Category: Budget Summary

The degree of speculation about this year’s Budget announcements was further compounded when the Office of Budgetary Responsibility uploaded their report on Budget changes prior to Rachel Reeves announcements to Parliament.

However, there are to be no changes to the main rates of Income Tax, NIC and VAT that affect wage earners across the UK, but the Budget Report highlights numerous changes to plug the gap in government finances. We have set out below the most impactful of these changes as they affect business owners and UK taxpayers.

Individuals — what changes and what to watch

Personal tax thresholds remain frozen

• The thresholds for income tax and employer National Insurance contributions will be frozen until at least April 2031 (with earlier freezes extended further by the new Budget).
• This “fiscal creep” means that as wages (or inflation) rise, more people will effectively pay higher rates of tax or move into higher tax bands even though nominal rates remain unchanged. 

Higher tax on investment, property and savings income

• Tax rates on dividends, property income and savings income are being increased by two percentage points. The dividend changes are due to take effect from April 2026 and the property and savings income a year later from April 2027. The dividend changes only apply to the basic and higher rate bands.
• Existing allowances (for example on dividends and savings) will continue to provide protection for people with low to moderate amounts of such income.

ISA reforms will see some limits reduced

• From 6 April 2027, the annual cash limit for ISA savings will be reduced to £12,000. The subscription limits for ISAs overall will remain at £20,000. Savers aged 65 and over will continue to be allowed to save up to £20,000 in a cash ISA each year. 

Two-child limit for Universal Credit (UC) to be scrapped

• The two-child limit introduced back in 2017 is to be scrapped from April of next year. The government has said that removing the two-child limit will lift 450,000 children out of poverty. There had been a concerted campaign over many years to have this cap removed.

Pension contributions via salary sacrifice will be limited

• For individuals using salary sacrifice schemes to contribute to pensions tax-efficiently, the relief will be capped so that only the first £2,000 of pension contributions per person per year remain exempt from National Insurance. Contributions above that threshold will be subject to NICs from 2029.
• This change is likely to hit higher earners and those with larger pensions contributions more heavily.

A new council-tax surcharge for high-value properties

• From April 2028, homes valued at over £2 million will attract a “High Value Council Tax Surcharge”.
• The surcharge will be banded: a property worth £2 million to £2.5 million will incur a surcharge of £2,500; properties worth more will pay higher surcharges (up to £7,500 for properties valued over £5 million).
• The surcharge will be collected locally (with council tax) but the revenue will go to central government.

New taxes on electric vehicles, online gambling and imports

• A new per-mile Electric Vehicle Excise Duty (eVED) will be introduced for battery electric cars and plug-in hybrids from April 2028. This is intended to replace some of the lost revenue from fuel duty. The rate will be 3p per-mile for fully electric vehicles and 1.5p for plug-in hybrids.
• The government is removing the customs-duty relief for low-value imports (£135 or less), a move aimed at levelling the playing field for UK retailers competing with foreign-based online sellers. This change will take effect from March 2029 at the latest.
• There will be tighter rules for VAT on ride-sharing taxi apps (preventing misuse of a scheme intended for tour operators).
• Changes to the taxation of online gambling are also on the way. This includes an increase in Remote Gaming Duty from 21 per cent to 40 per cent from 1 April 2026 and the abolishment of Bingo Duty from the same date.

Other changes with possible future effects

• Some changes to Capital Gains Tax for non-resident individuals, share exchange/reorganisation rules, and inheritance-related trust charges for former non-domicile residents were also announced.

Businesses — what changes and what to watch

Business rates relief and targeted support for certain sectors

• The government plans to make permanent lower business rates for over 750,000 retail, hospitality and leisure properties amounting to nearly £900 million per year from April 2026.
• A support package worth £4.3 billion will help businesses with rate bill increases following revaluations from April 2026.
• For film studios, 40 per cent business rates relief will be maintained for ten years, until 2034. 

Corporation tax, capital allowances and investment incentives adjusted

• Corporation Tax remains capped at 25 per cent for the duration of this Parliament.
• Writing-down allowances (the tax relief businesses claim when they buy capital items not qualifying for “full expensing”) will be reduced from 18 per cent to 14 per cent from April 2026, making it marginally less attractive to invest in some capital items unless they fall under the full expensing rules.
• From 1 January 2026, the government will introduce a new 40 per cent First Year Allowance for main rate expenditure. This will apply to most spending on assets for leasing and expenditure by unincorporated businesses.

Withdrawal of certain reliefs and tightening of anti-avoidance rules

• Relief for gains on disposals to Employee Ownership Trusts is being cut, from 100 per cent to 50 per cent. That reduces the appeal of these trusts as a tax-efficient exit strategy or ownership structure for both entrepreneurs and businesses.
• The Budget introduces new anti-avoidance rules addressing certain non-derecognition liabilities, among other technical reforms.

Changes to imports, compliance and VAT arrangements

• The removal of the low-value consignment relief (which previously exempted many foreign online retailers from customs duties on small-value imports) may benefit UK bricks-and-mortar retailers by levelling the playing field.
• More robust HMRC compliance and administrative reforms are planned, which the government expects will reduce the tax gap (the difference between what is owed and what is collected).

Minimum wage changes

• The National Living Wage (NLW) will rise from £12.21 to £12.71 per hour on 1 April 2026, a 4.1 per cent increase. The National Minimum Wage (NMW) for 18-20 year olds will also increase from £10.00 to £10.85, an 8.5 per cent increase, increasing pay by up to £1,500 a year. This change is part of efforts to narrow the wage gap between younger workers and those on the NLW. Additionally, the NMW for 16-17 year olds and the Apprentice Rate will both rise from £7.55 to £8.00 (a 6 per cent increase).

What this means in practice for different types of taxpayers

For a middle-income employee

If you are a typical employee with mainly salaried income and modest savings or investment income, the freeze on thresholds may slowly push more of your earnings into higher rate bands, reducing your disposable income over time. If you rely on dividends or rental income, your after-tax return may suffer due to the higher rates. Pension contributions made via salary sacrifice may lose some of their attractiveness if they exceed £2,000 per year, but modest savers should be relatively unaffected.

For higher earners, property owners, and investors

If you own a high-value home, rental property, or significant investments, these changes may hit you harder. The council-tax surcharge on expensive properties and the higher rates on investment income make clear that future tax burdens will increasingly fall on wealth, capital, and savings rather than earned income. Pension-savings advantages for high earners are reduced. For business owners, particularly those using or considering Employee Ownership Trusts, the reduction in reliefs may diminish some previously attractive exit or succession planning strategies.

For small businesses, investors and growth companies

The maintenance of Corporation Tax at 25 per cent provides some certainty, but reduced capital allowances and fewer reliefs may raise the effective tax cost of certain investments. On the plus side, support for high-streets (lower business rates for retail, hospitality, leisure) and targeted reliefs (e.g., for film studios) offer relief for businesses in those sectors. The removal of import-duty relief for low-value imports could benefit UK retailers by levelling the competitive field.

Broader context and likely economic impact

• The government expects these measures to raise around £26 billion per year by 2029–30, making this among the largest medium-term tax increases in recent decades.
• As a result, the overall tax take is projected to reach a record 38 per cent of GDP by 2030–31.
• Some planned reliefs and public spending measures are intended to offset cost-of-living pressures: for example, cuts to energy bills, freezing rail fares, and support for households on lower incomes.

What to keep an eye on

• Implementation: Many changes (pension-salary sacrifice cap, high-value property surcharge, vehicle mileage levy) come in over a number of years. The detail of how they will be applied may affect their actual impact.
• Behavioural responses: As thresholds remain frozen and investment incomes are taxed more heavily, individuals may shift the balance of their income (more salary, less dividends, changes to pension contributions) which could reshape personal tax planning strategies.
• Business planning and investment: Reduced writing-down allowances and withdrawal of some reliefs may influence decisions about capital expenditure, timing of investments, and business structure (especially for those considering Employee Ownership Trusts).
• Compliance and administration: The government’s push to tighten compliance and close loopholes may mean higher scrutiny for individuals and businesses, particularly around imports, VAT, and offshore arrangements.

Spring Statement 2025: Key Tax Measures and Modernisation Initiatives

Chancellor Rachel Reeves’ Spring Statement 2025, delivered on 26 March, arrived at a critical point for the UK economy. With the Office for Budget Responsibility downgrading growth forecasts to just over 1% for the year and borrowing costs climbing, the tone of the statement was more pragmatic than bold. The Chancellor focused on reforming the tax system, encouraging economic resilience, and driving public sector efficiency.

What she did not deliver is an easing of the Employers’ NIC and other business tax increases timed to commence April 2025.

Several key announcements were of direct interest to taxpayers, business owners, and advisers – especially those connected to tax compliance, digitalisation, and HMRC powers. Below is a summary and commentary on the most relevant developments.

Making Tax Digital: A cautious but firm step forward

The most significant administrative update was the proposed, phased extension of Making Tax Digital for Income Tax (MTD for IT). The new timeline will see sole-traders and landlords with income over £20,000 required to join from April 2028. Those earning less than £20,000 remain outside of the scope for now, though the door remains open for further inclusion after evaluation.

Key points:

• Quarterly digital updates will be required
• Use of MTD-compatible software is mandatory
• HMRC is promising better support, including for digitally excluded taxpayers

This longer runway reflects lessons from the somewhat bumpy rollout for VAT. Reeves has chosen to pair technology adoption with a broader simplification agenda, aiming to reduce burdens on small businesses. However, concerns remain that HMRC's own systems are not yet robust enough to support a seamless experience.

Comment: While the delay gives agents and taxpayers more time to prepare, the widening of the scope will demand strong communication and software readiness. The risk is that smaller landlords and sole traders will be hit by costs and confusion unless HMRC delivers better outreach and support tools than previously managed.

Closing in on promoters of tax avoidance

The government has published a consultation titled “Closing in on Promoters of Marketed Tax Avoidance,” targeting schemes that promise to artificially reduce tax liabilities. This builds on previous reforms but includes:

• New penalty models for scheme promoters
• The introduction of strict liability criminal offences for serial promoters
• Enhanced HMRC powers to publish names of enablers earlier in the process
• Measures to disrupt schemes at the planning stage, not just after the fact

This is part of a broader policy trend that shows HMRC is shifting focus from reactive enforcement to proactive disruption. The goal is to make the UK an increasingly hostile environment for tax avoidance outfits operating on the margins of legality.

Comment: There's a strong political consensus behind these moves. But care will need to be taken to avoid unintended effects on legitimate tax planning and professional advisory services. Many practitioners will welcome stronger action against cowboys but will be watching closely to ensure that standard commercial tax advice isn’t caught up in the dragnet.

Behavioural penalties reform

HMRC has launched a consultation on overhauling its behavioural penalties regime, which applies to errors in tax returns or failures to notify chargeability. The key aims are to:

• Simplify the rules, which are widely considered complex and hard to apply consistently
• Introduce clearer thresholds for when penalties apply
• Make penalties more proportionate and responsive to actual behaviour, such as whether a taxpayer took reasonable care

This is long overdue. The current system penalises errors and failures inconsistently, especially where reasonable care or human error can be demonstrated.

Comment: Most tax advisers will support efforts to make penalty regimes clearer and fairer. A shift towards a more education-first model could help reduce errors without overly penalising honest mistakes. The final shape of these reforms will depend heavily on the responses gathered during consultation.

Research and Development tax relief: Advance clearance proposals

The R&D tax relief regime continues to be a hot topic. While the merger of SME and RDEC schemes has already taken place, a new consultation explores the option of introducing advance clearances for R&D tax claims.

This could allow businesses to:

• Secure upfront agreement from HMRC on whether their projects meet R&D criteria
• Reduce the need for post-claim reviews and enquiries
• Improve certainty and reduce fraud and error, which have dogged the scheme

There’s no firm policy yet, but HMRC is clearly seeking a route to streamline processes and prevent abuse – especially after high-profile clampdowns on rogue advisers in the R&D claims space.

Comment: For legitimate claimants, this could be an excellent development. Knowing in advance whether work qualifies would save time, money, and stress. However, the devil will be in the detail: any advance clearance process must be accessible and efficient, or it risks becoming a bottleneck in its own right.

Better use of new and improved third-party data

Another forward-looking move is HMRC’s proposal to improve how it collects and uses third-party data under its bulk data-gathering powers. The aim is to:

• Expand sources of data that HMRC can draw upon
• Improve data quality and accuracy
• Use data more effectively to pre-fill returns, prompt compliance, and detect anomalies

Examples might include:

• Gig economy platforms providing earnings information
• Banks and payment processors offering transaction-level insights
• Real-time property income data from letting platforms

This is similar to pre-filling tax returns in some Scandinavian countries and could drastically improve tax administration if handled correctly.

Comment: As always, balance is key. The idea of reducing error through better data is sound, but privacy and data security must be front and centre. If HMRC starts collecting more data, it must also improve how it explains what it holds, and how it uses it.

Enhancing HMRC’s powers over non-compliant tax advisers

Alongside its focus on avoidance schemes, HMRC is consulting on tougher measures against tax advisers who facilitate non-compliance. This includes:

• New civil and criminal sanctions
• Expanding information powers to uncover hidden adviser-client relationships
• Public naming of advisers with track records of enabling tax avoidance

This aligns with a broader international trend towards holding professional enablers accountable, especially in high-value tax fraud cases.

Comment: While the vast majority of tax professionals are diligent and compliant, there’s an appetite within HMRC to weed out persistent offenders who enable grey-market schemes. The challenge is setting clear definitions so that robust, legal tax planning is not conflated with abusive avoidance.

