In this week’s blog, here at Tulip Thistle Accountancy, we take a closer look at some of the key highlights of Yesterday’s Autumn Budget 2017, for both individuals and businesses.
The overall economic outlook has worsened with the Office for Budget Responsibility revising down its forecasts for growth: it expects GDP to grow by 1.5% in 2017 (down from 2% predicted at the Spring Budget in March) and 1.4% in 2018 (down from 1.6%).
Raising productivity is key to boosting economic growth and wages, but growth has “remained stubbornly flat” and continues to be an issue.
The Chancellor announced that over the period 2017-18 to 2020-21, the Scottish budget will be boosted by around £2bn in total. Of this £1.6bn is for capital spending & £0.4bn for resource spending (which covers day-to-day spending, e.g. pay & service delivery). Attached article by the “Fraser of Allandar” Institute at the University of Strathclyde provides further insights & clarifies what is covered by the “Capital Spending” pot of money.
For Scotland the challenge remains how to balance the resource budget with major commitments such as additional support for the NHS, increased funds for childcare and public sector pay increases all to be paid for.
Important to realise is also that two of the “corner stone” announcements, regarding introduction of a new relief for Stamp Duty Land Tax for most first-time buyers & an increased Higher Rate (40%) Tax Band, do not apply to Scotland. We will need to await the Scottish Government’s budget on 14 December to see what, if anything changes for Scotland.
Individuals – Highlights:
- Personal Tax Allowance: increases to £11,850 in 2018/2019 (£11,500 in 2017/2018)
- Scottish Tax Bands: will be set by Scottish Government in its budget on 14 December 2017 (any changes to Tax Bands announced apply to England, Northern Ireland & Wales only)
- National Living Wage (all increases apply from April 2018):
- £7.83/hour (up 33p) for over 25s
- £7.38/hour (up 33p) for 21 – 24 year olds
- £5.90/hour (up 30p) for 18 – 20 year olds
- £4.20/hour (up 15p) for 16 – 17 year olds
- £3.70/hour (up 20p) for apprentices
- Personal Savings Allowances of £1,000 for Base Rate Payer & £500 for Higher Rate Tax payers remain unchanged
- Starting rate for Savings income will remain at £5,000 (assuming all other income does not exceed £16,500 in 2017/2018 and £16,850 in 2018/2019, up to £5,000 in interest income is tax free)
- Dividend allowance will reduce to £2,000 (from £5,000) as previously announced in March 2017 Budget
- Standard ISA annual subscription limit will remain at £20,000 per person, but limits for Junior ISAs and Child Trust funds will increase to £4,620/year from April 2018
- Lifetime allowance for Pensions will increase to £1,030,000
- National Insurance: the implementation of the proposed reforms to the national insurance contributions (NICs) system, to include the abolition of class 2 NICs, will be delayed by a year and will now take effect from April 2019
- Capital Gains Tax: the capital gains tax annual allowance will increase to £11,700 (up £400) for individuals and to £5,850 (up £200) for most trustees of a settlement from 6 April 2018.
- The government’s intention to introduce a 30-day payment window for Capital Gains Tax payments due on the disposal of residential property (not main residence) will be deferred until April 2020.
- From April 2018, diesel cars that don’t meet air quality standards will be hit by additional tax (excludes vans)
- Fuel duty rise for petrol and diesel cars scheduled for April 2018 scrapped
- Tobacco rate increases will apply that will see product costs increasing by 2% above Retail Price Index (RPI) inflation each year (equivalent to 28p on a pack of 20) until the end of the parliament. It was also announced that hand-rolling tobacco will rise by an additional 1% to 3% above RPI inflation rate
- Duty on beer, wine, spirits and most ciders will be frozen, but duty on high-strength “white ciders” to be increased in 2019 via new legislation
Businesses – Highlights:
- Current VAT thresholds will remain unchanged, despite pressure on government to review the rules for VAT registration, as in the UK these are significantly higher than those of any other member state of the EU and Organisation for Economic Co-operation and Development (OECD). The existing limits will remain in place for 2 years from 1 April 2018. However, in response to recommendations from the Office of Tax Simplification, the government will consult on the design of the thresholds.
- Import VAT: the existing accounting for VAT set-up provides a Cash Flow benefit to businesses in that we do not have to account for VAT at the point of entry but as part of the relevant VAT return timescale. The government will now consider what changes are necessary following exit from the EU so that any Cash Flow implications are mitigated.
- Payment with vouchers: the government is to consult on plans to ensure that when customers pay with vouchers, businesses will account for the same amount of VAT as they do for other means of payment
- Making Tax Digital: no changes were announced to the making tax digital (MTD)
timetable. See last week’s blog for more information. HMRC new initiative: “Making Tax Digital” – what’s it all about?
- Business Rates: more expected in the Scottish Government’s budget due on 14 December. Many of the recommendations of the Barclay report have already been accepted, including that business rates evaluations will be carried out every three years in future rather than every five years, and would be based on data from the previous year rather than from two years before
- Corporation Tax rate: will remain at 19% from 1 April 2018
- Company Van & Fuel benefit changes: from 6 April 2018, the van benefit charge will increase from £3,230 to £3,350 and the van fuel benefit charge will increase from £610 to £633.
- Capital Allowances:
- Annual Investment Allowance will remain at £200,000 for 2018-2019 & 2019-2020 Tax Years
- The 100% first-year allowance for businesses purchasing zero-emission goods vehicles or gas refuelling equipment will be extended for a further 3 years (until 31 March 2021 for Corporation Tax & 5 April 2021 for income tax)
- Energy saving first-year allowances scheme (which allows 100% of the cost of an investment in qualifying plant and machinery to be written off against the taxable income of the period in which the investment was made) has been updated, with new technologies added, some removed & several items modified
- Removal of Capital Gain indexation allowance: when a company makes a capital gain on or after 1 January 2018, the indexation allowance that is applied in order to determine the amount of the chargeable gain will be calculated up to December 2017. (Without this measure, indexation allowance would be calculated up to the month in which the disposal of the asset occurs.)
- IR35 / Off-payroll working in the private sector: The Government will consult in 2018 on whether to extend the off-payroll working rules that have applied to the public sector since April 2017 to the private sector (shifting burden of assessing IR35 status to employer)
- Construction Industry: a new reverse charge will be introduced to tackle VAT fraud in labour supply chains in the construction industry. The responsibility for VAT accounting will shift to the recipient of services, from 1 October 2019
- R&D Expenditure Tax Credit: From 1 January 2018, the rate of tax relief available to companies that carry out qualifying R&D and claim the research and development expenditure credit (RDEC) will increase from 11% to 12%.
- Entrepreneur’s relief: the government will consult in spring 2018 on how access to entrepreneurs’ relief might be given to those whose holding in their company is reduced below the normal 5% qualifying level as a result of raising funds for commercial purposes by issuing new shares. Allowing relief in these circumstances would incentivise them to remain involved in their businesses after receiving external investment.
If you would like to discuss how the Autumn Budget 2017 may effect you or your business, please get in touch!
Until the next time!
Charles Donkers (ACMA)