Philip Hammond unveiled a series of measures that was more generous than expected such as early increase in personal allowance and higher rate tax thresholds.
To make it easier for you, we have outlined the “golden nuggets” that we think will be of interest to you.
1. Personal Allowances
The changes on personal allowance and higher rate threshold will be implemented a year earlier. Therefore, from April 2019, personal allowance will increase to £12,500 and the higher rate threshold will increase from £46,350 to £50,000.
This means that basic rate taxpayers save £130 per year on tax and higher rate taxpayers will keep an extra £860 per year. Additional rate taxpayers will save £600 with these changes.
2. Principle Private Residence Relief
The Principle Private Residence Relief is a valuable relief that can offer complete exemption against the Capital Gains Tax arising on the disposal of the main or only residence.
The Chancellor will consult on two changes to this relief that will be implemented from 6 April 2020. These are:
- Restriction on the final period that attracts the relief (after moving out of the home and before sale) from the last 18 months to the last 9 months.
There will be no lettings relief (for the period the property is let) unless the owner occupies the property alongside the tenant.
3. Entrepreneur’s Relief
Entrepreneur’s Relief reduces the amount of Capital Gains Tax paid on disposals of businesses or shares in a personal company. This relief allows you to pay tax at 10% on all gains on qualifying assets.
However, the government announced two changes to the rules:
- The minimum qualifying period throughout which certain conditions for Entrepreneurs’ Relief must be met will be extended from 12 months to 24 months for disposals taking place on or after 6 April 2019.
Shareholders must now also be entitled to at least 5% of the distributable profits and of the net assets in a winding up. This is to eliminate the perceived abuse of the current rules.
4. Capital Allowances
The maximum amount of the Annual Investment Allowance (AIA) available to businesses investing in plant and machinery will increase from £200,000 to £1 million for a temporary period of two years when it will revert back to current rates, starting from 1 January 2019.
5. IR35 Rules For Private Sectors
IR35 is a regime of tax legislation that targets ‘workers’ operating through their own personal service companies (PSCs) It requires the PSC to distribute its income as salary to the director/ shareholder in order to avoid additional tax.
Due to the IR35’s complexity, a new regime has been introduced in 2017, switching the obligation to account for PAYE and NIC to the ’employer’. This only applies to the public sector. However, the government now intends for this regime to apply to large and medium sized companies in the private sector from April 2020.
6. Tax Avoidance on Insolvency
Under the current legislation, HMRC is classed as an ‘unsecured credit’. This means that HMRC ranks alongside ordinary supplier and customers of the business. However, the change in law which is applicable from April 2020 will mean that HMRC will stand ahead of holders of floating charges and unsecured creditors.
In order to further eradicate tax avoidance, legislation will be tabled to make directors and other persons involved in tax avoidance, evasion or phoenixism, jointly and severally liable for tax liabilities where there is a risk that the company may deliberately enter insolvency.
7. Council Tax on Empty Properties
Since 2013, councils were given powers to charge a 50% premium on Council Tax bills on long term empty homes and vast majority of councils currently apply a 50% premium on long-term empty houses.
However, it is anticipated that councils will be able to charge 100% premiums from April 2019, 200% premiums from April 2020 and 300% premiums from 2021.
8. Gift Aid Small Donation
The Gift Aid Small Donations Scheme (GASDS) limit has been increased from £20 to £30. This will more likely to apply from 6 April 2019.
9. Minimum Wage
The National Living Wage will increase from £7.83 an hour to £8.21 an hour from April 2019. This will benefit around 2.4 million worker and will be £690 annual pay rise for a full-time worker.
A new railcard for all young people aged 26-30 will be available nationally by the end of the year. The first digital only railcard will offer up to a 1/3 off most rail travel.
NHS funding will increase, including more spending for mental health of up to £2 billion a year by 2023/24.
12. 50p Coin
A commemorative 50p Brexit coin will be available to buy from Spring 2019.