Broader fiscal context and spending commitments

Outside of tax, the Spring Statement confirmed the government’s commitment to:

• A defence spending increase to 2.5% of GDP by 2027
• £3.25 billion for a new public sector transformation fund focusing on AI and tech
• Further work on the childcare and work incentives agenda to encourage people into employment

The welfare reform package – including changes to Personal Independence Payments and Universal Credit – has drawn criticism from some quarters, particularly disability rights groups. However, the Treasury is standing firm on needing to reduce what it calls "unsustainable welfare spending."

Final thoughts

Spring Statement 2025 didn’t deliver any dramatic tax rate changes or giveaways, but that was never likely. Instead, it focused on long-term system modernisation, stricter enforcement, and targeted reforms that could reshape how HMRC interacts with taxpayers and advisers.

For tax professionals and small business owners, the key takeaways are:

• The expansion of MTD for IT is real, though delayed
• Compliance standards are being tightened, with emphasis on behaviour and third-party data
• HMRC wants to be more proactive, both in stopping avoidance and in supporting legitimate claims, like R&D
• The next few years will require investment in systems, understanding of HMRC’s new powers, and ongoing engagement with consultations

None of these changes will happen overnight, but the direction of travel is clear: more digital, more data-driven, and more interventionist.

The long awaited, much anticipated and dreaded first Budget of the new Labour government was delivered to Parliament yesterday – 30 October 2024 – by the Chancellor, Rachel Reeves.

We now know where the funds will come from to finance investment and growth, and the vaunted tax increases are no longer speculative, we have the detail. 

The impact of the proposed £40bn of tax increases are summarised below.

What we knew before the Budget announcements

The following announcements were made before the Budget:

National Living Wage (NLW): 
The NLW, which applies to workers aged 21 and over, is set to increase to £12.21 per hour from April 2025, marking a rise from its current rate of £11.44. 

National Minimum Wage (NMW): 
Rates for 18 to 20 year olds will increase from £8.60 to £10 per hour. The increase in the 18-20 year old rate narrows the gap between that and the NLW, in anticipation of the adult rate being extended to 18 – 20 year olds in future years.

Non-Dom Tax Rules: 
New restrictions on non-domiciled tax statuses are set to tighten. These changes, taking effect in April 2025, will limit non-domiciled tax benefits to an initial four years of UK residency for those previously non-resident, potentially broadening the tax base.

From 6 April 2025, the government will introduce a new residence-based system for Inheritance Tax and scrap the planned 50% reduction in foreign income subject to tax in the first year of the new regime.

For Capital Gains Tax purposes, current and past remittance basis users will be able to rebase personally held foreign assets to 5 April 2017 on a disposal where certain conditions are met. Overseas Workday Relief will be retained and reformed, extending to a 4 year period and removing the need to keep the income offshore.

The amount claimed annually will be limited to the lower of £300,000 or 30% of the employee’s net employment income. 

The government is extending the Temporary Repatriation Facility to 3 years, expanding the scope to offshore structures, and simplifying the mixed fund rules to encourage individuals to spend and invest their FIG in the UK. 

VAT on Private School Fees: 
Starting January 2025, private school fees will be subject to 20% VAT. Alongside the removal of charitable rates relief on private schools, these moves will increase operational costs for these institutions.

Abolition of Furnished Holiday Lettings Tax Regime: 
From April 2025, the tax benefits associated with Furnished Holiday Lettings (FHL) will end, potentially affecting property owners reliant on this tax relief.

Income and gains from a FHL will form part of the person’s UK or overseas property business. These changes will take effect on or after 6 April 2025 for Income Tax and Capital Gains Tax and from 1 April 2025 for Corporation Tax and for Corporation Tax on chargeable gains. 

Other Budget Personal finance changes

Income Tax
There are no changes in the rates of Income Tax and the thresholds at which the higher (40%) and additional (45%) rates apply. As we have commented before, the freezing of the thresholds means that increases in earnings to compensate for inflation will “drag” individuals into tax or the higher rates of tax.

As an acknowledgement of this fiscal-drag effect, The Chancellor has committed to restoring the inflation-proofing of the Income Tax thresholds from April 2028.

High Income Child Benefit Charge
The government will not proceed with the reform to base the High Income Child Benefit Charge (HICBC) on household incomes. To make it easier for all taxpayers to get their HICBC right, the government will allow employed individuals to report Child Benefit payments through their tax code from 2025 and pre-prepopulate self-assessment tax returns with Child Benefit data for those not using this service.

Starting rate for savings
The government will introduce legislation in Finance Bill 2024-25 to retain the 0% band for the starting rate for savings income at its current value of £5,000 for tax year 2025 to 2026. This measure will apply to the whole of the UK. 

National Insurance rates and thresholds
The September Consumer Prices Index (CPI) figure of 1.7% will be used as the basis for uprating the Class 2 and Class 3 National Insurance contributions for the tax year 2025-26. The Class 1 Lower Earnings Limit and Class 2 Small Profits Threshold will also be uprated by September CPI for the 2025-26 tax year.

Inheritance Tax
The Inheritance Tax nil-rate bands are already set at current levels until 5 April 2028, and the government will introduce legislation in Finance Bill 2024-25 to fix these levels for a further 2 years until 5 April 2030. 
The:

• nil-rate band will continue at £325,000
• residence nil-rate band will continue at £175,000
• residence nil-rate band taper will continue to start at £2 million

Qualifying estates can continue to pass on up to £500,000 and the qualifying estate of a surviving spouse or civil partner can continue to pass on up to £1 million without an inheritance tax liability.

Unused pension funds and death benefits payable from a pension will be brought into a person’s estate for Inheritance Tax purposes from 6 April 2027.

Agricultural Property Relief and Business Property Relief
The government will reform these reliefs from 6 April 2026. The existing 100% rates of relief will continue for the first £1 million of combined agricultural and business property.

The rate of relief will be 50% thereafter, and in all circumstances for shares designated as ‘not listed’ on the markets of recognised stock exchanges, such as AIM.

Capital Gains Tax (CGT)
It was speculated that CGT gains would be taxed at Income Tax Rates, thankfully, that did not come to pass.

But there are increases, and they will apply to gains on disposals of chargeable assets made on or after 30 October 2024 (Budget Day). The main rates of CGT will change from the previous 10% and 20%, to 18% and 24%, respectively.

The 18% rate will apply to gains that fall to be taxed in the Income Tax basic rate band the 24% rate to gains that fall to be taxed in the higher rate bands.

The rate of CGT for Business Asset Disposal Relief (BADR) and Investors’ Relief is increasing to 14% for disposals made on or after 6 April 2025, and from 14% to 18% for disposals made on or after 6 April 2026.  The £1m limit for BADR remains unchanged.

The Investors’ Relief lifetime limit will be reduced from £10 million to £1 million for qualifying disposals made on or after 30 October 2024. 

No changes will be made to the 18% and 24% rates of Capital Gains Tax that apply to residential property gains.   

Making Tax Digital for Income Tax and Self-Assessment
Making Tax Digital (MTD) for Income Tax will be extended to sole traders and landlords with income over £20,000 by the end of this Parliament. The precise timing of this will be set out at a future fiscal event. This expands the rollout of MTD for Income Tax, which will begin from:

• April 2026 for sole traders and landlords with income over £50,000
• April 2027 for those with income over £30,000

Help to Save Scheme
The scheme will be extended for two years from April 2025. Accordingly, the last date a scheme can be opened is 5 April 2027. 

From 6 April 2025, the eligibility of the scheme will be extended to all individuals in receipt of Universal Credit earning £1 or more. 

ISA, Junior ISA, Lifetime ISA and Child Trust Funds
The annual subscription limits are unchanged at:

• ISAs will remain unchanged at £20,000 until April 2030
• Junior ISAs will remain unchanged at £9,000 until April 2030
• Lifetime ISAs will remain unchanged at £4,000 until April 2030
• Child Trust Funds will remain unchanged at £9,000 until April 2030

These measures will apply to the whole of the UK.

Carried Interest
Carried interest is typically paid to fund managers when an investment fund’s returns exceed a specified threshold, often after the fund liquidates assets and distributes returns to investors. Payment occurs after investors recover their initial investment and a preferred return, aligning the manager’s compensation with the fund's performance.

From April 2026, the tax regime for carried interest will be within the Income Tax framework, with a 72.5% multiplier applied to qualifying carried interest that is brought into charge.  As an interim step, the government will introduce legislation in Finance Bill 2024-25 to increase the 2 Capital Gains Tax rates for carried interest to 32% from 6 April 2025. 

Stamp Duty Land Tax
The government will introduce legislation in the Finance Bill 2024-25 to increase the higher rates of Stamp Duty Land Tax (SDLT), payable by purchasers of additional dwellings and by companies, from 3% to 5% above the standard residential rates. The government will also increase the single rate of SDLT payable by companies and non-natural persons acquiring dwellings for more than £500,000, from 15% to 17%. 

The changes will apply to transactions with an effective date on or after 31 October 2024.

Fuel Duty rates
The 5 pence cut in the rates of Fuel Duty, first introduced at Spring Statement 2022, will be extended to 22 March 2026. This will maintain the cut for a further 12 months in the rates for heavy oil (diesel and kerosene), unleaded petrol, and light oil by 5 pence per litre, and the proportionate percentage cut (equivalent to 5 pence per litre from the main Fuel Duty rate of 57.95 pence per litre) in other lower rates and the rates for rebated fuels, where practical. 

Air Passenger Duty (APD) rates for 2025-26 and 2026-27
The reduced rates for economy passengers will increase in line with RPI, rounded to the nearest pound. This means that domestic and international short-haul economy rates will remain unchanged from 2024-25. The standard and higher rates will be further increased to help account for recent high inflation.

For 2026-27, all rates will be increased by 13%, rounded to the nearest pound, to account in part for previous high inflation and to help maintain the value of APD rates in real terms. The higher rates that apply to larger private jets will increase by a further 50%. The new rates will apply from 1 April 2026. 

Tobacco Duty rates
The duty rates for all tobacco products will increase by the tobacco duty escalator of 2% above inflation (based on the Retail Price Index (RPI)).

The rate for hand-rolling tobacco will increase by an additional 10% above the escalator, to 12% above RPI.

The changes took effect at 6pm on 30 October 2024.

Alongside the introduction of a vaping products duty (see below) there will be an equivalent increase in tobacco duties. The government will make a one-off tobacco duty increase of £2.20 per 100 cigarettes or 50 grams of tobacco, effective from 1 October 2026.

Vaping products duty (VPD)
The government will introduce legislation in a future Finance Bill for a single duty rate of £2.20 per 10ml of vaping liquid. The measure will take effect from 1 October 2026, with businesses able to apply for approval from 1 April 2026. 

Alcohol Duty Uprating
In a welcome move, the alcohol duty rate on draught products is to be reduced. It is expected that this will reduce the price of an average strength pint by 1p per pint.

The government will also increase the discount provided to small producers for non-draught products and maintain the cash discount provided to small producers for draught products, increasing the relative value of Small Producer Relief. 

Alcohol duty rates on non-draught products will increase in line with RPI inflation from 1 February 2025.

Budget impact on UK businesses

Corporation Tax charge and rate
There are no proposed changes to Corporation Tax rates, a welcome announcement for SMEs.

The government will introduce legislation in Finance Bill 2024-25 to set the charge for Corporation Tax and thereby maintain the main rate at 25% and the small profits rate at 19%.

Employers’ National Insurance Contributions
One of the predicted tax increases was to Employers’ National Insurance. These are termed secondary contributions in the legislation. The prediction has proved to be correct.

From 6 April 2025 until 5 April 2028, the threshold at which Employers’ contributions will apply is being reduced from £9,100 to £5,000. In future years, this threshold will increase in line with the Consumer Price Index.

The main rate of employer’s secondary rate (Class 1) NIC will increase by 1.2% from 13.8% to 15%. Class 1A contributions (that apply to benefits in kind) and Class 1B contributions will increase by the same amount.

Thankfully, the government has listened to the various business lobby groups on behalf of smaller businesses and will also introduce legislation to increase the Employment Allowance from £5,000 to £10,500 and remove the restriction that currently applies to the Employment Allowance, where only employers who have incurred a secondary Class 1 National Insurance contributions liability of less than £100,000 in the tax year prior are able to claim.

This will take effect from April 2025 and will mean eligible employers will be able to reduce their National Insurance contributions liabilities by up to £10,500 per year. 

Tax treatment of double cab pick-up vehicles
The government will not introduce legislation to maintain the treatment of double cab pick-up vehicles with a payload of one tonne or more as goods vehicles.

HMRC is in the process of updating its guidance to clarify the position in respect of such vehicles which will be treated as cars for capital allowances, for benefits in kind and for some deductions from business profits. Transitional arrangements will also apply.

Energy Profits Levy (EPL) reform 2024
As announced at the July Statement 2024, the government will introduce legislation in Finance Bill 2024-25 to provide for changes to the Energy Profits Levy (EPL). The legislation will increase the rate of the levy by 3% to 38% and the sunset clause will be extended to 31 March 2030. The legislation will remove the 29% investment allowance, and the rate of the decarbonisation allowance will be set at 66% to broadly maintain the cumulative value of relief for decarbonisation expenditure. These changes will take effect from 1 November 2024.

Taxation of employee ownership
The taxation of Employee Ownership Trusts and Employee Benefit Trusts is to be reformed. These reforms will ensure that the regimes remain focused on encouraging employee ownership and rewarding employees, and to prevent opportunities for abuse. The changes will take effect from 30 October 2024. 

Close company shareholders — anti avoidance measure
The government will introduce new legislation to prevent avoidance of the section 455 Corporation Tax Act 2010 (Loans to Participators) charge, by ensuring that the Targeted Anti-Avoidance Rule (TAAR) remains robust and effective.

