The Chancellor delivered the Autumn Budget speech recently and pledged that austerity is coming to an end. What are the key tax announcements to be aware of?
Personal Allowance and Higher Rate Threshold: The government will legislate to increase the personal allowance to £12,500 for 2019/20 and 2020/21. Individuals will not pay the higher rate of income tax until they have income in excess of £50,000 from 6th April 2019; this measure has been brought forward by one year as expected.
Capital Gains Tax: Two new tests have been introduced in order to qualify for entrepreneurs’ relief (ER). The changes are effective immediately so any affected clients could benefit from advice in this area. To satisfy the definition of a personal company, the claimant must have a 5% interest in both the distributable profits and the net assets of the company. The new tests must be met, in addition to the existing tests, throughout the specified period to access the relief.
From 6th April 2019 the minimum qualifying period for ER will increase from twelve months to 24 months. However, individuals that have a 5% interest that becomes diluted due to a share issue taking place from 6th April 2019 will now be able to access the relief.
Changes to private residence relief from April 2020 were also announced; lettings relief will be reformed so that it is only available to those who are in shared occupancy with a tenant. The final period exemption will be reduced from 18 months to nine.
Corporation Tax: The corporation tax rate will remain static at 19% until 1st April 2020 when it is expected to decrease to 17%. As announced in July, the government will amend the loss relief legislation to prevent relief for carried forward losses being claimed in excess of that originally intended.
Capital Allowances: The annual investment allowance will be increased temporarily to encourage spending and growth. The current limit of £200,000 will increase to £1m from 1st January 2019 to 31st December 2020.
VAT: The VAT threshold will remain unchanged at £85,000 until 2022 despite the rising costs to the Exchequer. The government has confirmed that reform in this area will be considered once the terms of Brexit are clear.
Employment Taxes: Tax rules for off-payroll working in the private sector (IR35) will be reformed to mirror the rules for the public sector from April 2020. The government will undertake further consultations in this area in due course.
The full details can be found here: https://www.gov.uk/government/topical-events/budget-2018
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