Autumn Budget 2017 - Headline Announcements
The Chancellor, Philip Hammond, gave the first “Autumn Budget” today, following the Government’s decision last year to switch from March to November.
The Budget was presented against the backdrop of pressure on the economy including “peaking” public sector debt (as a percentage of GDP), “peaking” inflation (at 3% this quarter), and down-rated forecast growth (at 1.5% this year, staying flat until 2022/23). Mr Hammond was able to encourage us with predictions of progress in these areas over the coming years, including a predicted drop of 600,000 in the unemployment total by 2020.
Mr Hammond has continued with his themes of promoting productivity, improving key skills, building much needed homes and funding infrastructure with a variety of initiatives including an extension to the National Productivity Fund, ongoing commitments to major projects (like Crossrail and HS2), boosts to maths and computer science teaching resources and a target of 3 million apprenticeships by 2020, as well as an apparently vigorous and concerted attack on the use of available land for house-building, combined with £44 billion funding to support 300,000 new homes per annum.
On the social welfare front, the government have taken real steps to tackle some of the problems with Universal Credit and are giving attention to pay for nurses to try and help the NHS to recruit and retain more successfully.
A positive, optimistic picture painted of a nation accepting the challenges ahead and embracing change.Headline Announcements
Corporation Tax on chargeable gains – the freezing of indexation relief
At the current time, and for the last nearly 20 years, there has been a surprising difference between the way gains have been taxed on disposals of capital assets, as between those realised by individuals and those realised by companies: “Indexation relief” (a relief representing an inflation factor applied to the cost of an asset disposed of) came to an end for individuals and CGT purposes in 1998 but is still going for companies and CT purposes, to this day.
Indexation relief for companies will be frozen at January 2018 and no additional indexation relief will apply to gains made after that month.
This (partially) removes just one of the differentiators between holding assets personally or through a limited company, although there remains plenty still to explore when considering business or investment structures.
The UK tax base will broaden in relation to the taxation of non-residents’ gains on immovable property which will, from April 2019, include disposals of UK commercial property, both directly and indirectly, by non-residents, disposals of residential property by all companies and indirect disposals of residential property by all persons.
Stamp Duty Land Tax - relief for first time buyers
With effect from today (22 November 2017), first time buyers paying £300,000 or less for a residential property will pay no Stamp Duty Land Tax (“SDLT”).
Prior to 22 November 2017, a first time buyer acquiring a property for £300,000 would have paid SDLT of £5,000.
With effect from today (22 November 2017), first time buyers acquiring a residential property for between £300,000 and £500,000 will pay no SDLT on the first £300,000 of value and SDLT at a rate of 5% on the amount of the purchase price between £300,001 and £500,000.
Prior to November 2017, a first time buyer acquiring a property for £500,000 would have paid SDLT of £15,000. This will now be reduced to £10,000.
There will be no relief for first time buyers acquiring property for more than £500,000, they will continue to pay SDLT at the normal rates.
Reliefs and Allowances
Headline personal allowance and basic rate band income levels for 2018/19 are to be set at:
- Main personal allowance £11,850
- Basic rate band £34,500
So the new limit of annual income before higher rate tax starts to be paid will be £46,350
Benefits in Kind on Company Cars
From 6 April 2018, there will be no benefit in kind charge on electricity that employers provide to charge employees’ electric vehicles.
With effect from 6 April 2018, the percentage used to calculate the taxable benefit in kind for employees who are provided with a diesel car by their employer which is made available for private use will increase.
Prior to 6 April 2018, diesel cars suffered a 3% supplement in calculating the taxable benefit compared with petrol cars.
From 6 April 2018, this supplement will increase from 3% to 4% for all diesel cars that are not certified to the Real Driving Emissions 2 (RDE2) standard.
This measure will, however, remove the diesel supplement altogether for diesel cars which are certified to the RDEC standard.
Mileage Rates for Landlords
Traders have, for some time, been able to claim a simplified fixed rate deduction from their taxable profits each year based on the number of business miles they travelled.
In spite of this, landlords have been left with a more complex method of expenditure calculation based on actual running costs.
However, from 6 April 2017 (and so with effect from 2017/18 tax year), unincorporated property businesses will also be able to use this simplified method of calculating a mileage expense deduction on their tax return each year.
The mileage rates currently in operation are as follows:
- First 10,000 business miles per tax year 45p per mile
- Any business miles thereafter per tax year 25p per mile
As this measure will only extend the simplified mileage claim to unincorporated property business, it will not be available to landlords who operate through a company or through a “mixed” partnership (where one or more partners are not individuals).
Tax advantaged investment reliefs
There are various changes and proposals to tax-advantaged investment as follows:
- Action plan to unlock over £20bn of new investment in UK ‘knowledge-Intensive, scale-up businesses’
- Intention to double the EIS investment limits for investors in ‘knowledge-intensive’ companies from £1m to £2m
- The annual EIS and VCT investment limit the company may receive will increase to £10m
- Greater flexibility in the rules when determining whether a knowledge-intensive company will meet the permitted maximum age requirement
- However, as expected, intention to ensure that EIS is not used as a shelter for low risk capital preservation schemes by introducing a new ‘risk to capital’ condition. The condition considers if when taking a ‘reasonable’ view an investment has been structured to provide a low risk return to investors
Capital Gains Tax (CGT)
The changes to payment timings of Capital Gains Tax (CGT) on a disposal of residential property will be deferred so that they will be effective from April 2020 as opposed to April 2019. The changes will require a taxpayer to make a payment on account of any tax due within 30 days of the date of disposal.
In recent years the Lifetime Allowance limit on pension contributions has fallen significantly.
The Government announced at Budget 2015 that it would reduce the Lifetime Allowance for pension savings from £1.25 million to £1 million from April 2016.
From 2018-19, the Lifetime Allowance will now be increased by inflation (the Consumer Prices Index).
So £1,000,000 limit 2017/18 becomes £1,030,000 2018/19.
Annual Tax on Enveloped Dwellings (ATED) – Increase in Rates by 3% from 1 April 2018
ATED is an annual charge which applies to any single dwelling situated in UK which is valued at more than £500,000 as at the most recent revaluation date (currently 1 April 2017) and which is owned by certain ‘non-natural persons’ such as companies, partnerships with corporate members and collective investment schemes.
It was first introduced on 1 April 2013 at which time it applied to properties worth over £2m.
Now, in line with recent increases in the Consumer Prices Index (CPI), the rates of the charge are to be increased by 3% with effect from 1 April 2018 as follows:
|Property Value||Annual tax charge for 2017/18||Annual tax charge for 2018/19|
|£500,001 to £1,000,000||£3,500||£3,600|
|£1,000,001 to £2,000,000||£7,050||£7,250|
|£2,000,001 to £5,000,000||£23,550||£24,250|
|£5,000,001 to £10,000,000||£54,950||£56,550|
|£10,000,001 to £20,000,000||£110,100||£113,400|
|£20,000,0001 and over||£220,350||£226,950|
If you would like to discuss any of these matters or talk to us about your tax affairs in general, please contact our Tax Partners, Steve Crompton or Chris Barrington on the details below:
Partner – Head of Tax
direct dial: 01942 292541
mobile: 07790 840394
direct dial: 01942 292505
mobile: 07730 436070