In his Budget Philip Hammond announced that the “era of austerity is finally coming to an end but discipline will remain”.  It was a budget with no nasty surprises which is a relief.  All we need now is a good Brexit deal!  I have highlighted below some of the main headlines which will affect my clients.  The Finance Bill will be published on 7 November 2018 we will provide further detail.

Business taxes

Annual Investment Allowance (AIA) – The amount of qualifying investment in plant and machinery made on or after 1 January 2019 until 31 December 2020 will go up from £200,000 to £1m.

Digital service tax – from 2020 a new 2% tax will apply to digital businesses with annual UK revenues above £25m.  About time!

Employment allowance – From 2020 only employers with NIC bills below £100,000 in the previous tax year will be eligible for EA, which provides up to £3,000 of relief.  This is good news and better targeted at smaller businesses instead of wasting money giving it to large corporations.

Entrepreneurs’ Relief – For disposals from 6 April 2019 the minimum period throughout which the qualifying conditions for relief must be met will be extended from 12 months to 24 months.  In addition to the current requirements on share capital and voting rights, for disposals from 29 October 2018 shareholders must also be entitled to at least 5% of the distributable profits and net assets of a company to claim the relief.  This is a tightening up of ER.

Property tax

Capital gains tax and private residence relief – from April 2020 the final period exemption will be reduced from 18 months to 9 months.  Lettings relief will be limited to properties where the owner is in shared occupancy with the tenant.  More detail is needed on this as it effectively seems to remove the relief in all but the most limited circumstances!

Business rates –  Bills will be cut by one-third for retail properties with a rateable value below £51,000 for 2 years from April 2019 (until the next rate revaluation).

Personal tax

Personal Allowance (PA) and higher rate threshold – The PA and higher rate threshold will rise to £12,500 and £50,000 respectively from April 2019, one year earlier than planned. Both will remain at the same level in 2020-21 and then the PA will increase by Consumer Price Index (there is no corresponding commitment in relation to the higher rate threshold).

Off-payroll working in the private sector – In line with public-sector bodies and agencies, the IR35 extension rules will be applied in the private sector from April 2020. Responsibility for operating the charge will move from individuals to the organisation, agency or other third party engaging the worker, though small organisations will be exempt.  It will apply to Large and medium-sized businesses who are generally defined as those with 50 employees or more and those with either turnover or assets of €10m or more.  This needs to be confirmed.  There will be a further consultation on coming months which is expected to be published in Summer 2019 and HMRC will provide support and guidance ahead of implementation.  Yet more red tape!

Indirect taxes

VAT registration threshold – The current level of £85,000 will remain for a further two years until April 2022. The government will look again at the possibility of introducing a smoothing mechanism to avoid the ‘cliff-edge effect’ for small businesses once the terms of EU exit are clear.

Avoidance and evasion provisions

Insolvency – Taxes collected and held by businesses on behalf of other taxpayers (VAT, PAYE Income Tax, employee NICs, and Construction Industry Scheme deductions) will get preferential treatment on insolvency from 6 April 2020 (the rules will remain unchanged for taxes owed by businesses themselves, such as Corporation Tax and employer NICs). Further, directors and other persons involved in tax avoidance, evasion or phoenixism will be jointly and severally liable for company tax liabilities, where there is a risk that the company may deliberately enter insolvency.

The Autumn statement will take place on Monday 29 October.  Many rumours are swirling including the usual tax grab on pensions.   Off payroll working in the private sector is also likely to be dealt with much to the dismay of the contractor industry.  Lets see!  Watch this space.

We sat down to watch the Budget yesterday with much trepidation given the various rumours swirling around! But fortunately there were minimal changes which would have a negative impact on our clients.

Thankfully Mr Hammond did not the lower the VAT threshold as recommended by the Office of Tax Simplification, which would have been catastrophic for small businesses, but has instead frozen the threshold at £85,000 for the next 2 years. They have also addressed the problems surrounding business rates.

There were small increases in the tax free personal allowance and higher rate threshold.

There was no mention of changes to the pension regime this time around thankfully.

