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.

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.