Budget 2018 - A Summary
A package of measures to stimulate business investment and signal "Britain is open to business", with an increase to Annual Investment Allowance from £200,000 to £1m for two years.
Mr Hammond is raising the personal allowance to £12,500 and the higher rate threshold to £50,000 from April 2019 "one year early". He says it is a "tax cut for 32 million people" putting £130 in the pocket of a typical basic rate taxpayer.
He says: "Our careful management of the economy allows me to go further: So I will raise both the Personal Allowance and the Higher Rate Threshold to these levels from April 2019 delivering our manifesto commitments one year early."
Boost to National Living Wage
Hammond reveals a rise in the National Living Wage by 4.9% in April from £7.83 to £8.21.
He also announces the government will give the Low Pay Commission a new remit for national minimum wage rates beyond 2020, to be confirmed at next year's budget.
Fuel duty frozen, cigarette prices up, but beer and cider stays the same
Hammond announces "a series of measures to help families across Britain with the cost of living".
This includes confirmation of a freeze on fuel duty.
But, the price of tobacco will rise at the rate of inflation plus 2%.
Although, duties of beer and cider will stay the same.
Duties on spirits will also be frozen, with Hammond noting: "We can all afford to raise a wee dram to Ruth Davidson on the arrival of baby Finn."
Hammond says the measures will save 2p on a pint of beer, 1p on a pint of cider, and 30p on a bottle of Scotch or gin.
Some shops get business rates cut by a third
For the next two years all retailers in England with a rateable value of £51,000 or less will have their business rates bill by a third, Hammond announces.
Private sector workers to get same employment taxes
Hammond announces that the off payroll working rules - known as IR35 - will apply to the private sector, after being rolled out in the public sector last year.
But the changes will be delayed until April 2020 - and only to large and medium-sized businesses.
Lettings relief changes
Hammond announces tax changes.
He reveals from April 2020, the Employment Allowance will be targeted at "small and medium businesses with an Employer NICs bill under £100k a year".
He also announces from April 2020 the government will limit Lettings Relief to properties where the owner is in shared occupancy with the tenant, and reduce the final period exemption from 18 months to 9 months.
VAT registration to stay the same for two years
Hammond says he is exploring options to address the "cliff edge effect" of VAT registration.
"I will leave the threshold unchanged for a further two years," he announces.
Landlords Finance Cost Relief
Landlords will no longer be able to deduct all of their finance costs from their property income to arrive at their property profits. They will instead receive a basic rate reduction from their income tax liability for their finance costs.
Landlords will be able to obtain relief as follows:
in 2017 to 2018 the deduction from property income (as is currently allowed) will be restricted to 75% of finance costs, with the remaining 25% being available as a basic rate tax reduction
in 2018 to 2019, 50% finance costs deduction and 50% given as a basic rate tax reduction
in 2019 to 2020, 25% finance costs deduction and 75% given as a basic rate tax reduction
from 2020 to 2021 all financing costs incurred by a landlord will be given as a basic rate tax reduction.
Making Tax Digital for VAT Pilot
A pilot for the new online Making Tax Digital (MTD) for VAT service was launched yesterday (16.10.2018). HMRC will be inviting more than half a million businesses to try it before the new rules come into force from 1 April 2019. Under MTD, around 1 million businesses registered for VAT with a taxable turnover above £85,000 will need to keep their VAT records digitally and file their returns using MTD compatible software.
2018 Budget Predictions
VAT threshold to be Slashed?
Chancellor Philip Hammond is considering slashing the VAT threshold to help raise funding for the NHS. It is thought that £43,000 is the preferred level for Mr Hammond, which is almost half the current rate of £85,000 turnover in a year. The reduced level would drag hundreds of thousands of small businesses into the VAT system.
Increase in personal allowance to be scrapped?
The Chancellor may scrap the previous manifesto pledge to cut income tax in a bid to find an extra £20bn funding for the NHS. In 2015 the conservative party had pledged to increase the personal allowance to £12,500 by 2020.
Pension pots to be raided?
In his 2018 budget, Philip Hammond is expected to raid pension pots to help meet government targets of increasing NHS funding by £20bn by 2024.
Self Assessment Deadlines
Self assessment deadlines are quickly approaching. For the tax year 2017/18 the deadline for paper returns is 31 October 2018. For online returns the deadline is 31 January 2019. Are you ready?
October tax deadlines
5 October 2018 – deadline for Self Assessment registration for the self-employed and freelancers, or additional income earners
If you have recently become self-employed or have received additional income in the last tax year (2017/18) but have yet to make HMRC aware of your change in employment status or income, you must notify them and register for Self Assessment by Friday 5 October.
Missing this deadline will incur penalties. These can be up to 30% of the amount of tax that you owe, so it pays to be prepared.
31 October 2018 – deadline for paper Self-Assessment return for tax year ended 5 April 2018.
Planned tax for self-employed scrapped
A planned tax cut for 2.7m self-employed workers has been scrapped by the UK government.
It said Class 2 National Insurance contributions would not be abolished in this Parliament.
It cited concerns that low-earning self employed people would end up paying more to access the state pension and it would make the tax system more complex.
The Federation of Small Businesses said it was "extremely disappointing" and would hit more than 3m people. The move was set to save millions of workers about £130 a year but there had been concerns that the move would hit more than 300,000 self-employed people earning less than £6,000 a year who were paying the Class 2 NICs voluntarily, in order to access the state pension. They would have faced being moved to Class 3 contributions, raising weekly payments from £2.95 to £14.65.
