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Key Tax Measures from the Autumn 2017 Budget

By Emma Gilbert - Smith

On 22 November 2017 the Chancellor, Philip Hammond, made the Autumn 2017 Budget statement. As budget statements go, this was one relatively uncontroversial. Many of the measures announced will take effect from 2018/19 and will be included in Finance Bill 2017-18 which will be published on 1 December 2017.

The SWAT tax team have analysed the budget statement documents and  discussed their initial thoughts on the key tax measures in the webinar “Key points from the Autumn 2017 Budget” on 23 November 2017. This webinar can be viewed as a recording if you were unable to watch it live.

Here is our roundup of the key tax measures for the accountant in practice.

Stamp Duty

The headline-grabbing measure was the scrapping of stamp duty for first-time buyers on homes up to £300,000.  This measure will also affect first-time buyers who buy homes valued at up to £500,000. In this case the first £300,000 of the value will be free from stamp duty and the balance will be subject to 5% stamp duty.

This measure will save first-time buyers a maximum of £5,000.

Personal Tax

For 2018/19 the personal allowance will be £11,850 and the basic rate band will be set at £34,500 leading to a higher rate threshold, which will be £46,350.

There are no changes to income tax rates.

The income tax rates and band widths do not apply to Scottish taxpayers; Scottish income tax rates and bands will be announced at the Scottish draft budget on 15 December 2017.

Marriage Allowance allows the transfer of 10% of a taxpayer’s personal allowance to their spouse or civil partner, in some situations. This relief will be extended to allow Marriage Allowance claims in respect of deceased spouses or civil partners, and such claims can be backdated for up to four years.

A package of measures will be introduced to encourage EIS and VCT investment in knowledge-intensive companies. These measures are intended to take effect from 6 April 2018.  Additional measures will be implemented to ensure EIS and VCT-type investment schemes are targeted towards growth investments and not used as part of capital preservation arrangements.

Business Tax

Legislation will be introduced to allow unincorporated property businesses to claim a fixed-rate mileage deduction instead of claiming capital allowances and actual expenses incurred.  The deduction will be available from 6 April 2017.

The government will publish a call for evidence and consider whether rent-a-room relief (currently £7,500 per annum) is consistent with their policy of encouraging longer-term lettings.

No announcements were made on the subject of Making Tax Digital (MTD). Our current understanding is that from April 2019 only those with turnover below the VAT registration threshold will have to comply with MTD requirements, and for VAT purposes only. The budget documents tell us to expect an “updated statement of impacts” on 1 December 2017.

Legislation will be introduced to clarify the taxation of partnership income. This includes proposals to alter the way in which taxable profits are allocated between partners to make them ‘more compatible with commercial arrangements’. The clarification will also cover situations including those where partners are bare trusts or are partnerships themselves.

As announced previously the abolition of Class 2 NIC is to be delayed until April 2019 so the rate of Class 2 for 2018/19 is now set at £2.95 per week.

The government will consult on charging income tax on royalty payments made to non-UK residents.

The government has confirmed that disincorporation relief will not be extended beyond 31 March 2018.

Several measures designed to boost Research & Development have been announced, including an increase in the large-company scheme credit which will be 12% from 1 January 2018.  The intention to provide an advance clearance service for R&D expenditure will be particularly welcomed.

100% first year allowances for zero-emissions vans will be extended to 31 March 2021 and the first year tax credit scheme (for loss-making businesses that have purchased certain energy-efficient plant & machinery) will be extended for another five years.

Indexation allowance, currently available to relieve company capital gains, will be frozen from 1 January 2018.  Disposals made after this date can only receive indexation allowance up to December 2017.

Following the changes to the rules governing off-payroll workers in the public sector in 2017/18, the government will consult on tackling abuse of IR35 legislation in the private sector.

Employment Tax

Forthcoming consultations and improvements to HMRC guidance will clarify the tax treatment of employment expenses.  It was announced that employers will no longer have to check employees’ receipts when paying benchmark scale rates.

From 6 April 2018 the diesel supplement, used in calculating company car benefits, will increase from 3% to 4% for most diesel cars.

The car fuel benefit multiplier is increased from £22,600 to £23,400 from 6 April 2018.

For 2018/19 the van benefit is increased to £3,350 and the van fuel benefit is increased to £633.

There will be a new benefit in kind exemption from April 2018 which will exempt employees from taxation on the benefit where they recharge their own electric cars or hybrid cars using their employer’s electricity.

The government will legislate to deny foreign service relief on termination payments in cases where the employee is UK-resident in the year their employment is terminated.

Capital Gains Tax

For 2018/19, the annual exempt amount will be £11,700 for individuals and £5,850 for trusts.

From April 2019 the Non-Resident CGT scheme (which currently requires non-UK residents to pay CGT on UK-situated residential property) will be extended to apply to disposals of any UK immovable property.

A consultation will address the availability of Entrepreneurs’ Relief in situations where the taxpayer’s shareholding in a company is reduced to below the 5% holding requirement because the company raised funds for commercial purposes by issuing new shares.

Do you want to communicate the key budget measures to your clients? Our budget summary products can be personalised with your firm’s details and are available in digital and print formats.  For more information please click here. 

November 2017 

 

Disclaimer
This article is published with the understanding that SWAT UK Limited is not engaged in rendering legal or professional services. The material contained in this article neither purports, nor is intended to be, advice on any particular matter. This article is an aid and cannot be expected to replace professional judgment. SWAT UK accepts no responsibility or liability to any person in respect of anything done or omitted to be done by any such person in reliance, whether sole or partial, upon the whole or any part of the contents of this article.