The Chancellor announced no significant tax or pension changes in the Budget. The key measures that will affect savers and investors are as follows:
The personal allowance and higher rate threshold will increase a year earlier than expected to £12,500 and £50,000 respectively from 06 April 2019. This in effect means a tax cut for an estimated 31 million people. (The income tax rates and bands for Scottish taxpayers will be announced in the Scottish Budget on 12 December.)
There are no other changes to income tax bands or allowances.
The pension lifetime allowance (LTA) will rise to £1,055,000 from 06 April 2019. Reassuringly, there are no changes to pension annual allowances (AA). The standard AA remains at £40,000, the money purchase AA stays at £4,000 (with no carry forward) and there are no changes to the high income AA taper rules.
Mr. Hammond also confirmed that in the fight against financial fraud, regulations to ban cold calling in relation to pensions will be brought forward. The Government will put the measures before Parliament this autumn, and bring into force “as soon as possible thereafter.”
Capital gains tax and Entrepreneurs Relief
The capital gains tax allowance will increase by £300 to £12,000 from 06 April 2019. The Chancellor has however tweaked rules on tax relief for entrepreneurs by extending the qualifying period of the tax break from 12 months to two years, with the aim of encouraging longer-term investment in British business. (Currently Entrepreneurs pay a lower rate of tax at 10%, compared to the standard rate of 20%, on capital gains when they sell all or part of their business on amounts over the annual exemption amount of £11,700 2018/19.)
From April 06 2019, in order to qualify you must be a sole trader or business partner and have owned all or part of a business for at least 24 months before you sell. The relief is currently claimed by around 50,000 individuals each year and means average claimants typically save around £8,000 in tax. The changes also aim to tackle some who were abusing the relief, by narrowing the tax break to people who have at least a 5% stake in the company’s profits and assets.
As expected, the IHT nil rate band will remain frozen at £325,000 until April 2021.
The residence nil rate band will increase from £125,000 to £150,000 from 06 April 2019, allowing some couples to leave up to £950,000 to future generations free of IHT.
There will be a consultation to consider the simplification and fairness of trust taxation. The existing IHT regime for trusts is notoriously complex and any attempt to simplify it is extremely welcome.
Annual ISA limits stay at £20,000 per person, with no reduction in the range of ISA options available to meet different needs. However, the annual allowance for Junior ISAs and Child Trust Funds will be increased in 2019 in line with inflation, to £4,368. It’s currently £4,260 (2018/19).
Other significant measures…
As expected, fuel duty will be frozen for the ninth year in a row.
The duty on beer, cider and spirits will be frozen. The duty on wine will rise by 8p a bottle from 01 February 2019.
Cigarettes and tobacco
The cost of a packet of 20 cigarettes increased immediately after the Budget yesterday by 33p. Tobacco duty will continue to rise by inflation plus 2%.
Stamp Duty and housing
All first-time buyers purchasing shared equity homes of up to £500,000 will be exempt from stamp duty.
£500m will be available for the Housing Infrastructure Fund to enable a further 650,000 homes to be built.
Lettings relief limited to properties where the owner is in shared occupancy with the tenant.
An extra £1bn to help welfare claimants transfer to the new consolidated benefit, Universal Credit.
The Chancellor insisted that the controversial system is “here to stay.”
An extra £500m will be available for preparations for leaving the EU.
The Spring Statement in March 2019 could be upgraded to a full Budget if needed.
And a commemorative 50p coin will be minted to mark the UK’s departure from the EU!
Several measures, including an extra £160m for counter-terrorism police and £1bn for the armed forces cyber-capabilities and the new nuclear submarine programme.
Digital and Business
A new 2% digital services tax on UK revenues of the big tech giants from April 2020. (Profitable companies with global sales of over £500m will be liable.)
Business rates for firms with a rateable value of £51,000 or less to be cut by third over two years. (This measure will benefit 90% of independent shops, pubs and restaurants, cutting bills by £8,000.)
Business rates relief of £900m for small businesses and £650m to rejuvenate High Streets.
A new 100% mandatory business rates relief for all lavatories made available for public use!
Confirmation of an extra £20.5bn for the NHS over the next five years and a minimum extra £2bn a year for mental health services.
The roads and transport
£30bn for England’s roads, including repairs to motorways and potholes.
Air Passenger Duty to be indexed in line with inflation.
There will be a new tax on plastic packaging which does not contain 30% recyclable material, but no tax on takeaway coffee cups at this present time. (This will be reconsidered if the industry doesn’t make enough progress!)
£60m will be available for planting trees in England and £10m has been set aside to deal with abandoned waste sites.
Please note that this information is based on our understanding of measures announced by the Chancellor of the Exchequer during his Budget Speech on 29 October 2018. These measures may be subject to change. Independent confirmation should be obtained before acting or refraining from acting upon the information given. Brunsdon is not responsible for the content of third party web sites.