The change repeals the relief for return payments where the TAAR has applied and moves the related legislation together for clarity. 

The changes will take effect from 30 October 2024 and specifically will apply to return payments made on or after that date. 

Capital allowances for zero emission cars and electric vehicle charging points
The 100% first-year allowances for zero-emission cars and electric vehicle charge-points is extended until 31 March 2026 for Corporation Tax, and to 5 April 2026 for Income Tax.

Additional tax relief for visual effects (VFX)
Film and high-end TV companies will be able to claim an enhanced 39% rate of Audio-Visual Expenditure Credit (AVEC) on their UK visual effects (VFX) costs. UK VFX costs will be exempt from the AVEC’s 80% cap on qualifying expenditure. 

The changes will take effect from 1 April 2025, for expenditure incurred on or after 1 January 2025.

Taxation of company cars
The appropriate percentages for zero emission and electric vehicles will increase by 2% per year in 2028-29 and 2029-30, rising to an appropriate percentage of 9% in tax year 2029-30.   

Appropriate percentages for all cars with emissions of 1 to 50g of CO2 per kilometre, including hybrid vehicles, will rise to 18% in tax year 2028-29 and 19% in tax year 2029-30.   

Appropriate percentages for all other vehicle bands will increase by 1% per year in tax years 2028-29 and 2029-30. This will be to a maximum appropriate percentage of 38% for tax year 2028-29 and 39% for tax year 2029-30. 

Annual uprating of the van benefit charge and the car and van fuel benefit charges 2025-26
These rates will be increasing using the September 2024 Consumer Prices Index (CPI). 

The following new rates will come into effect from 6 April 2025:

• the van benefit charge will be £4,020 in tax year 2025-26
• the van fuel benefit charge will be £769 in tax year 2025-26
• the car fuel benefit charge multiplier will be £28,200 in tax year 2025-26

The government will introduce legislation by statutory instrument in December 2024 to ensure the changes are reflected in tax codes for tax year 2025-26.

Reporting Benefits in kind by payroll software
A technical note has been published which provides further clarification on plans for mandatory payroll reporting. The technical note confirms that, from April 2026, it will be mandatory to payroll all benefits in kind, except for employment related loans and accommodation. Payrolling for these two benefits will be introduced on a voluntary basis from April 2026 and the government will set out the next steps on when they will be mandated in due course.

OUR SUMMARY
Although some of the expected dire increases in tax proposed in the media since the general election, have not come to pass, there is still a lot to be considered.

If you have concerns about any of the points summarised above, please call. In particular, do not act based on this update without first consulting with your professional advisors.

As expected, the Chancellor has found wriggle room in his fiscal rules that have allowed him to please his fellow Conservatives by reducing the impact of taxation. Not an unfamiliar tactic for a government in a general election year.

The impact of tax changes announced are summarised below.

Impact on personal finances

Further fall in employee National Insurance contributions (NIC)

As expected, the Chancellor has found headroom to make a further reduction of 2 percentage points, from 10% reduced to 8%, effective from April 2024.

Taken together with the previous 2% drop following the Autumn Statement, this represents a reduction in this tax charge by one-third. It means that a person earning £35,400 will be more than £900 a year better off.

High Income Child Benefit Charge (HICBC)

From 6 April 2024, the income threshold at which the HICBC can recover Child Benefits from parents is being increased from £50,000 to £60,000. The band of income that will affect the amount of any HICBC clawback is also doubled, from £60,000 to £80,000.

From April 2024, Child Benefits will be subject to the HICBC at a rate of 1% of benefits received for every £200 the highest paid parent exceeds £200. This means that when the highest paid earner’s income exceeds £80,000, all Child Benefits will be recovered.

For new Child Benefit claims made after 6 April 2024, any backdated payment will be treated for HICBC purposes as if the entitlement fell in the 2024-25 tax year if backdating would otherwise create a HICBC liability in the 2023-24 tax year.

Capital Gains Tax (CGT) on UK residential property sales

The higher rate of CGT for residential property gains is being reduced from 28% to 24%. The change will take effect from 6 April 2024. The lower rate will remain at 18% for any gains that fall within an individual’s basic rate band.

The 18% and 28% rates of CGT that apply to gains in respect of carried interest remain unchanged from 6 April 2024. These rates previously mirrored those for CGT on disposals of residential property.

Restriction in scope of Agricultural Property Relief and Woodlands Relief

The scope of Agricultural Property Relief and Woodlands Relief will be restricted to property in the UK. Property located in the European Economic Area (EEA), the Channel Islands and the Isle of Man will be treated the same as other property located outside the UK. The changes will take effect from 6 April 2024.

Stamp Duty Land Tax – Multiple Dwellings Relief (MDR)

The MDR is being abolished. This change will come into effect for transactions with an effective date on or after 1 June 2024. Transitional rules mean that MDR can still be claimed for contracts which are exchanged on or before 6 March 2024, regardless of when completion takes place. This is subject to various exclusions, for example that there is no variation of the contract after that date.

Changes to Non-UK Domiciled tax rules

The government will abolish the remittance basis of taxation for non-UK domiciled individuals and replace it with a simpler residence-based regime, which will take effect from 6 April 2025. Individuals who opt into the regime will not pay UK tax on foreign income and gains for the first four years of tax residence.

Overseas Workday Relief (OWR) will be reformed with eligibility for the relief based on the new regime. OWR will continue to provide Income Tax relief for earnings from duties conducted overseas for the first three years of tax residence with restrictions on remitting these earnings removed.

The government has also announced an intention to move to a residence-based regime for Inheritance Tax, with plans to publish a policy consultation on these changes, followed by draft legislation for a technical legislation, later in the year.

A new ISA

A new British ISA with its own allowance of £5,000 a year is to be introduced for investments in UK equity. Further details of the new scheme will be released later this year. 

Flat lining Income Tax rates and allowances

One area of personal tax that was not eased in the Budget announcements was the fiscal drag created by the freezing of the Income Tax personal Allowance and High Income Threshold.

The Income Tax Personal Allowance (presently £12,570) and the higher rate threshold (presently £50,270) above which you will pay Income Tax at 40% not 20%, have not seen a significant increase for over four years.

In the same period, the Consumer Prices Index (CPI) has increased from 108 to 132. To keep pace with inflation, based on the CPI increase, a £45,000 salary in April 2020 would now need to be £55,000 to maintain the same purchasing power. And as the higher rate threshold has remained unchanged, at £50,270, the top £4,730 will be taxed at 40% not 20%.

Based on the CPI change, the present Personal Allowance should be circa £15,400 and the Higher Rate threshold £61,400 to maintain their monetary value. 

The Income Tax Personal Allowance and Higher Rate Threshold will remain unchanged and will not be reviewed again until April 2028.

Vaping Products Duty

The government has published a consultation on the detailed design and implementation of the duty, which will close on 29 May 2024. Registration for the duty will open on 1 April 2026 with the duty taking effect from 1 October 2026 alongside a proportionate increase in tobacco duties.

The duty will apply to liquids for use in vaping devices and e-cigarettes at the following rates:

• £1 per 10ml for nicotine free liquids
• £2 per 10ml for liquid containing nicotine at concentrations between 0.1 to 10.9mg per ml
• £3 per 10ml for liquids containing nicotine at concentrations 11mg per ml, or above

The government will also make a one-off tobacco duty increase of £2 per 100 cigarettes or 50 grams of tobacco from 1 October 2026.

Alcohol Duties

These duties will be frozen from 1 August 2024 until 1 February 2025. This extends the present six-month freeze announced last year.

Fuel Duty main rates

The rates of Fuel Duty introduced at Spring Statement in March 2022, and extended at Spring Budget in March 2023, will be extended for a further 12 months.

This will maintain the cut in the rates for heavy oil (diesel and kerosene), unleaded petrol, and light oil by 5 pence per litre, and the proportionate percentage cut (equivalent to 5 pence per litre from the main Fuel Duty rate of 57.95 pence per litre) in other lower rates and the rates for rebated fuels, where practical.

The changes will take effect from 23 March 2024.

Impact on UK businesses

VAT registration threshold increase

The taxable turnover threshold which determines whether a person must be registered for VAT, will be increased from £85,000 to £90,000. The taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £83,000 to £88,000.

These changes will be effective from 1 April 2024. 

This will benefit smaller traders who are tiptoeing towards the present registration threshold of £85,000 and really don’t want to register as they will not be able to pass on the 20% VAT to their customers.

NIC cuts for the self-employed

The Chancellor has made a further reduction in the Class 4 NIC paid by the self-employed. The further cut will be a reduction from 8% of chargeable profits to 6%. Essentially, the overall reduction will be from 9% to 6% effective from 6 April 2024.

No change in Corporation Tax (CT) rates

For the financial year beginning 1 April 2025, the rates of CT will remain unchanged. The main rate will stay at 25% with the reduced small profits rate at 19%.

Abolition of the Furnished Holiday Lets (FHL) tax regime

In a surprise announcement, the present favourable tax benefits of letting properties as short-term holiday lets is to be abolished from April 2025.

Draft legislation will be published at a future date and will include an anti-forestalling rule. This will prevent the obtaining of a tax advantage through the use of unconditional contracts to obtain capital gains relief under the current FHL rules. This rule will apply from 6 March 2024.

Full expensing to be extended to leased assets

At present, full-expensing of plant or machinery for leasing is excluded from a claim under the full-expensing or the 50% first year allowance for special rate assets.

The government will shortly publish draft legislation to bring leased assets into these reliefs.

Support for independent film makers

This relief will benefit independent filmmakers and will be provided via the Audio-Visual Expenditure Credit.

The Independent Film Tax Credit is aimed at films that have budgets (or total core expenditure) of up to £15 million and that receive a new accreditation from the British Film Institute. The credit rate will be 53% of qualifying expenditure. Qualifying expenditure is capped at a maximum of 80% of a film’s total core expenditure; the most taxable credit a film can receive will be £6.36 million.

The changes will take effect for films that commence principal photography from 1 April 2024 on expenditure incurred from 1 April 2024. Claims may be submitted from 1 April 2025.

Permanent extension for higher rates of Theatre, Orchestra and Museums and Galleries Tax Reliefs

This change affects the permanent extension of 40%/45% (for non-touring/touring and orchestral productions respectively) headline rates of relief for Theatre Tax Relief, Orchestra Relief, and Museums and Galleries Exhibition Tax Relief. These rates will take effect from 1 April 2025.

Energy Profits Levy — One Year Extension

As announced at Spring Budget 2024, the government will extend the sunset end date of the Energy Profits Levy to 31 March 2029. This is expected to raise a further £1.5 billion for the Treasury.

OUR SUMMARY

There are no radical changes in this Budget from a tax point of view although the Chancellor seems to have abolished as much as he has created in new regulations.

The Chancellor’s Budget speech to parliament was also peppered with much point scoring against the opposition parties. We will have to wait and see if the contents of the Budget provide a big enough rise in polling to prompt the Prime Minister to plump for a May general election. 

As expected, the Chancellor, Jeremy Hunt, resisted pressure to reduce taxes in any significant way, and the majority of his announced changes were already in the public domain. According to the Chancellor, the UK economy is on track to grow in the coming year with inflation halving.

We have listed any new variations in the UK tax rates, allowances, reliefs and other matters of interest in the update set out below.

Impact on UK businesses

Full expensing
The major announcement affecting business investment, and to reduce the impact of the forthcoming increase in Corporation Tax from April 2023, is the ability of companies to “fully expense” the purchase of qualifying plant and other equipment. 

Profits	£50,000	£75,000	£100,000	£150,000	£200,000	£250,000
Effective CY %	19%	21.50%	22.75%	24.00%	24.63%	25.00%

This will include spending on, but is not limited to, warehousing equipment such as forklift trucks, tools such as ladders and drills, construction equipment such as bulldozers and excavators, machines such as computers and printers, vehicles such as tractors, lorries and vans, office equipment such as chairs and desks, and some fixtures such as kitchen and bathroom fittings and fire alarm systems.
Effectively, qualifying purchases can be written off completely against company taxable profits.

The ‘full expensing’ policy will be introduced from 1 April 2023 until 31 March 2026.

The 50% First Year Allowance (FYA)
This current allowance lets taxpayers deduct 50% of the cost of other plant and machinery, known as special rate assets, from their profits during the year of purchase. This includes long life assets such as solar panels and thermal insulation on buildings.

The 50% FYA was introduced alongside the super-deduction and was due to end on 31 March 2023. It will now be extended by three years to 31 March 2026. For each year following the first year, 6% of the remaining cost will be written off via Writing Down Allowances (WDAs).

The 50% FYA allows for faster relief than under the default WDAs-only regime, which is worth 6% each year, including year one.

As part of his commitment to maintain a stable economy, the Chancellor’s long-term ambition is to make the 50% FYA permanent.

Simplifying tax system
Changes to simplify the tax system of the UK were underlined by a number of changes to positively impact the lives of small business owners. They are:

• Changes to the Enterprise Management Incentives (EMI) scheme from April 2023 to simplify the process to grant options and reduce the administrative burden on participating companies. This includes, from 6 April 2023, removing requirements to sign a working time declaration and setting out details of share restrictions in option agreements.
• Delivery of IT systems to enable tax agents to payroll benefits in kind on behalf of their clients – allowing agents to better support their clients and reducing burdens on employers.
• The government will extend the Help to Save scheme by 18-months, on its current terms, until April 2025. A consultation will also be launched on longer terms options for the scheme. 
• Measures to simplify the customs import and export processes, including improvements to the Simplified Customs Declaration Process, and the Modernising Authorisations project.

