2018, indexation allowance will be frozen.
- Despite rumours to the contrary, the VAT threshold was not reduced and will be maintained at £85,000 for the next two years.
- Research and Development tax credit will be increased to 12% from 1 January 2018. If you have developed a new process or product and would like to consider making an R&D claim, please contact us.
- Class 2 National Insurance remains with us for another year and the proposed increase in Class 4 National Insurance contributions from 9% to 10% has been delayed. Additionally, the charging of National Insurance on employment termination payments has also been delayed until 2019.
- For savers, the Individual Savings Allowance (ISA) remains unchanged at £20,000.
Announcements to assist younger members of the population and new voters included;
- The Abolition of Stamp Duty Land Tax on residential purchases up to £300,000 for first time buyers.
- Extension of the Railcard regime offering discounts on rail travel to age 30 (from 25)
- Improvements to Student Loan administration to prevent over-deduction of loan repayments at the end of the loan.
The Chancellor continues to attack polluting vehicles and proposed increasing the diesel supplement for company car tax from 3% to 4% for diesel cars that do not meet the Real Driving Emissions Step 2 (RDE2) standards. Meanwhile, the provision of electricity to employees to charge electric vehicles will not be taxed as a benefit in kind. Van and van fuel benefits will increase in line with inflation.
Fuel duty and alcohol duties were frozen for 2018/19 with increases in tobacco duties above the rate of inflation.
The new tax system “Making Tax Digital” will force some taxpayers initially to make quarterly returns to HMRC. Initially, it will affect businesses with a turnover above the VAT threshold (£85,000) who will need to report under the new system from April 2019 but initially only for VAT obligations. Smaller businesses will be able to opt in if they wish to do so. No business will now be required to use Making Tax Digital until at least April 2019.
The penalty regime is also due for revision and draft legislation will be announced next Summer.
There are still some tax-planning opportunities available and with the changes to the Dividend allowance (for example) set to reduce from £5,000 to £2,000 in 2018/19 we recommend that you contact us to determine how to optimise your tax position for 2017/18. Please do contact Roland, Alison, Susan or myself on 01276 25542 to discuss further.
Liz Noble FCA