Budget 2018 - Private Client key points

The Chancellor, Philip Hammond, presented his second Autumn Budget on Monday 29 October 2018. There was more in the Budget than anticipated, and some of the changes will have a significant impact on companies and individuals.

The key points to consider from a personal tax/private client perspective are:

The personal allowance for the 2018/19 tax year will be £12,500;
The basic rate band for the 2018/19 tax year will be £37,500;
The capital gains tax annual exemption for 2019/20 will be £12,000;
The dividend allowance and savings allowance remains unchanged;
The Government has confirmed it will not abolish Class 2 National Insurance Contributions;
The inheritance tax nil rate band which is currently £325,000 will be frozen until April 2021.

Property disposal

From 6 April 2020, UK residential property disposals made by a UK resident individual will need to be reported to HMRC with 30 days of the completion of the property disposal and a payment on account will need to be made for any capital gains tax due. This will mainly affect individuals who are disposing of a second home or rental property, individuals who make a disposal that will not give rise to a tax liability, such as on a disposal of their main residence, will not be required to make a report.

Private residence relief

Private residence relief is a relief available when an individual sells their main residence and means that, subject to meeting certain conditions, they will not be required to pay capital gains tax on the disposal. From April 2020 two changes will be made to private residence relief:

The final period exemption will be reduced from 18 months to 9 months, although there will be no changes to the 36 months that are available to disabled persons or individuals in a care home;
The current rules regarding Lettings Relief will be reformed so that the relief only applies in circumstances where the owner of the property is in ‘shared-occupancy’ with a tenant.

Further details regarding these changes will be announced by the Government in due course.

The introduction of these changes from April 2020 will have a big impact for individuals who own second homes. Care will need to be taken by individuals who sell properties that have previously qualified as their main residence but have subsequently been let out to third parties, as from April 2020 they will no longer benefit from the generous Lettings Relief rules that was available previously. Any individual who has a second home should take personal tax advice when selling the property to ensure that they are meeting all the new requirements put in place by HMRC from April 2020.

Our full summary focuses on the tax measures which may affect you, your family and your business. To help you decipher what was said we have included our own comments.