R&D tax credits
A £500 million per year package of support for 20,000 research and development (R&D) intensive businesses through changes to R&D tax credits was announced. In full, the Chancellor’s announced changes in this important area are:

• The scheme is targeted specifically at loss making R&D intensive SMEs. Focusing support towards those most impacted by the rate changes introduced at Autumn Statement 2022.
• A company is considered R&D intensive where its qualifying R&D expenditure is worth 40% or more of its total expenditure.
• Eligible loss-making companies will be able to claim £27 from HMRC for every £100 of R&D investment, instead of £18.60 for non-R&D intensive loss makers.
• Around 1,000 claiming companies will come from the pharmaceutical and life sciences industry. This will support the development of life saving medicines.
• Around 4,000 digital SMEs will be from the computer programming, consultancy, and related activities sector. This will support the development of AI, machine learning and other digital based technologies.
• Around 3,000 other manufacturing firms, and another 3,000 professional, scientific, and technical activities firms will also qualify for the enhanced support.
• This builds on previously announced changes to support modern research methods by expanding the scope of qualifying expenditure for R&D reliefs to include data & cloud computing costs.
• The permanent increase from 13% to 20% for the R&D Expenditure Credit rate announced at Autumn Statement 2022 also means the UK now has the joint highest uncapped headline rate of tax relief in the G7 for large companies.

Creative sector tax concessions
Newly announced reforms to tax reliefs for the creative sectors will ensure theatres, orchestras, museums and galleries are protected against ongoing economic pressures and will continue to guarantee that more world-class productions are made in the UK.

UK AI research support
£900 million of funding was committed for an AI Research Resource and an exascale computer – making the UK one of only a handful of countries to have one – and a commitment to £2.5 billion ten-year quantum research and innovation programme through the government’s new Quantum Strategy.

Levelling up
The following measures were announced to help level-up growth across the UK:

• Greater responsibility for local leaders to grow their local economy.
• Over £200 million for high quality local regeneration projects in areas of need, from the transformation of Ashington Town Centre to a skills and education campus in Blackburn.
• Over £400 million for new Levelling Up Partnerships for twenty areas in England, such as Rochdale and Mansfield.
• Business rates retention expanded to more areas in the next Parliament.
• Delivering trailblazer devolution deals for the West Midlands and Greater Manchester Combined Authorities that include single multi-year settlements for the next Spending Review, alongside a commitment to negotiate further devolution deals in England.
• 12 Investment Zones across the UK including 4 across Scotland, Wales and Northern Ireland.
• £8.8 billion over the next five-year funding period for a second round of the City Region Sustainable Transport Settlements.

Many of the Budget decisions on tax and spending apply in Scotland, Wales and Northern Ireland. As a result of decisions that do not apply UK-wide, the Scottish Government will receive around an additional £320 million over 2023-24 and 2024-25, the Welsh Government will receive £180 million, and the Northern Ireland Executive will receive £130 million.

Previously agreed changes effective from April 2023
Changes to personal or business finances (from April 2023) that were agreed or announced prior to the Budget presentation by Jeremy Hunt on 15 March are listed below:

• Corporation Tax: 19% rate for profits up to £50,000, tapering to main rate of 25% for profits over £250,000, from April 2023
• £900 Cost of Living Payment for households on means-tested benefits in 2023-24
• £300 Pensioner Cost of Living Payment in 2023-24
• £150 Disability Cost of Living Payment in 2023-24
• Business Rates: freezing the multiplier in 2023-24 
• Business Rates: 75% relief for Retail, Hospitality and Leisure sectors in 2023-24, up to £110,000 cash cap
• Business Rates: three-year transitional relief to limit bill increases at the revaluation
• Business Rates: three-year supporting small businesses scheme for properties losing Small Business Rates Relief or Rural Rates Relief
• Business Rates: delay improvement relief by one year to April 2024
• Business Rates: relief for property improvements from 2024-25
• Income Tax and National Insurance: maintain thresholds at 2023-24 levels until April 2028
• Inheritance Tax: maintain thresholds at current level until April 2028
• Income Tax: reduce the dividend allowance from £2,000 to £1,000 from April 2023 and then £500 from April 2024
• Income Tax: reduce the additional rate threshold from £150,000 to £125,140 from April 2023
• Capital Gains Tax: reduce the annual exempt amount from £12,300 to £6,000 from April 2023 then £3,000 from April 2024
• Vehicle Excise Duty: equalise treatment of electric and internal combustion engine vehicles from April 2025
• National Insurance: maintain the secondary threshold for employer contributions at current level from April 2023 until April 2028
• R&D tax reliefs: rebalance generosity of reliefs from 1 April 2023
• VAT: maintain registration threshold at current level, £85,000 to 31 March 2026
• Van benefit charge: uprate with CPI in 2023-24
• Car fuel benefit charge: uprate with CPI in 2023-24
• First Year Allowance for electric vehicle charge points: extend for a further two years until April 2025
• Pension Credit: uprate Standard Minimum Guarantee by CPI in 2023-24
• Benefit cap levels: uprate by CPI in 2023-24
• Capital Gains Tax: extend the period for no gain/no loss transfers to three years for couples that separate or divorce
• Annual Investment Allowance: permanently set at £1m from April 2023
• Income Tax: basis periods reform for the self-employed from April 2024 with transition year in 2023-24

Impact on personal finances

Increase in pensions’ tax support
The present £40,000 cap on annual pension contributions that qualify for Income Tax relief is being increased to £60,000 from 6 April 2023.

The present Lifetime Allowance is being abolished.

Both of these changes are intended to incentivise older employees to continue in work whilst continuing to build additional pension savings.

In addition, the Money Purchase Annual Allowance will increase from £4,000 to £10,000 and the minimum Tapered Annual Allowance will increase from £4,000 to £10,000 from 6 April 2023. 

The adjusted income threshold for the Tapered Annual Allowance will also be increased from £240,000 to £260,000 from 6 April 2023.

Childcare support increased 
Childcare support in England is being expanded to include children over the age of 9 months. The announcement confirmed 30-hours of free childcare for every child over the age of 9 months, with support being phased in until every single eligible working parent of under 5s gets this support from September 2025.

The changes will be introduced in phases, with 15-hours of free childcare for working parents of 2-year-olds coming into effect in April 2024 and 15 hours of free childcare for working parents of children from 9 months from September 2024.

Parents receiving Universal Credits as well as being in employment will receive financial support to include upfront payment of childcare costs. The maximum they can claim will also be boosted to £951 for one child and £.1,630 for two children – an increase of around 50%

Extension of Energy Price Guarantee
It was announced that the Energy Price Guarantee cap of £2,500 would be extended for the next three months until 30 June 2023. From 1 July 2023 (rather than 1 April 2023 as previously announced), this guarantee will change so that the typical household will pay on average £3,000 a year (an increase of £500). 

Also, from 1 July 2023, the government will adjust the Energy Price Guarantee premium that over 4 million households pay for their prepayment meter. This will bring their charges into line with comparable customers who pay by direct debit.

Duties on fuel frozen
The proposed 11p rise in fuel duty will be cancelled thus maintaining last year’s 5p cut for another 12-months.

Draught Relief
Draught Relief has also been significantly extended from 5% to 9.2%, so that the duty on an average draught pint of beer served in a pub, from 1 August 2023, will be up to 11 pence lower than the duty in supermarkets. The commitment to duty on a pub pint being lower than the supermarket has been termed the “Brexit Pubs Guarantee” by the Chancellor, and this change will also be enjoyed by every pub in Northern Ireland thanks to the Windsor Framework.

Access to employment reforms
Major set of reforms to support people into work, removing barriers that stop those on benefits, older workers, and those with health conditions who want to work.

OUR SUMMARY

One thing is for sure, our tax code and the supporting business regulations are becoming more complex in spite of the promoted changes towards simplifying matters. 

We encourage readers who are concerned or interested in more information on any of the announcements described in this short update, to pick up the phone to discuss how you may be affected.

The new Chancellor of the Exchequer, Kwasi Kwarteng, delivered a fiscal statement referred to as The Growth Plan 2022 on 23 September 2022. The statement to a packed House of Commons centred on the government’s plans for generating growth.

Colloquially referred to as a mini-budget, it would perhaps be more fitting to refer to the statement as a maxi-budget. In his first major statement since becoming Chancellor, a number of striking measures were announced representing a major shift in policy direction for the Exchequer.

Paying an estimated £45 billion for these measures will see borrowing levels soar as the government attempts to grow the economy and avoid a deep recession. It is hoped that these measures will help to reduce peak inflation by around 5%.

The Chancellor was also keen to remind the House of the measures already announced to tackle spiralling energy costs. This included the Energy Price Guarantee which will see the average household have their energy bills capped at £2,500 a year for the next two years, a £400 energy rebate for UK households as well as more support for vulnerable households.

A new Energy Bill Relief Scheme to help cut energy bills in the non-domestic sector will also apply to energy usage from 1 October 2022 to 31 March 2023 and will automatically be applied to qualifying businesses fuel costs.

National Insurance

Before the Chancellor rose to his feet, a number of other important announcements had already been made. The first of these related to the new Prime Minister’s pledge to reverse the 1.25% rise in National Insurance contributions (NICs) that came into effect at the start of the 2022-23 tax year on 6 April 2022. This will see the reversal of the increase from 6 November 2022 and will cover Class 1 (both employee and employer), Class 1A , Class 1B and Class 4 (self-employed) NICs.

It was also confirmed by the Chancellor that the ring-fenced Health and Social Care Levy of 1.25% due to be introduced from April 2023 will not go ahead as originally planned. These measures will provide average savings of around £135 in this tax year and £330 in 2023-24 for almost 28 million people across the UK as well as a tax cut for 1 million businesses. The 1.25% increase to the rate of Income Tax on dividends which took effect in April 2022 will remain in place until April 2023.

Income Tax

The Chancellor announced that the government will reduce the basic rate of Income Tax to 19% (from 20%) with effect from April 2023. This brings forward the planned 1p cut in the basic rate by 12 months. According to HM Treasury, the 19% rate is the lowest the basic rate has ever been in the modern Income Tax system. There will also be a four-year transition period for Gift Aid relief to maintain the Income Tax basic rate relief at 20% until April 2027 to help support almost 70,000 charities.

The reductions will not apply to the non-savings and non-dividend income of Scottish taxpayers because the power to set these rates is devolved to the Scottish Government. However, the Scottish government will receive additional funding which they can use as they see fit, including a reduction on Income Tax or other taxes, or increased spending. The Income Tax rate cuts will apply to Welsh taxpayers.

The Chancellor also announced plans to scrap the 45% additional tax rate from April 2023 but following a significant backlash this move was cancelled on 3 October 2022.

Income Tax and dividend income

The tax rates payable on dividend income will revert back to those that applied before April 2022, from April 2023 in line with the 1.25% decrease in NIC contributions.

The rates that will apply in all regions of the UK from 6 April 2023 are:

• Dividends that form part of the basic rate band – 7.5% (8.75% 2022-23)
• Dividends that form part of the higher rate band – 32.5% (33.75% 2022-23)
• Dividends that form part of the additional rate band – 38.1% (39.35% 2022-23)

The dividend tax is charged on taxable dividend income an individual receives that falls outside of the personal allowance and that exceeds the dividend allowance. The current £2,000 dividend tax-free allowance is unchanged.

Stamp Duty Land Tax (SDLT)

The Chancellor announced a permanent increase of the SDLT nil rate band to £250,000 (from £125,000) with immediate effect from the date of his announcement, 23 September 2022.

Prior to the announcement, no SDLT was payable for first-time buyers making a purchase of up to £300,000. This limit has now been increased by £125,000 with immediate effect to £425,000. The first-time buyers relief also increases the nil-rate threshold to £425,000 (£300,000 prior to 23 September 2022) for first-time buyers of properties costing up to £625,000 (£500,000 prior to 23 September 2022). There is no relief available for first-time buyers spending more than £625,000 on a property. There are a number of requirements that must be met in order to qualify for the relief.

These measures will reduce stamp duty bills across the board for all movers by up to £2,500 with first-time buyers able to access up £11,250 in relief.

It is important to note that these measures apply to England and Northern Ireland only. Any changes to the Land and Buildings Transaction Tax in Scotland or the Land Transaction Tax in Wales will be announced separately

Reversal of Corporation Tax increase

The Corporation Tax main rate had been set to increase from 19% to 25% from 1 April 2023 for companies with profits over £250,000. A Small Profits Rate (SPR) of 19% was also to have been introduced from the same date for companies with profits of up to £50,000 with a marginal rate of Corporation Tax. This would apply to companies making profits of between £50,000 and £250,000 meaning an incremental rise in the Corporation Tax rate from 19% to 25% depending on how much profit a firm was making.

The Chancellor has now confirmed that these planned rises have been cancelled in full. This means that the Corporation Tax rate will remain at 19% for all firms, regardless of the amount of profits made. The Chancellor was excited to inform the House that this means the UK will have the lowest Corporation Tax rate in the G20 group of the world's major economies.

Annual Investment Allowance threshold

The Annual Investment Allowance (AIA) was permanently set at £200,000 for all qualifying expenditure on or after 1 January 2016. Following the pandemic, this limit had been temporarily increased (with a number of extensions) to £1 million.

This increased threshold was set to expire on 31 March 2023, but the Chancellor announced that the limit will be permanently extended to £1 million. This will give business owners thinking about high-value investments in qualifying assets some comfort and remove the need to rush any capital acquisitions.

Investment Schemes

The Seed Enterprise Investment Scheme (SEIS) is to be extended to help more UK start-ups raise higher levels of finance.

The Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) will be extended beyond 2025.

Investment Zones

As part of the Growth Plan, the government is in discussions with 38 local authorities to establish investment zones in England.

