Autumn Budget Statement
- What it means to you
- For 2019/20, the personal allowance is increased from £11,850 to £12,500 and the basic rate limit from £34,500 to £37,500, so that the level of income at which an individual comes within the change to income tax is extended from £46,350 in 2018/19 to £50,000 in 2019/20.
- The 2019/20 figures will remain the same for 2020/21. After that they will rise with the annual increase in the Consumer Price Index.
- The higher rate limit and the personal allowance income limit remain unchanged at £150,000 and £100,000 respectively for 2019/20.
- The basic, higher and additional rates are all unchanged, as are the rates on dividends and savings income.
- The dividend allowance(£2,000), personal savings allowance (£1,000), starting rate for savings and starting rate limit all stay at their 2018/19 levels.
- The transferable tax allowance for married persons (aka the marriage allowance) automatically becomes £1,250 for 2019/20.
- Other income tax personal reliefs are increased in line with inflation, as is the capital gains tax annual exempt amount which becomes £12,000 from 6 April 2019. Rates of capital gains tax are unchanged, as are income tax rates for trustees.
Capital Gains Tax
With effect for disposals on or after 29 October 2018, a new test will be added to existing tests that determine if a company is an individual’s personal company for entrepreneurs’ relief.
Capital gains tax payment window
The Government will legislate in the Finance Bill 2019 to introduce a requirement for UK residents to make a payment on account of capital gains tax following the completion of a residential property disposal. This will apply to disposals by non-UK residents on or after 6 April 2019 and by UK residents on or after 6 April 2020.
Residence nil rate band Some minor technical amendments are being made to the operation of the residence nil rate band. These will have effect from 29 October 2018.
Private residence relief
From April 2020, two changes will be made to private residence relief as follows:
Digital services tax (DST)
Tackling the tax treatment of digital business is part of the OECD’s base erosion and profit shifting (BEPS) project and the Chancellor has confirmed he remains committed to this process but has proposed the introduction of a digital services tax whilst the BEPS project is finalised. The DST will be 2% tax on revenues generated from search engines, social media platforms and online marketplaces where those activities are linked to the participation of UK users. There will be a £25 million per annum allowance and the DST will only apply to groups that generate global yearly revenues of more than £500 million.
There are several changes to the capital allowance regime for businesses which are as follows:
- The annual investment allowance will temporarily increase from £200,000 to £1 million for the two- year period from 1 January 2019 to 31 December 2020. This does mean there will once again be complex rules for periods of account spanning those dates, and businesses will need to take care that they do not inadvertently spend too much at the wrong time in the accounting period.
- The 100% first-year allowances for energy saving plant and machinery and environmentally beneficial plant and machinery will come to an end on 5 April 2020. The current 100% first-year allowance for expenditure incurred on electric charge-point equipment, which was to have expired on 5 April 2019, is extended to 5 April 2023.
- The special rate of writing-down allowance will reduce from 8% to 6% from 6 April 2019. The special rate applies to cars (other than certain low emission cars), long-life assets, thermal insulation and integral features. For periods of account spanning 6 April 2019, expenditure in the special rate pool will be relieved at a hybrid rate somewhere between 6% and 8%.
- A new Structures and Buildings Allowance (SBA) is to be introduced for new non-residential structures and buildings. Relief will be provided on eligible construction costs incurred on or after 29 October 2018, at an annual rate of 2% on a straight-line basis. SBA expenditure will not qualify for the annual investment allowance.
- The Government will legislate in Finance Bill 2019 to clarify when expenditure on altering land for the purposes of installing plant or machinery can qualify for capital allowances. The intention is to put beyond doubt that the land alteration expenditure qualifies for plant or machinery capital allowances only where the plant or machinery itself so qualifies. This takes effect for capital allowances claims made on or after 29 October 2018.
It had previously been announced that Finance Bill 2019 would introduce a shared occupancy test for rent-a-room relief for 2019/20 onwards. The potential claimant (or a member of his household) would have to use the residence as sleeping accommodation for at least part of the period of the tenancy in order to qualify for rent-a-room relief on the rents. However, it is now announced that this test will not be introduced by Finance Bill 2019 after all.
Extension of first-time buyers relief
First-time buyers relief will be extended to include qualifying shared ownership property purchases in England and Northern Ireland. The first £300,000 on an initial share purchased will not be liable to Stamp duty Land Tax (SDLT). This is whether or not the purchaser elects to pay SDLT on the market value of the property. The balance of the initial share purchased will be chargeable at 5% on amounts over £300,000 with no SDLT chargeable on the lease. There will be no relief on any further shares purchased. This change will apply to relevant transactions with an effective date on or after 29 October 2018 and will also be backdated to 22 November 2017 when the relief for first time buyers was introduced.