There was no mention of moving “off payroll working” rules currently in operation in the public sector into the private sector but they have announced a ‘careful consultation’ to look at impact on the public sector and this will be published in 2018. I will write a further blog when this is published.

Some highlights:-

• Tax-free personal allowance on income tax to rise to £11,850 in line with inflation in April 2018
• Higher-rate tax threshold to increase to £46,350
• VAT threshold for small business to remain at £85,000 for two years
• Help for first time buyers with a 0% rate of SDLT on the first £300,000 of the purchase price of a home, where the total price paid for the property does not exceed £500,000. If the purchase price is more than £500,000 the exemption will not apply and the normal SDLT rates will be charged.
• Capital gains tax relief for overseas buyers of UK commercial property to be phased out, with exemptions for foreign pension funds
• National Living Wage to rise in April 2018 by 4.4%, from £7.50 an hour to £7.83.
• Existing diesel supplement in company car tax to rise by 1%
• Capital gains tax relief for overseas buyers of UK commercial property to be phased out, with exemptions for foreign pension funds

HMRC have announced that from 4 September 2017, they will stop issuing paper copies of clients’ tax calculations and tax year overviews for mortgage applications, insisting that they have come to an agreement with the Council of Mortgage Lenders for them to accept online print outs.

Up until recently HMRC, at a push, have issued SA302 statements setting out a person’s income and tax for each year and this has been an essential document for the self-employed and members of partnerships obtaining mortgages.

But in the last couple of years HMRC have made it increasingly difficult to obtain SA302’s and there seems to have been a lack of communication between what the mortgage industry requires and what HMRC is prepared to provide. In my experience this has been unsatisfactory as many mortgage brokers and lenders would not accept the substitute SA302 information or were unaware of the procedure.  HMRC refused to provide the information and thus we as Accountants were faced with an accusation of being unhelpful.

As part of its drive towards digital tax HMRC now require every tax payer in this country to open a Personal Tax Accounts (PTA), although this message does not appear to have reached the public at large! Many routine matters can now be dealt with only through PTAs but Accountants cannot yet access clients’ PTAs.

Understandably, many clients either see no need for a PTA if they use an agent, or are confused by the fact that the Agent online service is different from a PTA.

HMRC said that the Council of Mortgage lenders will accept self-served copies of the tax calculation from the HMRC online account or the commercial software used to file the Self Assessment return and that the majority of lenders have now agreed to do so.  I am able to provide these documents from my software and HMRC online account.

If a lender refuses to accept self-serve copies, HMRC suggests that agents check if they are on the List of Lenders who accept them.

In the future, anyone applying for a mortgage will need to either persuade their prospective lender that the new procedure is acceptable, or go through the process to open a PTA.

I am pleased to advise of a few changes:-

I have been joined by a former colleague, Angie Withers, who is Member of the Association of Accounting Technicians and will work alongside my tax expertise helping small businesses with book keeping and accounts. HMRC are keen to have all businesses keeping digital records and Angie is on a mission to show businesses how good online bookkeeping is allowing businesses to track payments and expenses and have financial information at their fingertips  so you know your profitability both in terms of invoices issued but more importantly in terms of cashflow movements.  I am a convert – it is easy to use and helps me to track my business payments on a daily basis.

I am sharing the office with another business, Ferry Financial which provides financial planning services. I have known David Ferry who runs the business for many years and he has made me understand the benefit of long term planning ie. knowing where you want to be in the future and making some effort to plan for it.  This can be by way of insurances, investments, ISA’s and pensions.

Pensions are never out of the news and it seems like the state pension age moves ever further away. If nothing else it pays to keep track of any pensions that you might have accrued in the past (whether final salary or money purchase) and your entitlement to the state pension when the time comes.  There is no doubt that the earlier you start to save for a pension the better the outcome. But its never too late. Pension freedom has opened up opportunities that now makes pension saving a much more interesting proposition for you and your family.  I have recently gone through the exercise of looking at my pensions and I feel in a much better place for the future.

My clients best interests are at the heart of everything that I do and I am delighted to be working alongside Angie and David.

If you would like any more details about Angie or David, please do not hesitate to contact me on Jayne@stratfordtaxstudio.co.uk