The Chancellor, Philip Hammond, presented his second Autumn Budget on Monday 29 October 2018.
His main message was “austerity is coming to an end” and whilst there were a number of cash bonuses announced for public services, there were also a few key tax “giveaways” that will grab the headlines. However, whilst there were a number of positive changes announced, there was a lot more in the Budget than it first appeared, and some of the changes could have a significant impact on companies and individuals.
Our detailed Budget analysis, which can be accessed by downloading our summary, focusses on the tax measures which may affect you, your family and your business.
However, a summary of what we consider to be the main aspects is set out below.
Entrepreneurs’ Relief
Mr Hammond has announced some discrete but significant changes to the way Entrepreneurs’ Relief (ER) works. The headlines will pick up on the extension from 12 months pre-sale to 24 months (from 6th April 2019) for the conditions to be met, however, an additional condition was brought into effect for disposals of shares from 29th October. Shareholders must now be beneficially entitled to 5% of the equity and 5% of the distributable profits of a company to qualify for ER, as well as 5% of the ordinary share capital and voting rights. Whilst we await HMRC guidance on this, there is a concern in the industry that this may create uncertainty over ER for shareholders in a company which has different classes of shares. We will provide further detail on this as and when it is available, but more information on the changes to ER can be found on our blog.
Private Client
The acceleration of the increase in the personal allowance to £12,500 and Higher rate threshold to £50,000 is a welcome benefit to individual taxpayers, as these increases will now come into effect for the 2019/20 tax year, a year earlier than promised. However, there was a reduction in the capital gains tax exemption for homeowners that let their former home out before selling it, which will hit some taxpayers hard. More details on this can be found here.
Business and other taxes
A number of changes were announced which will impact businesses, both good and bad. On the plus side, businesses will benefit from a 2 year increase in the Annual Investment Allowance limit (the amount of capital expenditure that can be immediately written off against taxable profits), which will be increased to £1m from 1st January 2019. In addition, expenditure on commercial premises from 29th October will benefit from tax relief over 50 years (whereas previously no tax relief was available until the property was sold). These are welcome additions that will encourage capital investment in UK businesses. However, Large and medium sized employers will soon be responsible for determining whether a consultant working through their own company should be treated as an employee for income tax purposes, placing the burden of proof onto the employing company. This is not due to come into force until April 2020 but employers should review practices now to see how this might impact them.
Further details on the impact for businesses can be found on our blog here.
Although a number of changes were announced, there may also be a need for a further Budget in Spring 2019 should Brexit negotiations prove to be unsuccessful. The key message, whether a Spring 2019 Budget is required or not, is that you should seek advice before taking any action, either as a result this summary or otherwise. If you have any questions then our team will be happy to help.
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David Robinson
As a Tax Partner, I advise clients on all aspects of UK tax, ranging from business taxes, transactions and private client matters, helping to achieve the objectives and aspirations of businesses and their owners.
View my articlesTags: Business Taxes