The government will also work with the devolved administrations and local partners to deliver this opportunity to drive local growth in Scotland, Wales and Northern Ireland.

These Investment Zones will be designed to encourage investment and new economic activity, supporting growth and jobs. The Investment Zones will benefit from lower taxes and more relaxed planning frameworks to encourage rapid development and business investment.

VAT

The Chancellor announced that VAT-free shopping for overseas visitors is to be reintroduced to help encourage more tourists to the UK. The VAT Retail Export Scheme was cancelled on 1 January 2021. The old paper-based system will be replaced with a modern, digital one and will be put in place as soon as possible.

Miscellaneous

• The planned increases next year in the duty rates for beer, cider, wine and spirits in line with RPI have all been cancelled.
• The cap on bankers’ bonuses is to be scrapped to enhance London’s reputation as a worldwide banking centre.
• The Office of Tax Simplification is to be wound down with responsibility for tax simplification being handed to Government.
• There will be moves to simplify IR35 rules, including the repeal of the 2017 and 2021 reforms.

The Chancellor, Rishi Sunak, has delivered his Spring Statement to the House of Commons against a backdrop of a growing cost of living crisis. The Chancellor also stressed that, apart from the untold human suffering, the Russian invasion of Ukraine is creating further uncertainty in the domestic and global economy, particularly in relation to energy markets and the food supply-chain.

On the morning of the Spring Statement, the Office for National Statistics (ONS) announced that the rate of Consumer Price Index inflation increased to 6.2% in February putting further pressure on the Chancellor to act. The Office for Budget Responsibility (OBR) also expects average inflation to rise to 7.4% this year.

We have highlighted below the main tax measures that were announced:

National Insurance contributions (NICs)

The Chancellor did not remove the 1.25% increase in NICs due to come into effect from this April to help fund the NHS and Social Care. However, he did try to soften the blow by announcing a significant increase in the National Insurance Threshold from £9,880 to £12,570. This increase will see the alignment of the Primary Threshold (PT) for Class 1 NICs and Lower Profits Limit (LPL) for Class 4 NICs with the personal allowance of £12,570 from 6 July 2022. It has also been confirmed that the thresholds will remain aligned going forward. According to government figures this means that around 70% of employees will pay less NICs, even accounting for the introduction of the Health and Social Care Levy.

The PT and LPL will be £9,880 (as previously announced) from 6 April 2022 – 5 July 2022. It is unusual for tax rates to change during a tax year, but the Chancellor was facing pressure to make changes and the short period before the new tax year starts left him with no choice but to delay the increase for 3 months. July is the earliest date that will allow all payroll software developers and employers to update their systems and implement the necessary changes. This means the LPL will be £11,908 for the 2022-23 tax year which is equivalent to 13 weeks of the threshold at £9,880 and 39 weeks at £12,570.

Reducing Class 2 NICs payments for low earners

From April 2022, the self-employed will see Class 2 NICs liabilities reduced to nil on profits between the Small Profits Threshold (SPT) and LPL. This will ensure that no one earning between the SPT and LPL will pay any Class 2 NICs, while allowing individuals to be able to continue to build up National Insurance credits. This change represents a tax cut for around 500,000 self-employed people worth up to £165 per year.

Employment Allowance

In his speech, the Chancellor confirmed that the government would increase the Employment Allowance by £1,000 to £5,000 from April 2022. This represents a tax boost for around 495,000 small businesses who can claim an increased reduction in their NIC liabilities or even reduce their bills to zero.

In total, this means that from April 2022, 670,000 businesses will not pay NICs and the Health and Social Care Levy due to the Employment Allowance. The Employment Allowance is only available to employers with employer NIC liabilities of under £100,000 in the previous tax year. Connected employers or those with multiple PAYE schemes will have their contributions aggregated to assess eligibility for the allowance. 

Fuel duty cut

The Chancellor announced a temporary UK-wide 5p per litre cut in fuel duty on petrol and diesel from 6pm on 23 March 2022 for 12 months. This is a saving worth around £100 for the average car driver, £200 for the average van driver, and £1500 for the average haulier in the coming year. This represents total savings for households and businesses worth around £2.4 billion in 2022-23 and is only the second cut in fuel duty over the last 20 years.

VAT

The government will expand the scope of VAT relief available for energy saving materials (ESMs) by reducing VAT from 5% to 0% from 1 April 2022 until 31 March 2027. This will ensure that households having energy saving materials installed like solar panels, heat pumps, or insulation will pay no VAT.

The government will also include additional technologies and remove the complex eligibility conditions, reversing a Court of Justice of the European Union ruling that unnecessarily restricted the application of the relief. A typical family having roof top solar panels installed will save more than £1,000 in total on installation, and then £300 annually on their energy bills. 

The VAT rate cannot immediately be reduced to 0% in Northern Ireland due to the Northern Ireland Protocol. However, the Northern Ireland Executive will receive a Barnett share of the value of the relief until it can be introduced UK-wide.

Household Support Fund

The government launched a £500 million package of support for vulnerable households in October 2021. The Household Support Fund is used to help support millions of vulnerable households in England and monies is distributed by councils. This means that local councils can use the funding to provide discretionary support to vulnerable households. This could include using small grants to meet daily needs such as food, clothing, and utilities. 

The Chancellor announced as part of his Spring Statement measures that the government will provide an additional £500 million for the Household Support Fund from April 2022. The Barnett formula will apply in the usual way to additional funding for the devolved administrations.

R&D tax relief reform

It has been confirmed that from April 2023, all cloud computing costs associated with R&D, including storage, will qualify for relief. This change will boost sectors where the UK is a world-leader, including AI, robotics, manufacturing, and design. Further changes to the relief may also be announced as part of the Budget later this year.

Income Tax basic rate

Whilst no immediate changes were announced, the Chancellor confirmed that the government will reduce the basic rate of Income Tax to 19% from April 2024.

This will apply to the basic rate of non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland and to the savings basic rate which applies to savings income for taxpayers across the UK. 

The reduction in the basic rate for non-savings-non-dividend income will not apply for Scottish taxpayers because the power to set these rates is devolved to the Scottish Government. However, the Scottish government will receive additional funding which they can use as they see fit, including on reducing Income Tax or other taxes, or increased spending.

As with the Spring Budget 2021, much of the detail for the Autumn Budget had been leaked to the press prior to the official report to parliament, 27th October 2021. 

But we now have all the details and, as usual, there is much to consider. The following Budget summary is split into two sections:

1. Taxation changes
2. Other announcements

Please call if you need to discuss how these changes may affect your business or tax affairs in the coming months.

Taxation changes

Income Tax 2022-23 to 2025-26

No increase in rates and the higher rate threshold is frozen at £37,700 through to April 2026. For the same period, the personal tax allowance is also frozen at £12,570 (£12,570 2021-22) and will apply to all regions of the UK.

In what many commentators consider to be a “stealth tax”, wage earners benefitting from annual increases in their earnings up to April 2026 will find themselves paying tax on the full value of any increases. This is because, with personal allowances and the higher rate thresholds frozen until April 2026, any increases in earnings will be taxed and, in some cases, this may push earnings into the higher rate tax bands.

Regional variations to Income Tax rates may apply in Wales and Scotland.

Income Tax and dividend income

The current £2,000 dividend tax-free allowance is unchanged.

As announced 7 September 2021, the tax rates payable on dividend income will increase in line with the 1.25% increase in certain NIC contributions. The rates that will apply in all regions of the UK from 6 April 2022 are:

• Dividends that form part of the basic rate band – 8.75% (7.5% 2021-22)
• Dividends that form part of the higher rate band – 33.75% (32.5% 2021-22)
• Dividends that form part of the additional rate band – 39.35% (38.1% 2021-22)

Starting rate for savings

The band of savings income that is subject to the 0% starting rate will remain at £5,000 for 2022-23.

Reform of Basis Periods for self-employed and partners

The basis on which profits are taxed in a tax year are to be changed from the account’s year ending in a tax year to the actual profits arising in a tax year. Self-employed sole traders and partners who already have a year end at the end of the tax year will experience no change in their basis of taxation. 

For affected traders with year ends other than the end of March or 5 April, there will be a transition to an actual basis during 2023-24 and the new rules will come into force from 6 April 2024.

The reform will include greater flexibility on the use of overlap relief in the transition year and provisions to reduce the impact of transition profits on allowances and profits.

National Insurance

Boris Johnson announced – earlier this year – a 1.25% increase in certain NIC contributions from April 2022. This is ring-fenced to provide funding for health and social care. From April 2023, this NIC increase will be withdrawn and replaced by a new Health and Social Care Levy at the same rate.

The government will use the September Consumer Prices Index figure of 3.1% as the basis for uprating National Insurance limits and thresholds, and the rates of Class 2 and 3 National Insurance contributions, for 2022-23.

This excludes the Upper Earnings Limit and Upper Profits Limit which will be maintained at 2021-22 levels, in line with the higher rate threshold for Income Tax.

Lifetime Allowance for pension pots

From April 2021 to April 2026 the pensions lifetime allowance will remain frozen at £1,073,100.

Capital Gains Tax

Any attempt to align CGT rates with Income Tax rates seems to be off the table for the time being. Apart from anti-avoidance changes, there are two changes worth mentioning:

• Capping the annual exempt amount. This was fixed at £12,300 from April 2021 to April 2026 for individuals, personal representatives, and some types of trusts for disabled people; and £6,150 for trustees of most settlements, and
• The deadline for reporting chargeable residential property sales – not a main residence, this covers sales of second homes or buy-to-let properties – is increased from 30 days to 60 days. This change applies to disposals that complete on or after 27 October 2021. 

The second change is welcomed as the 30 days reporting window was a tight reporting timeline in which to gather all the relevant data to make a submission to HMRC and to pay any taxes due.

Corporation Tax

No change in Corporation Tax rates until April 2023. For the financial year beginning 1 April 2022, the rate will remain at 19%.

As announced earlier this year, from 1 April 2023, there will be two rates of CT.

• Taxable profits up £50,000 will continue to be taxed at 19%
• Taxable profits more than £250,000 will be taxed at 25%
• Profits between £50,000 and £250,000 will be subject to a marginal tapering relief. This would be reduced for the number of associated companies and for short accounting periods.

Corporation Tax and banking companies

From 1 April 2023, the rate of surcharge on banking companies will be 3% and the surcharge allowance increased from £25m to £100m.

Corporate Tax – R&D Relief

R&D tax reliefs will be reformed to support modern research methods by expanding qualifying expenditure to include data and cloud costs. This will effectively capture the benefits of R&D funded by the reliefs through refocusing support towards innovation in the UK, and target abuse and improve compliance. These changes will be legislated for in Finance Bill 2022-23 and take effect from April 2023.

Museums and Galleries Exhibition Tax Relief

The sunset clause in this relief is extended for a further two years until 31 March 2024.

Cultural Relief changes

Theatre Tax Relief and Museums and Galleries Tax Relief

Rates will increase from 20% (for non-touring productions) and 25% (for touring productions) to 45% and 50% respectively from 27 October 2021.

From 1 April 2023, the rates will fall to 30% and 35%, with a return to 20% and 25% on 1 April 2024. As mentioned above, the Museums and Galleries Tax Relief will expire after 31 March 2024.

Orchestra Tax Relief

From 27 October 2021, the relief will increase from 25% to 50%, reducing to 35% from 1 April 2023, and returning to 25% from 1 April 2024.

Reliefs for investments in qualifying assets

Super-deduction

The temporary “Super-deduction” and a 50% first year allowance – that were introduced April 2021 – will continue to apply to qualifying expenditure up to 31 March 2023. 

The super-deduction allows businesses to remove 130% of qualifying expenditure as a deduction from taxable profits.

Annual Investment Allowance

The existing Annual Investment Allowance (AIA) was due to reduce to £200,000 (from the present £1m) from 1 January 2022. This date has been changed. The £1m of AIA relief will now revert to £200,000 from 1 April 2023.

Business owners thinking about high-value investments in qualifying assets will now have more time to consider their timing of capital acquisitions.

Reform of loss relief rules for Corporation Tax

The government will legislate in the Finance Bill 2021-22 to amend the loss relief rules to ensure that the legislation continues to work as intended for companies adopting International Financial Reporting Standard (IFRS) 16. The changes will have retrospective effect from 1 January 2019. 

Van and car benefit changes

This measure increases the van benefit charge and the car and van fuel benefit charges by the Consumer Price Index from 6 April 2022. The flat-rate van benefit charge will increase to £3,600; the multiplier for the car fuel benefit will increase to £25,300; and the flat-rate van fuel benefit charge will increase to £688.

Inheritance Tax

No changes to present rates and allowances. These are all frozen at current levels until April 2026.

This means the nil-rate band will continue to be £325,000 and the residence nil-rate band at £175,000, for this period. 

VAT

There will be no changes to the 20% rate. The £85,000 registration limit and the £83,000 deregistration limit will remain at these levels until 31 March 2024.

The temporary reduced rate of 5% for hospitality, holiday accommodation and attractions was increased to 12.5% from 1 October 2021. This rate will remain until 31 March 2022 when it will revert to 20%. This acknowledges the disruption and financial hardship suffered by this sector during the COVID pandemic.

VAT rules in Freeports

From 3 November 2021, the government will introduce new elements into the VAT free zone model for Freeports.  They are:

• implement a free zone exit charge to ensure businesses do not gain an unintended tax advantage from the zero-rate in the free zone model,
• make amendments to existing VAT law to ensure free zone rules and warehousing rules are mutually exclusive,
• amend some parts of historic free zone legislation which are incompatible with the new free zone VAT rules.

 

Other announcements

Increasing the normal minimum pension age

The earliest age at which pension savers can access their pensions without incurring an unauthorised payments tax charge is changing.

