Autumn Budget 2017
Prospects for growth, especially for productivity have been downgraded, but the Chancellor was bullish in his forecasts for investment and the Government’s intention to sort out the slow pace of house building in the UK. A few non-tax comments of note were:
• Unemployment at its lowest rate since 1975.
• Chancellor is providing an extra £3bn to prepare for Brexit over the next two years.
• Government to create 5 new garden towns, make better use of land and aim to be building 300,000 new homes a year by the mid-2020s.
• Devolved administrations will have more money to spend. An increase of £2bn for Scotland, £1.2bn for the Welsh Government and £660m for the Northern Ireland Executive.
Our summary of a selection of specific tax changes and other budget announcements for 2018-19 and future years follow.
Personal Tax and miscellaneous matters
Personal Tax allowance
The personal allowances for 2018-19 is £11,850 (2017-18 £11,500). According to HMRC, this means that an average taxpayer will pay £1,075 less tax than in 2010-11.
Income Tax bands, rates and the dividend allowance
The Income Tax bands for 2018-19 have been increased. They are:
• Basic rate band increased to £34,500 (2017-18 £33,500)
• Higher rate band £34,501 to £150,000 (2017-18 £33,501 to £150,000)
• Additional rate, no change, applies to income of more than £150,000.
There is no change in Income Tax rates, and the tax rates applied to dividend income. Readers should note that the present £5,000 tax-free dividend allowance will, as previously announced, be reducing to £2,000 from April 2018.
The Scottish parliament sets the basic rate limit for Scotland meaning that higher rate taxpayers may pay more tax in 2018-19.
Marriage Allowance extended
There is a small increase in this allowance to £1,185 from April 2018. This is the amount of unused personal tax allowance that can be transferred between spouses, or civil partners, if the person receiving the transfer is not a higher rate tax payer.
From 29 November 2017, the Government will also allow Marriage Allowance claims on behalf of deceased spouses and civil partners, and for the claim to be back dated four years in appropriate cases.
Changes will be made to ensure that payments from an offshore trust intended for a UK resident individual do not escape tax when they are made via an overseas beneficiary or a remittance basis user. This will take effect from April 2018.
Abolishing Stamp Duty Land Tax for certain first-time buyers
With immediate effect, first-time buyers will pay no stamp duty on homes costing no more than £300,000.
First-time buyers of homes worth between £300,000 and £500,000 will not pay stamp duty on the first £300,000. They will pay the normal rates of stamp duty on the price above that. This will save £1,660 on the average first-time buyer property.
80% of people buying their first home will pay no stamp duty, but there will be no relief for those buying properties over £500,000.
National Living Wage (NLW) and National Minimum Wage (NMW) increases
From April 2018, the NLW will increase from the present £7.50 per hour to £7.83 per hour.
From the same date, the NMW rates will also increase to:
• £7.38 per hour for 21 – 24 year olds
• £5.90 per hour for 18 - 20 year olds
• £4.20 per hour for 16 and 17 year olds
• £3.70 per hour for apprentices
Fuel duty no change
For 2018, the fuel duty will remain frozen, for the eighth consecutive year.
New railcard for the 26 to 30 age group
No doubt to win back the support of the younger generation, the government will work with the rail industry to introduce a new railcard from Spring 2018.
Duty frozen for most alcoholic drinks
The duty on beer, wine, cider and spirits to be frozen. However, cheap, high strength cider will be subject to a new band of duty from 1 February 2019.
Duty on tobacco products to increase
The duty on cigarettes will increase by 2% above inflation and hand-rolling tobacco by 3% above inflation, with effect from 6pm, 22 November 2017.
Universal Credit (UC) changes
In response to recent adverse publicity the Government has agreed to various changes that are intended to ease the financial hardship for new claimants. They include:
• Households in need, who qualify for UC will be able to access a month’s worth of support within 5 days. This will be funded by an interest free loan that can be repaid over a 12-month period.
