CBW's Michaela Lamb highlights the key announcements in Hammond's first Autumn Budget.
Personal allowance and rates
From April 2018, the personal allowance will increase to £11,850 and the basic rate band will be £34,500, taking the total earnings allowed before reaching the higher rate threshold to £46,350.
Dividend and savings allowances and the saving rate
No changes to any of these allowances were announced in the budget.
The ISA limit remains unchanged at £20,000 for 2018/19.
Non-Residents and Non-Doms
Previously announced legislation will be introduced from April 2018 to ensure that payments from offshore trusts intended for UK resident individuals do not escape tax when they are made via an overseas beneficiary, or taxed on the remittance basis. This will look at capital payments that are made to a close family member of UK resident settlers, and the capital payments will be taxable as if they were received by the settler under these circumstances.
From April 2019, withholding tax on royalties paid from the UK to offshore individuals will be introduced.
Reporting and non-compliance
A consultation will be published in Spring 2018 regarding the extension of the time limits for assessing all offshore cases from the current 4, 6 and 20 years allowed (depending on circumstances) to at least 12 years, where there is non-compliant behaviour. This is to enable HMRC enough time to establish the facts in cases where is it often more difficult to obtain the information, and therefore which usually take longer.
In addition, the response to a recent consultation will be published on 1 December 2017 which looks at the requirement for businesses or intermediaries creating or promoting certain types of complex offshore financial arrangement to notify HMRC of those structures and to provide details of their clients that are using the arrangement.
Non-resident landlord companies
From April 2020, non-resident companies carrying on a UK property business will be chargeable to UK corporation tax instead of income tax. This will apply to both income and to chargeable gains on the disposal of UK properties.
VCTs, EIS and SEIS
Increase in the limits for knowledge intensive companies
From April 2018, individuals will be able to invest up to £2million in EIS (Enterprise Investment Scheme) companies, where at least the excess over the usual £1million is invested in knowledge-intensive companies. The usual £1million limit will apply to all other EIS investments.
Companies that qualify as knowledge-intensive will be able to raise up to £10million per year from SEIS (Seed Enterprise Investment Scheme), EIS and VCT (venture capital trust) investors. This is double the current limit of £5million, although this rate will continue to apply to all other companies. From the date of royal assent, knowledge intensive companies will also be able to measure the age of their company from the date that their turnover first reaches £200,000, which will allow for older companies that start slowly or spend long periods of time in the development phase to benefit from EIS investment.
Various anti-avoidance measures are being introduced, the most significant being that only investments in those companies where the funds invested are genuinely at risk will qualify for the relief in future.
Benefits in kind
The supplement used to calculate the benefit in kind charge on diesel vehicles will increase from April 2018 from 3% to 4% where the vehicle does not comply with RDE2 standards. The chancellor has confirmed that this will only apply to cars and not vans and that this is not intended to be a “white-van tax”.
Where an employer provides electricity to an employee so that they can charge their electric vehicle, this will be a tax -free BIK at least for now.
General van benefit and car and van fuel benefits will increase by the RPI from April 2018.
Scale rates and benchmarking
From April 2019, the existing concessionary travel and subsistence overseas scale rates will be replaced with a statutory scale rate basis for the sake of clarity.
Also from April 2019, HMRC will abolish the current system of receipt checking for subsistence benchmark scale rates. Employers will only be asked to ensure that employees are undertaking the qualifying travel required.
Capital Gains Tax (CGT)
Annual exemption and rates
From April 2018, the annual exemption will increase to £11,700 for individuals and £5,850 for personal representatives and trustees. No changes to the current rates was announced, so these will continue to be 10% and 20% for most gains and 18% and 28% for residential property.
Payment date for CGT on residential property
Currently, UK resident tax payers and non-residents who complete a UK tax return are permitted to pay the CGT due on the sale of residential property at the same time as they pay their income tax – 31 January following the end of the tax year. From April 2020, CGT on all sales of residential property will need to be paid to HMRC within 30 days of completion of the sale.
Changes in mileage allowances for landlords
For accounting periods starting on or after 6 April 2017, landlords will be permitted to claim a mileage allowance calculated as a fixed rate deduction rather than calculating actual costs incurred and capital allowances for the vehicle used. This will simplify the process and encourage more landlords to make the claim for these costs.
No further amendments were announced and the previously announced rates will apply – currently 19% reducing to 17% from April 2020.
Research & development
The current R&D expenditure credit claimed by larger companies will be increased by 1% to 12% for expenditure incurred after 1 January 2018.
As previously announced, this will be brought to an end on 31 March 2018 with no extension having been granted.
Unlike individuals, companies are currently permitted to claim indexation on the disposal of capital assets. The Chancellor believes this to be an anomaly, and so from January 2018 the indexation allowance will be frozen. Indexation up to that date will still be permitted in calculating the chargeable gain.
Annual Tax on Enveloped Dwellings (ATED)
From April 2018, the ATED charge payable on residential property will increase at every level by 3% in line with the CIP.
The current registration threshold of £85,000 and the deregistration threshold of £83,000 will be frozen for the next 2 years (2018/19 and 2019/20).
Joint and several liability for online market places
From the date of royal assent, all businesses trading online will be required to display their VAT reference, and the online marketplaces that control and support the sale (e.g. the likes of Amazon) will be held to be jointly and severally liable for any future unpaid VAT of the UK businesses using their marketplace, where the sales arise from goods that are situated in the UK. This will only affect the online marketplaces where any of the sellers using the marketplace are not compliant with their VAT obligations.
Stamp Duty Land Tax (SDLT)
Abolition of SDLT for first time buyers
With immediate effect, SDLT for first time buyers will be abolished on all purchases of up to £300,000, and on the first £300,000 for properties purchased for up to £500,000. In those cases, the excess over £300,000 will be chargeable at 5%. Properties purchased for more than £500,000 by first time buyers will not benefit.
Relief on 3% surcharge
Again, with immediate effect, a number of reliefs against the 3% SDLT surcharge on second properties will be introduced when certain circumstances apply. Those circumstances will be:
- a court order issued on a divorce or dissolution of a civil partnership prevents someone from disposing of their interest in a main residence;
- a spouse buys the property from their spouse;
- a person buys a property in a child’s name or on a child’s behalf, where they are doing so in their capacity as the deputy of that child; or
- a purchaser adds to their interest in their main residence.
There will be legislation to prevent abuse of the reliefs, which will include the condition that an individual must dispose of the whole of their interest in their main residence and to someone other than to their spouse in order to claim the relief.
From April 2019, SDLT will need to be paid to HMRC within 14 days.
From April 2018, the lifetime allowance will be increased in line with the CPI to £1.03million.
The Government will publish a consultation in 2018 on how to make the taxation of trusts fairer, simpler and more transparent.