SDLT higher rates
The Government will extend the time allowed to amend a tax return relating to higher rates for additional dwellings from three months to twelve months for those who sell their old homes more than 12 months after they buy a new home.
ISAs and Child Trust Funds
The ISA annual subscription limit will remain at £20,000 for 2019/20. The annual subscription limits for Junior ISAs and Child Trust Funds are increased in line with inflation to £4,368 from 6 April 2019.
VAT registration and deregistration thresholds
The current VAT registration threshold of £85,000 and the deregistration threshold of £83,000 will be maintained. The threshold will stay at its existing amount until April 2022.
Legislation will be implemented that ensures that the correct amount of VAT is levied on the amount paid by the customer, regardless of whether the customer pays with a voucher or other means of payment.
VAT fraud in labour provision in the construction sector
The Government will extend the scope of the domestic reverse charge mechanism to include labour provision in the construction sector.
Split payment (alternative method of collecting VAT)
The Government have announced that they will publish a response to their previous consultation on the introduction of a split payment method under which businesses would pay the VAT collected from the customer directly to HMRC.
Charities and charitable giving
- The Government will legislate to increase the charities’ small trading exemption limits. These limits apply to trading that does not relate to the charities’ primary purpose. The main limit is 25% of the charity’s income, but it is currently £5,000 if total income is under £20,000, and is currently £50,000 if total income is over £200,000. In future the limits will be £8,000 if total income is under £32,000 and £80,000 if total income is over £320,000. The changes will have effect on and after 6 April 2019 for unincorporated charities and from 1 April 2019 for incorporated charities.
- The Gift Aid Small Donations Scheme currently applies to donations of £20 or less made by individuals in cash or by contactless payment. This will increase to £30. Parliamentary timetable permitting, the increase will take effect from 6 April 2019.
- The previously announced simplification of Gift Aid donor benefit rules will go ahead from 6 April 2019 as expected.
National Living Wage
The national living wage will increase to £8.21
Car and van benefits
The amount to which the appropriate percentage is applied in determining the taxable benefit of company car fuel is £24,100 for 2019/20 (£23,400 for 2018/19). The cash equivalent of the benefit of a company van for 2019/20 is £3,430 (£3,350 for 2018/19). The cash equivalent of the benefit of van fuel for 2019/20 is £655 (£633 for 2018/19).
IR35: Off-payroll working in the private sector
Responsibility for operating the off-payroll working rules (IR35) in the private sector, and deducting any tax and national insurance contributions due, will move from the individual to the organisation, agency or other third party paying the individual’s personal service company. Small organisations will be exempt. This change will bring private sector organisations into line with public sector bodies and agencies, and will have effect from 6 April 2020.
National insurance contributions (NICs)
Reforms to the NICs treatment of termination payments and income from sporting testimonials, which were originally to be introduced from 6 April 2018 but were then deferred until 6 April 2019, are still further delayed, this time until 6 April 2020.
Most employers can currently claim an employment allowance of up to £3,000 to offset against their liability to employer Class 1 NICs. The Government are to restrict the allowance to employers with an employer NICs liability of less than £100,000 in the preceding tax year. Where employers are connected, the £100,000 threshold will apply to their aggregated liability. This change will take effect from 2020.
Self-funded work-related training costs
Following consultation, the Government are maintaining, but not widening, the scope of tax relief currently available to employees and the self-employed for work-related training costs. Short Term Business Visitors (STBVs) Following consultation on the tax and administrative treatment of STBVs from overseas branches of UK headquartered companies, the Government will widen eligibility for the STBV PAYE special arrangement and extend its deadlines for reporting and paying tax. This will have effect from April 2020.
The predicted changes to pensions tax (reduction of annual allowance and/or taper limit, restriction of relief to basic rate etc.) have not materialised. The lifetime allowance is increased with inflation to £1,055,000.
- The fraction of the gain that is exempt is given by dividing the length of the part period of ownership during which the dwelling-house was the individual’s only or main residence, but inclusive of the last 18 months of the period of ownership in any event (36 months for certain disposals by disabled persons and long-term residents in a care home) by the length of the period of ownership. The 18-month period is to be reduced to 9 months, but the 36-month period, where it applies, will be unchanged.
- Where the dwelling-house in question has at any time in the period of ownership been let as residential accommodation, the part of the gain, if any, which would otherwise be a chargeable gain by reason of the letting is exempt to the extent of the lower of £40,000 and the amount of the gain otherwise exempt. This lettings relief will be reformed so that it applies only in circumstances where the owner of the property is in shared- occupancy with a tenant.