From 6 April 2028, the normal minimum pension age is increasing from 55 to 57.

Universal Credits

To compensate for the recent withdrawal of the £20 a week UC payment, the government is to decrease the amount it reduces UC payments when a claimant works more hours. Presently, for every £1 earned UC payments decrease by 63p. From 1 December 2021 at the latest, this will be lowered to 55p for every £1 earned.

Duties and Miscellaneous taxes 

• Tobacco Duty will be increased by agreed rates above the Retail Prices Index (RPI) from 6pm on 27 October 2021.
• Alcohol duty rates will be frozen.
• Landfill Tax will increase in line with RPI increases. The increase will be effective from April 2022.
• Aggregates Levy – the government will freeze the Levy rates in 2022-23. 
• Gaming Duty will increase in line with RPI changes. The increase will be effective from April 2022.
• VED rates for cars, vans and motorcycles will increase in line with RPI changes. Change will be effective from April 2022.
• VED rates for HGVs. The government will continue to freeze HGV VED for 2022-23. It will also suspend the HGV Levy for a further year from 1 August 2022.
• Fuel Duty rates for 2022-23 will remain frozen.
• Air Passenger Duty rates for flights within the UK will be reduced from April 2023 when new bandings are introduced. Rates for short and long-haul flights will increase in line with the RPI and a new ultra-long-haul band will be introduced.

ISA investment limits for 2022-23

The limits set for 2022-23 are:

• Adult ISAs the limit remains at £20,000
• Junior ISA limit remains at £9,000
• Child Trust Funds remain unchanged at £9,000

National Living Wage increases

The NLW will increase to £9.50 per hour (previously £8.91) from 1 April 2022.

The full changes to the National Minimum Wage rates from 1 April 2022 are as follows:

• The 21 to 22 year-old rate will be £9.18 per hour
• The 18 to 20 year-old rate will be £6.83 per hour
• The 16 to 17 year-old rate will be £4.81 per hour
• The apprentice rate will be £4.81 per hour

More has been disclosed, leaked, of this year’s Budget announcements than in previous years. But we now have the details and there is a lot to consider. The following Budget summary is split into four sections:

1. COVID-19 related support measures for UK businesses
2. Support for the UK housing market
3. Taxation changes
4. Other announcements

Please call if you need to discuss how these changes may affect your business or tax affairs in the coming months.

COVID-19 related support measures for UK businesses

The Treasury is to continue the two existing major support schemes in an attempt to hold back a significant increase in unemployment rates as business owners grapple with the effects of COVID-19 disruption. Details are set out below.

Coronavirus Job Retention Scheme 

This scheme, nicknamed the Furlough Scheme, was due to end 30 April 2021. It is now being extended to 30 September 2021.

The judgement must be that there will be enough control over COVID by autumn 2021 to stimulate demand and give employers more confidence to retain staff. The Chancellor has obviously crunched the numbers and considers employment support in this way a more attractive strategy than increasing unemployment costs.

In more detail:

• For employees, there will be no change to the terms – they will continue to receive up to 80% of their salary, for hours not worked, until the scheme ends.
• Employers will be asked to contribute 10% towards wages for hours not worked from July 2021, rising to 20% in August and September 2021.

Self-Employed Income Support Scheme (SEISS)

There has been much criticism of this scheme as it has not been possible for self-employed businesses that commenced trading during 2019-20 to claim.

To counter this, the following changes to SEISS have been announced.

1. All qualifying self-employed businesses can continue to claim SEISS grants if they continue to be adversely affected by COVID lockdown measures. The present scheme was due to end 30 April 2021. This has now been extended to 30 September 2021.
2. Businesses previously excluded from claims because they commenced during the 2019-20 tax year will now be eligible to claim the fourth and fifth SEISS grants as long as their tax return for 2019-20 was filed by midnight 2 March 2021.
3. For the fifth grant claims can be made from July 2021. Self-employed persons whose turnover has fallen by more than 30% will continue to qualify for the 80% grant. Those with decreases in turnover of less than 30% will be restricted to a 30% claim.

Restart grants

£5bn of funding is being allocated for these grants. They will support businesses obliged to close during much of lockdown. The grants will consist of:

• A one-off grant of up to £18,000 for hospitality, accommodation, leisure, personal care and gym businesses in England. 
• Non-essential retail that have tended to open first, can apply for a one-off £6,000 grant.

Business rates holiday continued

This year, government will continue with the 100% business rates holiday for the first three months of the 2021-22 financial year, in other words, through to the end of June 2021 for the retail, leisure and hospitality sectors.

For the remaining nine months of the year, to 31 March 2022, business rates will still be discounted by two thirds, up to a value of £2 million for closed businesses, with a lower cap for those who have been able to stay open.

Exemption for COVID-19 related home office expenses

The temporary Income Tax exemption and Class 1 National Insurance Contributions disregard for employer reimbursed expenses that cover the cost of relevant home office equipment is extended and will have effect until 5 April 2022.

Exemption for reimbursement of antigen test costs

The government will legislate in Finance Bill 2021 to introduce a retrospective Income Tax exemption for payments that an employer makes to an employee to reimburse for the cost of a relevant coronavirus antigen test for the tax year 2020-21.

A new Recovery Loan Scheme

The Recovery Loan Scheme ensures businesses of any size can continue to access loans and other kinds of finance between £25,000 and up to £10 million per business once the existing COVID-19 loan schemes close. This will provide further support as businesses recover and grow following the disruption of the pandemic and the end of the transition period.

Once received, the finance can be used for any legitimate business purpose, including growth and investment.

The government guarantees 80% of the finance to the lender to ensure they continue to have the confidence to lend to businesses.

The scheme launches on 6 April 2021 and is open until 31 December 2021, subject to review. Loans will be available through a network of accredited lenders.

Reduced rate of VAT

The temporary reduced rate of 5% for hospitality, holiday accommodation and attractions will be extended until 30 September 2021. This is a welcome bonus for this sector badly affected by COVID lockdown restrictions.

This will be followed by the introduction of a new reduced rate of 12.5% from 1 October 2021 that will be in effect until 31 March 2022 at which point it will revert to the 20% standard rate.

Other support measures

Other measures outlined in the Budget include:

• Extension of the apprenticeship hiring incentive in England to September 2021 and an increase of payment to £3,000.
• £7 million for a new “flexi-job” apprenticeship programme in England, that will enable apprentices to work with a number of employers in one sector.
• Additional £126 million for 40,000 more traineeships in England, funding high quality work placements and training for 16-24 year olds in 2021-22 academic year.

Support for the UK housing market

Support will include a mortgage guarantee scheme that will help home buyers purchase properties up to £600,000, and an extension to the existing stamp duty holiday that was due to end 31 March 2021.

The detail:

Mortgage guarantee scheme

The government will underwrite 95% of the risk of default. It will apply to home acquisitions up to £600,000 and set deposits required to 5%.

Stamp duty holiday

The present £500,000 threshold for paying Stamp Duty Land Tax (SDLT) was increased on a temporary basis and was due to end 31 March 2021. 

The nil rate band will continue to be £500,000 for the period 8 July 2020 to 30 June 2021. From 1 July 2021 until 30 September 2021, the nil rate band will be £250,000. The nil rate band will return to the standard amount of £125,000 from 1 October 2021. This applies to England and Northern Ireland only. The devolved administrations have not announced any further extension beyond 31 March 2021 when this summary was written on Budget Day.

Non-resident SDLT

A 2% SDLT surcharge, above existing rates, for non-UK residents purchasing residential property in England and Northern Ireland?is to be introduced from 1 April 2021.?

Taxation changes

Many of the tax changes announced are for a fixed period, generally, from April 2021 to April 2026. This does provide welcome certainty for businesses. Announcements made include:

Income Tax 2021-22 to 2025-26

The basic rate threshold is increasing to £37,700 for 2021-22 (2020-21: £37,500) and then frozen until April 2026. For the same period, the personal tax allowance is set at £12,570 (2020-21: £12,500) and will apply to all regions of the UK.

Taxpayers who will benefit from annual increases in their earnings up to April 2026 may find themselves paying tax at the higher rates if these increases breach the £37,700 annual basic rate limit.

Regional variations to Income Tax rates apply in Scotland and may apply in Wales.

National Insurance

NIC Upper Earnings limits and Upper Profits limits will also remain at a fixed amount until April 2026 and will be based on the Income Tax higher rate threshold of £50,270.

Starting rate for savings

The band of savings income that is subject to the 0% starting rate will remain at £5,000 for 2021-22.

Lifetime Allowance for pension pots

From April 2021 to April 2026 the pensions lifetime allowance will be frozen at £1,073,100.

Cycle to work scheme change

The government will legislate in Finance Bill 2021 to introduce a time-limited easement to the employer-provided cycle exemption to disapply the condition which states that employer-provided cycles must be used mainly for journeys to, from, or during work. The easement will be available to employees who have joined a scheme and have been provided with a cycle or cycling equipment on or before 20 December 2020.

The change will have effect on and after Royal Assent of Finance Bill 2021 and be in place until 5 April 2022, after which the normal rules of the exemption will apply.

Van benefits for zero carbon emissions

The government will legislate in Finance Bill 2021 to reduce the van benefit charge to zero for vans that produce zero carbon emissions.?The change will have effect on and after 6 April 2021.

Capital Gains Tax

Any attempt to align CGT rates with Income Tax rates seems to be off the table for the time being. Apart from anti-avoidance changes, the only announcement on this tax that has general relevance is capping the annual exempt amount. This will be fixed at £12,300 from April 2021 to April 2026 for individuals, personal representatives and some types of trusts for disabled people; and £6,150 for trustees of most settlements.

Corporation Tax

As expected, there will be increases in Corporation Tax, but not yet and only for larger companies. Company owners will be relieved that there are no imminent increases in CT rates until April 2023.

From 1 April 2023, there will be two rates of CT.

• Taxable profits up £50,000 will continue to be taxed at 19% under the new Small Business Profits Rate
• Taxable profits in excess of £250,000 will be taxed at 25%
• Profits between £50,000 and £250,000 will be subject to a marginal tapering relief. This would be reduced for the number of associated companies and for short accounting periods.

Carry back of trading losses

The present provisions that restrict the carry back of tax losses is being relaxed, temporarily, extending the period over which?incorporated and?unincorporated?businesses may carry-back trading losses from one year to three years.

This extension will apply to a maximum £2,000,000 of unused trading losses made in each of the tax years 2020-21 and 2021-22 by unincorporated businesses.?The £2,000,000 maximum applies separately to unused trading losses made by?incorporated companies, after carry-back to the preceding year, in relevant accounting periods ending between 1 April 2020 and 31 March 2021 and a separate maximum of?£2,000,000?for periods ending between 1 April 2021 and 31 March 2022.

The £2,000,000?cap will be subject to a group-level limit, requiring groups with companies that have capacity to carry back losses in excess of £200,000 to apportion the cap between its companies. Further detail on the group limit will be published in due course.

R&D tax credit cap to be introduced

For accounting periods beginning on or after 1 April 2021, the amount of SME payable R&D tax credit that a company can receive in any one year will be capped at £20,000 plus three times the company’s total PAYE and National Insurance contributions liability, in order to deter abuse.

Enterprise Management Incentives

As announced on 21 July 2020, the government will legislate in Finance Bill 2021 to extend the time-limited exception that ensures that employees who are furloughed or working reduced hours because of coronavirus (COVID-19) continue to meet the working time requirements for EMI schemes.

The change will apply to existing participants of EMI schemes and it also allows employers to issue new EMI options to employees who do not meet the working time requirement as a result of COVID-19. This measure will have effect until 5 April 2022.

Major new investment reliefs

A new “super-deduction” and a 50% first year allowance are to be introduced that will allow businesses to increase the tax relief they can claim for qualifying investments in plant and other equipment. It will apply to expenditure between 1 April 2021 and 31 March 2023.

The super-deduction will mean that assets will qualify for tax relief based on 130% of the actual cost of expenditure incurred. 

Assets that qualify for the special rate relief will qualify for the 50% first year allowance.

The existing Annual Investment Allowance £1m limit will continue to be available until 31 December 2021. 

Freeports

In an attempt to reposition the UK as a global player a raft of tax incentives are to be provided to the eight freeport locations in England announced in the Budget. They will include enhanced structures and buildings allowances.  

Inheritance Tax

No changes in the present rates and allowances that are all frozen at current levels until April 2026.

This means the nil-rate band will be £325,000 and the residence nil-rate band at £175,000 for this period. 

VAT

There be no changes to the standard 20% rate. 

The £85,000 registration limit and the £83,000 deregistration limit will be frozen until 31 March 2024.

Other announcements

Universal Credits

The recent increase in benefits of £20 per week is to be extended for a further six months.

Working Tax Credit claimants will receive equivalent support via a £500 one off payment.

Duties

There will be no increases in duty on alcoholic drinks or fuel.

Vehicle excise duties will see a small increase in line with the Retail Prices Index (RPI).

Air Passenger Duty long haul rates will also increase in line with RPI as will gaming duty and Landfill Tax.

ISA investment limits for 2021-22

The limits set for 2021-22 are:

• Adult ISAs the limit remains at £20,000
• Junior ISA limit remains at £9,000
• Child Trust Funds remain unchanged at £9,000

National Living Wage increase

The NLW will increase to £8.91 per hour from 1 April 2021.

Visa reforms

There will also be new reforms to the immigration system that will help ambitious UK businesses entice top talent. These reforms will include a new unsponsored points-based visa to attract highly skilled migrants and a new, improved visa process for scale-ups and entrepreneurs.

Help to Grow schemes

Two new Help to Grow schemes are set to launch by the autumn to help support 130,000 small and medium sized businesses. The Help to Grow: Management scheme will help small and medium sized businesses get world-class management training with the government contributing 90% of the cost. 

