Trick or Treat? Tax Highlights from Budget 2018
By: Hallie Andrews Business Sales & Reorganisations, Business Tax, Capital Allowances, Capital Gains Tax, Employment taxes, Individuals, Personal Tax, Personal Tax Services, Property Taxes, Research & Development, Succession Planning, Tax Updates, VAT
Here are some of the highlights from the Chancellor of the Exchequer’s 2018 Budget (published on 29 October 2018):
- The Personal Allowance will be raised to £12,500 and the Higher Rate Threshold (i.e. the amount that an individual can earn before paying higher rate tax) to £50,000 in April 2019 – a year earlier than planned. These levels will remain the same in 2020/21, and then increase by CPI going forward.
- The final exemption period for Principal Private Residence Relief (PPR) which provides Capital Gains Tax relief on the sale of your home will be reduced from 18 to 9 months.
- Under the current PPR rules, where you have let a property which at one point was your home Lettings Relief may be available to reduce your liability to Capital Gains Tax. From April 2020, Lettings Relief will be restricted such that it only applies where the owner of the property is in shared occupancy with the tenant. As full PPR applies in cases where the owner shares their property with just one tenant/lodger, the new Lettings Relief will only apply where the owner is sharing their home with 2 or more tenants.
- The government will publish a consultation in January 2019 on an SDLT surcharge of 1% for non-UK residents purchasing residential property in England & Northern Ireland.
- Effective from 29 October 2018, First-Time Buyers’ Relief for SDLT will be extended so that all qualifying shared ownership properties up to £500,000 can benefit. This will be backdated to 22 November 2017.
- Non-UK resident persons who dispose of interests in UK land will be charged to Capital Gains Tax (Corporation Tax for companies) from April 2019.
- Furthermore, non-UK resident persons with a 25% or greater interest in a company which derives at least 75% of its value from UK land will be charged to Capital Gains Tax (Corporation Tax for companies) on disposal from April 2019.
- As a result of the above two changes, ATED-related Capital Gains Tax will be abolished from April 2019.
- Following a consultation, in April 2020 responsibility for operating the off-payroll working rules (also known as IR35) and making deductions will shift from the worker to the end client where the end client is a medium to large private sector employer. These rules were rolled out to the public sector in April 2017.
- Under the current rules, the conditions for Capital Gains Tax relief Entrepreneurs’ Relief must be met for a period of at least 12 months up to the date of sale. From April 2019, this minimum period will be extended to 24 months.
- In addition to the current requirements on share capital & voting rights for Entrepreneurs’ Relief, from 29 October 2018 shareholders must also be entitled to at least 5% of the distributable profits and net assets of the company to claim the relief. This may therefore cause issues for shareholders with alphabet shares unless they have an absolute right to at least 5% of dividends and assets on a winding up.
- In light of comments from CBI, the Annual Investment Allowance (AIA) for Capital Allowances will temporarily be increased from £200,000 to £1m.
- New non-residential structures and buildings will be eligible for a 2% Capital Allowance provided that the contract for construction is entered into on or after 29 October 2018.
- The Writing Down Allowance (WDA) for capital allowances will be reduced from 8% to 6% for assets in the special rate pool from April 2019.
- The amount of payable R&D tax credit that a qualifying loss-making country can receive in any tax year will be restricted to 3 x the company’s total PAYE and NICs liability for that year, from 1 April 2020.
- The VAT threshold of £85,000 will remain unchanged for a further 2 years until April 2022.
- Access to the Employment Allowance (which provides a reduction of up to £3,000 of the employer’s NIC bill) will be restricted to organisations with an employer NIC bill below £100,000.
- Relief for the cost of purchased goodwill will be introduced for businesses with eligible intellectual property from April 2019.
- Business rates will be cut by 1/3 for retail properties with a rateable value below £51,000 for 2 years from April 2019.
- 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.
- Non-UK resident companies that receive UK property income will be charged to Corporation Tax rather than Income Tax, from April 2020. This will deliver more equal treatment for UK and non-UK resident companies in receipt of similar levels of property income.
- Introduction of a new Digital Services Tax for large, established, digital services companies (e.g. search engines, social media platforms, online marketplaces). This will be charged at a rate of 2% on revenues.
- From 1 April 2020, the proportion of capital gains that can be relieved by brought-forward capital losses will be restricted to 50% for large companies (subject to a £5m allowance).
- From April 2019, the upper limit for trading that charities can carry out without incurring a tax liability will be increased from £5,000 to £8,000 where turnover is under £20,000, and from £50,000 to £80,000 where turnover exceeds £200,000.
- The individual donation limit under the Gift Aid Small Donations will be increased to £30. This applies to small collections where it is impractical to obtain a Gift Aid declaration.