Friday, 20 April 2018

Had a chance yet to digest what the 2018 Spring Statement means for you?

Here’s a summary…

Last month, Philip Hammond announced his first Spring Statement.

After two full Budgets in 2017, it didn’t include any tax changes or new spending initiatives (these will come in the Autumn Budget).

Instead, it represented a move to a new cycle of annual tax and spending changes and, as such, focused on reviewing Office for Budget Responsibility (OBR) figures and announcing consultations.

Here’s a recap of its key contents for the 2018/19 tax year:

Consultations ranged from ways to squeeze more tax from international digital businesses to a proposal for extending entrepreneurs’ relief to some shareholders whose holdings drop below the qualifying 5% level. There’s also the possibility of the VAT threshold being lowered.

The start of April saw the usual changes to the income tax rates and allowances as well as national insurance contributions. This year there will also be a cut in the dividend allowance and some special new tax rates for Scottish taxpayers. Modest tax increases have been applied to company cars, but their cumulative impact could be significant for some people.

Many employees will see any extra net income from the tax changes diminished by higher minimum auto-enrolment pension contributions, although the lifetime allowance for pensions has been raised.

And, less welcome for some will be the changes to employee termination payments and the new rules for enterprise investment schemes.

Other areas included:

English business rates                                                                                               
The next revaluation of business property in England will be brought forward one year to 2021, with three-yearly revaluations thereafter.

Entrepreneur’s relief                                                                                                     
A consultation paper was published on how to give entrepreneurs’ relief in circumstances where it would otherwise be lost because of a new share issue.

It could be extended for shareholders who currently miss out because their company issues new shares to raise cash, dropping their shareholding below the crucial 5% point.

VAT threshold                                                                                                             
Because of concern that the VAT threshold of £85k is inhibiting business growth, the government issued a call for further evidence on restructuring the VAT registration threshold to offer more incentives for small businesses to grow. There’s already some evidence that businesses deliberately limit growth to avoid crossing the existing £85,000 threshold (which has been frozen for the next two years).

So, watch out for changes – maybe a system of gradually increasing tax rates as turnover rises, or possibly different rates for different types of business.

Tax and the digital economy                                                                                           
There were several papers examining taxation issues surrounding the digital economy, including VAT and income tax leakage through internet trading platforms.                                                                                       
The government says that some people who use online platforms to run their businesses are not paying their fair share of taxes. One approach could be to ask platforms to help with tax admin – rather like employers.

Self-funded work-related training                                                                             
A consultation paper was published examining how to extend the existing tax relief framework to self-funded work-related training by employees and the self-employed.

According to HMRC, over 1 million people paid for their own training back in 2016, so now the government would like views on how to extend the tax relief to provide a training boost and encourage this further.

Tax evasion and money laundering                                                                                                   
The government wants to crack down on people who use cash to evade tax and for money laundering by taking a keen interest in large cash transactions and finding out why they are used.

Enterprise investment schemes and venture capital trusts                           
New rules for enterprise investment schemes and venture capital trusts will mean more cash for innovative businesses – but higher risks for investors.

HMRC to extend powers                                                                                         
HMRC can demand a security deposit from businesses where tax is at risk for VAT, PAYE and NICs as well as various other taxes, and this will now be extended to corporation tax and the Construction Industry Scheme.

Get everything you need in your 2018/19 Tax Tables

We have free 2018/19 Tax Tables to give out if you’d like one.

They conveniently give you all the key numbers in one place and include all of the updated information announced in the Spring Statement.

If you’d like us to send you your new Tax Tables for the 2018/19 tax year, please get in touch.

Key changes for 2018/19 include:

  • Increases to the personal allowance, and basic and higher rate tax thresholds.
  • New income tax bands and rates for Scotland.
  • A cut in the dividend tax allowance from £5,000 to £2,000.
  • Revised company car tax scales, with an increase in the diesel levy.
  • The first increase in the lifetime pension allowance since 2010.
  • An increase in the maximum tax relievable investment in Enterprise Investment Schemes.

Questions or queries on how these relate to you?

If you have any questions or would like some more information on how the Spring Statement affects you, please get in touch.

Until next month (when we return to a lighter take on things)...