• Claimants will be eligible for UC from the day they apply, the present 7-day rule will be scrapped.
• Low-income households affected by areas with higher rent increases will receive an extra £280 on average to meet these higher costs.
Pension lifetime allowance increased
The lifetime allowance will increase to £1,030,000 from April 2018.
Diesel Vehicle Excise Duty (VED) change
From April 2018, the first year VED (car tax) rate for diesel cars that don't meet the latest standards will go up by one band. The Chancellor emphasises this is cars only, and that the money will go to a new Clean Air Fund.
Business Tax changes
Corporation Tax changes
Although there is no change to the rate of Corporation Tax, maintained at 19%, HMRC is to freeze indexation allowance on corporate capital gains for disposals after 1 January 2018.
£64m for construction and digital training courses
The new funding will be split as to:
• £34m to teaching construction skills, and
• £30m towards digital courses using Artificial Intelligence.
Legislation has been revised to be more compatible with commercial arrangements for allocating shares of profit, and to avoid additional administrative burdens for taxpayers. The changes will have effect for the tax year 2018-19 and subsequent tax years.
Business rates changes
From April 2018, business rates will rise by any increase in the Consumer Price Index (CPI) rather than the Retail Prices Index (RPI). The change has been brought forward two years. Historically, the RPI has tended to be higher than the CPI.
Rates revaluations will now be undertaken every 3 years rather than the present 5 years. This will start after the next rates revaluation due during 2022.
Pubs with a rateable value up to £100,000 will continue to receive a £1,000 discount next year.
Venture Capital Schemes
Changes are to be made to the Enterprise Investments Scheme, the Seed EIS and Venture Capital Trusts. The aim is to target Venture Capital Schemes on companies where there is a real risk to the capital being invested, and will exclude companies and arrangements intended to provide ‘capital preservation’.
Incentives to encourage VCTs towards higher risk investments will include:
• removing certain ‘grandfathering’ provisions that enable VCTs to invest in companies under rules in place at the time funds were raised, with effect on and after 6 April 2018;
• requiring 30% of funds raised in an accounting period to be invested in qualifying holdings within 12 months after the end of the accounting period, with effect on and after 6 April 2018;
• increasing the proportion of VCT funds that must be held in qualifying holdings to 80%, with effect for accounting periods beginning on and after 6 April 2019;
• increasing the time to reinvest the proceeds on disposal of qualifying holdings from six months to 12 months for disposals on or after 6 April 2019;
• introducing a new anti-abuse rule to prevent loans being used to preserve and return equity capital to investors, with effect on and after Royal Assent of Finance Bill 2017-18.
EIS and VCTs will also see increased limits for investments in knowledge-intensive companies:
The Government will legislate to:
• double the limit on the amount an individual may invest under the EIS in a tax year to £2 million from the current limit of £1 million, provided any amount over £1 million is invested in one or more knowledge-intensive companies;
• raise the annual investment limit for knowledge-intensive companies receiving investments under the EIS and from VCTs to £10 million from the current limit of £5 million. The lifetime limit will remain the same at £20 million;
• allow knowledge-intensive companies to use the date when their annual turnover first exceeds £200,000 in determining the start of the initial investing period under the permitted maximum age rules, instead of the date of first commercial sale.
The changes will have effect on and after 6 April 2018. This measure is subject to normal state aid rules.
R & D expenditure credit increase
The Government will legislate to increase the rate of the R&D expenditure credit from 11% to 12%, to support business investment in R&D.
This change will have effect on and after 1 January 2018.
Diesel car supplement increase
The diesel car supplement is to be increased from 3% to 4% from 6 April 2018. This will increase the company car tax and car fuel benefit charge (for company cars provided with an element of private use).
This change will apply to all diesel cars registered on or after 1 January 1998 that do not meet the Real Driving Emissions (Step 2) standards.