In addition, the Help to Grow: Digital scheme will help small businesses develop digital skills by giving them free expert training and a 50% discount on new productivity-enhancing software, worth up to £5,000 each.

Single contactless payments

Our final comment on the Budget seems to anticipate a coming consumer spending bonanza. The legal limit for single, contactless payments is increasing from £45 to £100.

As the EU withdrawal transition period draws to an end (completes 31 December 2020) UK businesses face yet more adjustments in addition to those presented by COVID disruption.

Businesses that trade with the EU should by now have matters in hand to cope with cross-border trading from 1 January 2020. But what about businesses that move goods between the mainland and Northern Ireland? 

The government have issued instructions for traders moving goods from the mainland to Northern Ireland. If affected, you should be receiving a letter with details of a Trader Support Service and its benefits for UK businesses.

The service will:

• provide a free end-to-end support package to manage import and safety and security declarations on behalf of traders.
• educate businesses on what the protocol means for them, and the steps they need to take to comply with it. This will include online training sessions and webinars, with information being continually updated as we move closer to 1 January 2021
• be available to businesses moving goods into Northern Ireland under new processes in the Northern Ireland Protocol that start from 1 January 2021

It can help if you:

• are moving the goods yourself
• act on behalf of someone
• send parcels between Great Britain and Northern Ireland, or bring parcels into Northern Ireland from outside the UK

If your business trades with Northern Ireland you should consider signing up for the Trader Support Service. Google the service to sign up online.

In the face of Brexit uncertainties and the recent Coronavirus outbreak the new Chancellor, Rishi Sunak, was faced with falling economic indicators, the need to boost NHS services and was consequently limited in his options to spend on plans to improve business confidence and fund infrastructure projects.

Interestingly, there were a number of measures that will directly benefit those affected by the current COVID-19 outbreak and these are reported in this update.

Details of other changes for 2020-21 – for individuals and businesses – are set out in our Budget Summary below. 

Personal Tax and miscellaneous matters

Statutory Sick Pay (SSP)

SSP will be temporarily payable from day 1 instead of day 4 for affected individuals and will include those infected and those self-isolating, who are not infected.

Those who cannot claim SSP, the self-employed for example, are to be provided with easier access to Universal Credits and the Contributory Employment and Support Allowance.

Local Authority Hardship Fund

Government is providing a new £500m Hardship Fund so local authorities can support economically vulnerable people and households.

Most of this funding will probably support the extension of council tax relief.

Personal Tax allowance

The personal Income Tax allowance for 2020-21 is maintained at £12,500 (2019-20 £12,500). 

Income Tax bands, rates and the dividend allowance

The Income Tax bands for 2020-21 have also been maintained at 2019-20 levels. They are:

• Basic rate band £37,500 (2019-20 £37,500)
• Higher rate band £37,501 to £150,000 (2019-20 £37,501 to £150,000)
• Additional rate, no change, applies to income of more than £150,000.

Consequently, the higher rate threshold will stay as £50,000 from April 2020. There is no change in Income Tax rates, and the tax rates applied to dividend income.

Changes to these Income Tax bands apply to England, Wales and Northern Ireland. The Scottish parliament now set their own Income Tax bandings. 

Earlier payments of Capital Gains Tax (CGT)

As previously announced, from April 2020, UK residents will be required to make a payment on account for CGT due on a chargeable residential property sale. For example, the sale of a buy-to-let property. A formal computation of any gains and payment of CGT due on the disposal will have to be made within 30 days of the property disposal.

The changes have applied from April 2019 for non-UK residents.

Capital Gains Tax Private Residence Relief changes

From April 2020, the government is making two changes to the private residence relief:

1. The final exempt period will be reduced from 18 months to 9 months, with no change to the 36 months available for those disabled or in care homes, and
2. Lettings relief will be reformed so that it only applies in certain circumstances where the property owner is in shared occupancy with the tenant.

CGT Entrepreneurs’ relief

One of the significant announcements in the budget speech was the reduction of the lifetime allowance for this relief from £10m to £1m. This will apply to all relevant business disposals on or after 11 March 2020. The Chancellor has avoided the abolition of the relief but has restricted lifetime claims to £1m.

Special provisions may apply to disposals contracted for sale before 11 March 2020, but when the sale was not completed at that date.

Business owners and their advisors will need to consider other options to reduce CGT on business sales in excess of this £1m limit.

CGT annual allowance

The annual tax-free allowance is to be increased to £12,300 for 2020-21 (£12,000 2019-20).

The equivalent allowance for trustees is £6,150 (£6,000 2019-20).

Tax benefit charges for low CO2 vehicles

In an attempt to support new regulation in this area, the listed benefit rates will be cut by 2% for vehicles that qualify for the new standard (Worldwide harmonised Light Vehicle Test Procedure (WLTP) for all new cars registered from 6 April 2020).

Tobacco Duty Rates

All tobacco products will see an increase in duty by 2% above the current rate of inflation.

Hand-rolling tobacco will see an increase of 6% above the rate of inflation.

These changes will impact prices from 6pm, 11 March 2020.

Vehicle Excise Duty

Rates are due to be increased in line with the Retail Prices Index from April 2020.

Fuel Duty

Is frozen for another year.

Alcohol duty rates

Alcohol Duty rates remain unchanged for 2020-21. This will be welcome news for pubs and bars.

ISA limits 2020-21

Adult savings limits remain unchanged at £20,000.

Junior ISA limits are increased to £9,000.

Zero-rating of VAT for women’s sanitary products

This measure is to be introduced from 1 January 2021.

Bank support from mortgage lenders

Although not a budget announcement, a number of banks and other mortgage lenders are offering a moratorium on mortgage repayments to those directly affected by the Coronavirus. This is welcome support for individuals whose income may be diminished by absence from work. At least one High Street lender has committed to a three-month moratorium.

Banks are also considering increasing credit card limits and cash withdrawal limits.

Business Tax changes

National Insurance

It was confirmed that the tax threshold for National Insurance Contributions will rise to £9,500 from April 2020 (was £8,632). This should save £100 a year in National Insurance contributions for some 31 million people.

Relief for Statutory Sick Pay payments

Small and medium sized businesses, those with less than 250 employees at 28 February 2020, will be able to reclaim any approved SSP payments. The actual method for making a claim is yet to be agreed as current payroll processes cannot accommodate this type of refund.

Watch this space as this is a welcome cost saver for smaller businesses.

Business Rates Retail Discount Scheme

The government has already announced that, for one year from 1 April 2020, the business rates retail discount for properties with a rateable value below £51,000 in England will increase from one third to 50% and will be expanded to include cinemas and music venues. 

To support small businesses, in response to COVID-19, the retail discount will be increased to 100% and expanded to include hospitality and leisure businesses.

The government previously committed to introducing a £1,000 business rates discount for pubs with a rateable value below £100,000 in England for one year from 1 April 2020. To further support pubs, in response to COVID-19, the discount will be increased to £5,000. 

Affected businesses should receive amended rates bills for 2020-21 from their local authority. Regional variations may apply.

One-off grant for small businesses

The government is to provide a £3,000 grant to businesses that presently qualify for the Small Business Rates Relief or Rural Rate Relief.

Businesses that think they may be eligible should contact their local authority.

Coronavirus Business Interruption Loan Scheme 

The government will launch a new, temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, to support businesses to access bank lending and overdrafts. 

Government will provide lenders with a guarantee of 80% on each loan (subject to a per lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £1.2 million in value. This new guarantee will initially support up to £1 billion of lending on top of current support offered through the British Business Bank.

HMRC’s Time To Pay Scheme

HMRC are expanding the number of operatives that manage calls from taxpayers that are unable to pay their taxes on time. If readers are concerned about meeting tax payments call the dedicated help-line 0800 0159 559.  

Corporation Tax

The previously announced reduction in Corporation Tax from 19% to 17% – from April 2020 – has been scrapped. Corporation Tax rates are to remain at 19% for the financial year beginning 1 April 2020.

Structures and Buildings allowance

The annual writing down rate is to be increased from 2% to 3% from April 2020.

Digital Services Tax

Despite opposition from various quarters it looks as if the new Digital Services Tax of 2% will be applied to digital businesses from April 2020.

This will be a major revenue raiser for HMRC.

Capital loss restriction from 1 April 2020

For accounting periods ending on or after 1 April 2020, companies making capital gains will only be able to offset up to 50% of those gains using carried-forward, allowable capital losses.

Employment Allowance

The present £3,000 relief that reduces employer’s NIC contributions is to be increased to £4,000 from April 2020. From 6 April 2020, you will only be able to claim if your Class 1 NIC bill was below £100,000 in the previous tax year.

Car and van benefits charges

Van benefit charges and car and van fuel benefit charges will be increased to account for inflation from April 2020.
    
R&D expenditure credit

This “Above the line” expenditure credit is currently 12% of qualifying R&D expenditure. This is to be increased to 13% from 1 April 2020.

Zero-rating of e-publications

From 1 December 2020, e-books, e-newspapers, e-magazines and academic e-journals will be zero-rated for VAT purposes.

VAT reverse-charge for the construction sector

A reminder that the domestic reverse charge process will apply to the construction sector from 1 October 2020.

Affected contractors that are still unsure of the changes they will need to make are invited to call so we can help you set up the relevant systems.

VAT registration threshold – no change

The present VAT registration limit (£85,000) and deregistration limit (£83,000) will continue to apply for a further two years; until 31 March 2022.

Clamp-down on tax evaders

As is usual, the budget includes a number of provisions to reduce the successful application of tax avoidance strategies.

Bank support for small businesses

In concert with the flexibility being offered to individuals, banks are looking at relaxing their criteria that would allow small businesses affected by Coronavirus disruption to obtain loans on favourable terms. 

Climate issues

The government will also invest in the natural environment: planting enough trees to cover an area the size of Birmingham, restoring peatlands and providing more funding to protect the UK’s unique plants and animals. 

The government will also go further to tackle the scourge of plastic waste by introducing a Plastic Packaging Tax, as well as providing further funding to encourage producers to make their packaging more recyclable.

Autumn Budget 2018

 

The Prime Minister announced at the Conservative Party conference that the end of austerity was in sight. Recent tax revenues have exceeded expectations, and although there was an expectation that these declarations and indicators would herald a relaxation of fiscal policy, the Chancellor is mindful of the potential fallout next year when we leave the EU, with or without a deal. The Chancellor mentioned he would consider a Spring Budget in the event of a ‘no deal’ Brexit.

 

And so, prudence seems to have directed his thinking.

 

The remainder of this update confirms tax and other changes announced that will affect businesses and other taxpayers from next year.

 

Personal Tax and miscellaneous matters

 

Personal Tax allowance

 

The personal Income Tax allowance for 2019-20 will be increased to £12,500 (2018-19 £11,850). It will remain at this increased level for two years.

 

Changes to personal tax allowances will apply to the whole of the UK.

 

Income Tax bands, rates and the dividend allowance

 

The Income Tax bands for 2019-20 have been increased. They are:

• Basic rate band increased to £37,500 (2018-19 £34,500)
• Higher rate band £37,501 to £150,000 (2018-19 £34,501 to £150,000)
• Additional rate, no change, applies to income of more than £150,000.

As a result, the higher rate threshold will increase to £50,000 from April 2019. There is no change in Income Tax rates and the tax rates applied to dividend income.

 

Changes to these Income Tax bands apply to England, Wales and Northern Ireland. The Scottish parliament now set their own Income Tax bandings.

 

Earlier payments of Capital Gains Tax (CGT)

 

UK residents will be required to make a payment on account for CGT due on a residential property sale. The new regulations will also affect disposals by non-UK residents.

 

The changes will apply from April 2019 for non-UK residents and April 2020 for UK residents.

 

Capital Gains Tax Private Residence Relief changes

 

From April 2020, the government intends to make two changes to the Private Residence Relief:

1. The final exempt period will be reduced from 18 months to 9 months, with no change to the 36 months available for those who are disabled or in care homes, and
2. Lettings relief will be reformed so that it only applies in certain circumstances where the property owner is in shared occupancy with the tenant.

CGT Entrepreneurs’ relief

 

Two changes are coming into effect:

1. Claimants must have a 5% interest in the distributable profits and the net assets of the company to qualify, and separately
2. That the minimum period, during which certain conditions must be met to qualify for the relief, is being increased from one to two years.

The first measure will have effect for disposals on or after 29 October 2018.

 

The second measure will have effect for disposals on or after 6 April 2019, unless a business ceased before 29 October 2018.

 

Inheritance Tax: changes to the nil-rate band

 

From 29 October 2018, amendments to the residence nil-rate band will provide certainty as to when a person is treated as “inheriting” property and clarify the “downsizing” rules.

 

Rent-a-room relief change cancelled

 

The expected change to require shared occupancy to qualify for rent-a-room relief is not to be introduced.

 

ISAs

 

For 2019-20, the ISA limit will remain at £20,000. The limit for Junior ISAs and the Child Trust Fund is to be increased to £4,368.

 

Limit on pensions’ savings to be increased

 

The life time limit on pension savings is to be increased in line with inflation to £1,055,000 for the 2019-20 tax year.

 

Stamp duty first time buyers’ relief in England

 

This relief is being extended to cover the purchase of qualifying shared ownership property and will be effective for transactions on or after 29 October 2018 and will be backdated to 22 November 2017.

 

The first £300,000 of an initial share purchased will not be liable to SDLT based on the market value of the property. The remainder of the value over £300,000 will be charged at 5%. No SDLT will be chargeable on the associated lease. Relief is not extended to further shares purchased and will not apply to purchases of property valued at over £500,000.