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Should time spent commuting to work count as part of the working day?
The University of the West of England (UWE) has suggested that this should be the case.
Many UK employees use travel time to start or finish off work, according to a survey carried out by UWE.
It polled 5,000 rail passengers and found that many workers use their commute to reply to emails ahead of the working day, or to catch up on work they did not manage to finish during their normal working hours.
Monitoring tasks performed by employees during their journeys to and from work is an ‘ongoing issue’, according to the survey. Currently, no legal guidance exists on how to monitor and reward employees who work during their commute.
Commenting on the matter, Dr Juliet Jain, Senior Research Fellow at UWE, said: ‘If travel time were to count as work time, there would be many social and economic impacts, as well as implications for the rail industry.
‘It may ease commuter pressure on peak hours and allow for more comfort and flexibility around working times. However, it may also demand more surveillance and accountability for productivity.’
Important tax dates for August 2018
Important tax dates for August 2018:
1 August 2018 – Due date for corporation tax due for the year ended 31 October 2017.
19 August 2018 – PAYE and NIC deductions due for month ended 5 August 2018. (If you pay your tax electronically the due date is 22 August 2018)
19 August 2018 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2018.
19 August 2018 – CIS tax deducted for the month ended 5 August 2018 is payable by today.
HMRC urged to reverse the burden and complexity of the UK tax system
The British Chambers of Commerce (BCC) has urged HMRC to ‘reverse the burden and complexity’ associated with tax administration and compliance.
A survey carried out by the BCC and software company Avalara revealed that 75% of businesses believe the overall burden of tax administration and compliance has increased, when compared to five years ago. 64% of firms surveyed stated that VAT generates ‘the biggest administration and compliance burden’, whilst many businesses reported that the ‘vast array of rules and rates’ can be confusing.
According to the survey, firms also feel under pressure to be ready for the April 2019 introduction of the government’s landmark Making Tax Digital (MTD) initiative. The BCC stated that there is a ‘real need’ to reduce compliance costs, transaction costs and the complexity of business tax. It is calling for HMRC to make compliance easier and improve its process for collecting tax.
‘Companies now routinely cite tax administration and compliance, rather than regulation, as their biggest single source of administrative headaches,’ said Dr Adam Marshall, Director General of the BCC. ‘If the government wants its ‘global Britain’ vision to become a reality, it is time to tackle the huge costs and complexities of the UK tax system, which sap away time and resources that could be better spent raising business productivity and growth.’
HMRC tax investigations into SMEs are 'too intensive'
New research commissioned by HMRC has revealed that more than half of small and medium-sized enterprises (SMEs) believe that HMRC’s tax investigations are ‘too intensive’.
Insurer Professional Fee Protection (PfP), who undertook the research, found that 52% of SMEs believe that tax probes are ‘too rigorous’, while an additional 56% think HMRC investigations are ‘too costly and time consuming’.
PfP warned that tax investigations often prove to be disruptive for SMEs, with many resulting in significant professional fees.
Commenting on the issue, Kevin Igoe, Managing Director of PfP, said: ‘Small businesses think they are getting rough treatment from HMRC and are making this clear. [They] are often at the receiving end of lengthy tax investigations, which can be very disruptive. Many of these businesses also do not have the resources at their disposal to manage an inquiry or negotiate with inspectors.’
According to the research, 48% of SMEs ‘do not believe that HMRC’s penalties are fairly distributed’, and many think that small firms are ‘unfairly targeted’.
PfP also revealed that, in 2016/17, HMRC’s investigation teams collected an additional £16 in taxes for every £1 spent on investigatory staff.
Making Tax Digital
VAT registered businesses with a taxable turnover above the VAT threshold (£85,000) will be mandated to keep digital VAT records and send returns using Making Tax Digital (MTD) compatible software from April 2019.
Training for Self-Employed to be tax deductible?
A government proposal to make training for new skills for the self-employed tax deductible is being welcomed by the Association of Independent Professionals and the Self-Employed (IPSE).
IPSE have said that the tax relief should not be limited to formal qualifications, but also include the training many sole traders need which are specific to their individual trade such as general training on how to run a business – such as marketing or accounting.
IPSE does however, question the necessity of an annual cap on tax relief spending on the self-employed, an issue which has been raised in the consultation papers. Imogen Farhan, IPSE Policy and External Affairs Officer, commented:
“We would also recommend the government follow the lead of many OECD nations by not imposing an annual cap. It is difficult to imagine a cap that would be suitable for all sectors and earning levels. Instead, the government could minimise the risk of misuse by introducing clear rules on the types of training people can undertake.”
Marriage Tax Allowance – What is it?
The marriage tax allowance is a tax break designed to allow you or your partner to transfer one another part of your personal allowance.
Your personal allowance is the amount you can earn tax free every year. For 2018/19 this amount is £11,850.
Being able to transfer over your personal allowance means that you or your partner could save up to £238 in tax this year.
Once you have signed up for marriage tax allowance, as long you continue to meet the following criteria, you will get the tax break every year:
You are married or in a civil partnership.
Either yourself or your partner are a non-taxpayer (earn less than this tax years personal allowance of £11,850).
The other person in the relationship must earn less than £46,350, which is the upper limit of the basic tax rate of 20 per cent.
You both have to be born on or after April 6 1935.
You can still claim the allowance if your partner died after April 2015.
The partner who doesn't pay tax can transfer up to a limit of £1,190 of their unused personal allowance to the other person in the relationship, saving the tax paying partner up to £238 in tax.