 

Tobacco duty increases confirmed

 

The rates for duty for all tobacco products increased by inflation plus 2% from 6pm, 29 October 2018.

 

Hand-rolling tobacco also rose by an additional 1% above this increase, to 3% above the RPI from the same date.

 

Duties on beer, wine and spirits

 

There are to be no increases to the duty charged on beers, spirits or cider, except for certain ciders treated as high strength for duty purposes.

 

Wines and high strength sparkling cider drinks will see duty increased in line with inflation from 1 February 2019.

 

Vehicle excise duty

 

The VED rates for cars, vans and motorcycles is due to increase by reference to the RPI from 1 April 2019.

 

Fuel duty increase frozen

 

Duty increase is frozen for the ninth consecutive year.

 

Air passenger duty (APD) increases

 

Travellers should note that APD will increase in line with inflation for long-haul flight passengers only. The new rates will apply from 1 April 2020.

Business Tax changes

 

Corporation Tax

 

Corporation Tax rates to remain at 19% for the financial year beginning 1 April 2019.

 

Employment Allowance reform

 

From 2020, the government will legislate to restrict access to the £3,000 NIC Employment Allowance, to employers with employer NIC liabilities of under £100,000 in the previous tax year. Connected employers will have their contributions aggregated for this purpose.

 

Annual Investment Allowance increased

 

The Annual Investment Allowance (AIA) is to be increased from the present £200,000 to £1m from 1 January 2019 to 31 December 2020. It is then presumed that this will return to the £200,000 limit. This should provide a welcome boost to business investment during the Brexit transition period.

 

Please note that not all capital purchases qualify for this relief. Please call for clarification of what is covered if you are considering a significant acquisition.

 

R&D tax credit claims to be restricted

 

From 1 April 2020, the amount of payable tax credit that can be claimed under the R&D SME tax relief scheme will be limited to three times the company’s total PAYE and NIC payments for the period. Any loss that cannot be surrendered can be carried forward and used against future profits.

 

The government will consult with interested parties on this issue.

 

IR35 changes

 

The changes recently made to IR35 arrangements in the public sector are to be rolled out to the private sector. The changes will come into effect from April 2020 and small firms will be exempt. Firms that have concerns that they may be affected should contact us for more details.

 

Car and van fuel benefit charge increases

 

For 2019-20, these will increase by reference to the September 2018 Retail Prices Index.

 

A new 2% digital services tax

 

From April 2020, the major social media, search engine and online retailers will be subject to a 2% tax on revenues generated from UK users of their services. The Chancellor did indicate that if an internationally recognised levy was introduced, that the UK may fall into line in place of this 2% UK tax.

 

At last, rates relief for High Street retailers

 

In a much anticipated announcement, smaller retailers in England, occupying shop premises with rateable values under £51,000, should benefit from a cut of one-third in their business rates bills for 2 years from April 2019.

 

They should also benefit from £675m to be spent on improvements by councils to help transform high streets, the redevelopment of empty shops as homes and offices and the repurposing of old and historic buildings.

 

In a humorous exchange, the Chancellor also announced 100% business rates relief for public lavatories.

 

Plastics tax

 

For those readers who are concerned about the environment they will be pleased to note that the government is to consider introducing a tax on the production and importing of plastic packaging from April 2022.

 

The charge will apply to plastic packaging that does not contain at least 30% recycled plastic.

 

Changes to the apprentices’ levy

 

From April, larger employers will be able to invest up to 25% of their apprenticeship levy to support apprentices in their supply chain. Additionally, some smaller employers will pay half what they currently pay for apprenticeship training: a reduction from 10% to 5%. The government will fund the remaining 95%.

 

Charities small trading exemption increase

 

The limits that exempt small scale trading by charities from UK tax are to be increased to:

• If annual charity income is under £32,000 the trading limit is £8,000.
• If annual charity income is between £32,000 and £320,000, the trading limit is 25% of income.
• If annual charity income is more than £320,000, the trading limit is £80,000.

The changes will apply from 6 April 2019 for unincorporated charities and from 1 April 2019
for incorporated charities.

 

A new structures and buildings allowance (SBA)

 

This will provide tax relief for qualifying capital expenditure on new non-residential buildings where all contracts for the physical construction works are entered into on or after 29 October 2018.

 

Relief will not include the cost of land or dwellings.

 

Tax relief for electric charge points to be extended

 

The present first year allowances available for the installation of electric charge points is to be extended for four years, until the end of the financial year 2022-23.

 

Reduction in tax writing down allowance

 

The special rate of writing down allowance is being reduced from 8% to 6% from April 2019.

 

Supposedly, this is intended to closer align tax depreciation with commercial depreciation rates.

 

Anti-avoidance measures

 

The Finance Bill will contain a number of measures that will continue to improve HMRC’s campaigns to reduce the impact of tax avoidance schemes.

 

Tax to be protected in insolvency

 

From 6 April 2020, the government will change the insolvency rules so that taxes collected on behalf of employees and customers, primarily employees PAYE and NIC and customers VAT, will be treated as a preferential creditor on winding up rather than distributed to other creditors.

 

Company loss relief loop-holes to be closed

 

Most of the changes will apply from April 2019 and will prevent relief for carried forward losses being claimed in excess of that intended by legislation.

 

The changes will include:

• the definition of “relevant profit”,
• the computation of life assurance and annuity business profits,
• the deductions allowance in group situations,
• the calculation of terminal relief,
• the cap on profits against which certain losses may be allowed,
• and other minor considerations.

VAT: reverse charge process to be extended to construction services

 

This change, to extend the reverse charge process to the building and construction industry is due to come into effect from 1 October 2019.

 

This will place the onus for dealing with the VAT charge due on subcontractors’ bills to the main contractor.

 

This will cause accounting rather than cash flow issues for main contractors as they will add entries to their VAT returns to pay the subcontractors VAT, but then deduct the same amount as input VAT on the same return.

 

The aim is to stop subcontractors adding VAT to their bills and then disappearing without remitting the VAT to HMRC.

 

VAT registration threshold – no change

 

The present VAT registration limit (£85,000) and deregistration limit (£83,000) will continue to apply for a further two years; until 31 March 2022.

 

A summary of the Spring Statement will be added later today.

Prospects for growth, especially for productivity have been downgraded, but the Chancellor was bullish in his forecasts for investment and the Government’s intention to sort out the slow pace of house building in the UK. A few non-tax comments of note were:

• Unemployment at its lowest rate since 1975.
• Chancellor is providing an extra £3bn to prepare for Brexit over the next two years.
• Government to create 5 new garden towns, make better use of land and aim to be building 300,000 new homes a year by the mid-2020s.
• Devolved administrations will have more money to spend. An increase of £2bn for Scotland, £1.2bn for the Welsh Government and £660m for the Northern Ireland Executive.

Our summary of a selection of specific tax changes and other budget announcements for 2018-19 and future years follow.

Personal Tax and miscellaneous matters

Personal Tax allowance

The personal allowances for 2018-19 is £11,850 (2017-18 £11,500). According to HMRC, this means that an average taxpayer will pay £1,075 less tax than in 2010-11.

Income Tax bands, rates and the dividend allowance

The income tax bands for 2018-19 have been increased. They are:

• Basic rate band increased to £34,500 (2017-18 £33,500)
• Higher rate band £34,501 to £150,000 (2017-18 £33,501 to £150,000)
• Additional rate, no change, applies to income of more than £150,000.

There is no change in income tax rates, and the tax rates applied to dividend income. Readers should note that the present £5,000 tax-free dividend allowance will, as previously announced, be reducing to £2,000 from April 2018.

The Scottish parliament sets the basic rate limit for Scotland meaning that higher rate taxpayers may pay more tax in 2018-19.

Marriage Allowance extended

There is a small increase in this allowance to £1,185 from April 2018. This is the amount of unused personal tax allowance that can be transferred between spouses, or civil partners, if the person receiving the transfer is not a higher rate tax payer.

From 29 November 2017, the Government will also allow Marriage Allowance claims on behalf of deceased spouses and civil partners, and for the claim to be back dated four years in appropriate cases.

Offshore trusts

Changes will be made to ensure that payments from an offshore trust intended for a UK resident individual do not escape tax when they are made via an overseas beneficiary or a remittance basis user. This will take effect from April 2018.

Abolishing Stamp Duty Land Tax for certain first-time buyers

With immediate effect, first-time buyers will pay no stamp duty on homes costing no more than £300,000.

First-time buyers of homes worth between £300,000 and £500,000 will not pay stamp duty on the first £300,000. They will pay the normal rates of stamp duty on the price above that. This will save £1,660? on the average first-time buyer property.

80% of people buying their first home will pay no stamp duty, but there will be no relief for those buying properties over £500,000.

National Living Wage (NLW) and National Minimum Wage (NMW) increases

From April 2018, the NLW will increase from the present £7.50 per hour to £7.83 per hour.

From the same date, the NMW rates will also increase to:

• £7.38 per hour for 21 – 24 year olds
• £5.90 per hour for 18 – 20 year olds
• £4.20 per hour for 16 and 17 year olds
• £3.70 per hour for apprentices

Fuel duty no change

For 2018, the fuel duty will remain frozen, for the eighth consecutive year.

New railcard for the 26 to 30 age group

No doubt to win back the support of the younger generation, the government will work with the rail industry to introduce a new railcard from Spring 2018.

Duty frozen for most alcoholic drinks

The duty on beer, wine, cider and spirits to be frozen. However, cheap, high strength cider will be subject to a new band of duty from 1 February 2019.

Duty on tobacco products to increase

The duty on cigarettes will increase by 2% above inflation and hand-rolling tobacco by 3% above inflation, with effect from 6pm, 22 November 2017.

Universal Credit (UC) changes

In response to recent adverse publicity the Government has agreed to various changes that are intended to ease the financial hardship for new claimants. They include:

• Households in need, who qualify for UC will be able to access a month’s worth of support within 5 days. This will be funded by an interest free loan that can be repaid over a 12-month period.
• Claimants will be eligible for UC from the day they apply, the present 7-day rule will be scrapped.
• Low-income households affected by areas with higher rent increases will receive an extra £280 on average to meet these higher costs.

Pension lifetime allowance increased

The lifetime allowance will increase to £1,030,000 from April 2018.

Diesel Vehicle Excise Duty (VED) change

From April 2018, the first year VED (car tax) rate for diesel cars that don’t meet the latest standards will go up by one band. The Chancellor emphasises this is cars only, and that the money will go to a new Clean Air Fund.

Business Tax changes

Corporation Tax changes

Although there is no change to the rate of Corporation Tax, maintained at 19%, HMRC is to freeze indexation allowance on corporate capital gains for disposals after 1 January 2018.

£64m for construction and digital training courses

The new funding will be split as to:

• £34m to teaching construction skills, and
• £30m towards digital courses using Artificial Intelligence.

Partnership tax

Legislation has been revised to be more compatible with commercial arrangements for allocating shares of profit, and to avoid additional administrative burdens for taxpayers. The changes will have effect for the tax year 2018-19 and subsequent tax years.

Business rates changes

From April 2018, business rates will rise by any increase in the Consumer Price Index (CPI) rather than the Retail Prices Index (RPI). The change has been brought forward two years. Historically, the RPI has tended to be higher than the CPI.

Rates revaluations will now be undertaken every 3 years rather than the present 5 years. This will start after the next rates revaluation due during 2022.

Pubs with a rateable value up to £100,000 will continue to receive a £1,000 discount next year.

Venture Capital Schemes

Changes are to be made to the Enterprise Investments Scheme, the Seed EIS and Venture Capital Trusts. The aim is to target Venture Capital Schemes on companies where there is a real risk to the capital being invested, and will exclude companies and arrangements intended to provide ‘capital preservation’.

Incentives to encourage VCTs towards higher risk investments will include:

• removing certain ‘grandfathering’ provisions that enable VCTs to invest in companies under rules in place at the time funds were raised, with effect on and after 6 April 2018;
• requiring 30% of funds raised in an accounting period to be invested in qualifying holdings within 12 months after the end of the accounting period, with effect on and after 6 April 2018;
• increasing the proportion of VCT funds that must be held in qualifying holdings to 80%, with effect for accounting periods beginning on and after 6 April 2019;
• increasing the time to reinvest the proceeds on disposal of qualifying holdings from six months to 12 months for disposals on or after 6 April 2019;
• introducing a new anti-abuse rule to prevent loans being used to preserve and return equity capital to investors, with effect on and after Royal Assent of Finance Bill 2017-18.

EIS and VCTs will also see increased limits for investments in knowledge-intensive companies:

The Government will legislate to:

• double the limit on the amount an individual may invest under the EIS in a tax year to £2 million from the current limit of £1 million, provided any amount over £1 million is invested in one or more knowledge-intensive companies;
• raise the annual investment limit for knowledge-intensive companies receiving investments under the EIS and from VCTs to £10 million from the current limit of £5 million. The lifetime limit will remain the same at £20 million; 
• allow knowledge-intensive companies to use the date when their annual turnover first exceeds £200,000 in determining the start of the initial investing period under the permitted maximum age rules, instead of the date of first commercial sale.

The changes will have effect on and after 6 April 2018. This measure is subject to normal state aid rules.

R & D expenditure credit increase

The Government will legislate to increase the rate of the R&D expenditure credit from 11% to 12%, to support business investment in R&D.

This change will have effect on and after 1 January 2018.

Diesel car supplement increase

The diesel car supplement is to be increased from 3% to 4% from 6 April 2018. This will increase the company car tax and car fuel benefit charge (for company cars provided with an element of private use).

This change will apply to all diesel cars registered on or after 1 January 1998 that do not meet the Real Driving Emissions (Step 2) standards.