Budget 2018 – what does it mean for me?
Wondering what the 2018 Budget means for you? We've listed the key points here.
Perhaps trying to avoid the spook of a Halloween Budget, yesterday we saw Philip Hammond open his red briefcase and introduce the first Monday budget since 1962. The overriding theme of the budget speech was that “austerity is coming to an end” however “discipline will remain” as the government are now at a point where they are no longer borrowing money to fund spending.
Unsurprisingly, with the proposed deadline looming, there were a number of mentions of Brexit including £2.2bn already being allocated to departments for preparations. However, what the UK’s contingent workforce were waiting for was any announcement regarding the roll out of IR35 changes into the private sector following the 2017 public sector roll out. The Chancellor did not disappoint with announcing that the roll out of IR35 reforms in the public sector will happen in April 2020 and only to medium and large businesses. Allowing contractors to breathe a sigh of relief and giving these businesses some time to prepare.
But what else did the budget cover and what were the key points? We’ve listed everything you need to know below.
Personal taxation and wages
- The personal allowance threshold, the rate at which people start paying income tax at 20%, to rise from £11,850 to £12,500 in April 2019 – a year earlier than planned
- The higher rate income tax threshold, the point at which people start paying tax at 40%, to rise from £46,350 to £50,000 in April 2019
- The additional tax rate threshold will remain at £150,000
- National Living Wage increasing from £7.83 to £8.21 an hour, from April 2019.
- Tax rates and thresholds are different in Scotland. The Scottish government’s Finance Secretary Derek Mackay will set out his income plan for Scottish tax payers on 12 December.
- Capital gains tax annual exemption will increase to £12,000 (from £11,700) in April 2019.
Businesses and other taxes
- Changes to the off-payroll rules will extend from the public sector to medium and large private sector companies from April 2020
- Corporation Tax rate will remain at previous pledge of 19% and is expected to reduce further to 17% in April 2020
- The Employment Allowance, which provides many employers with relief of up to £3,000 per tax year from their employers’ National Insurance contributions (NICs) bill, will be restricted to only those employers who had a NICs bill below £100,000 in the previous tax year.
- VAT registration threshold will remain at £85,000 for a further 2 years until April 2022. VAT deregistration threshold will remain at £83,000.
- The period a company must have been previously trading to qualify for Entrepreneur’s Relief a company will increase from 12 months to 2 years in April 2019.
- Annual Investment Allowance (AIA) to be increased from £200,000 to £1m for two years
- Capital Allowances – writing down allowance for those purchasing capital items in the special rate pool will reduce from 8% to 6% in April 2019.
- Contribution of small companies to Apprenticeship Levy to be reduced from 10% to 5%
- Business rates bill for firms with a rateable value of £51,000 or less to be cut by third over two years
- Benefit in Kind – employers reimbursing employees for subsistence using benchmark scale rates will no longer be required to check receipts from April 2019. The existing concessionary accommodation and subsistence overseas scale rates will be placed on a statutory basis providing greater certainty for businesses.
Pensions and Savings
- The band of savings income at the 0% starting rate will be kept at its current level of £5,000.
- The annual subscription limit for Junior ISAS and Child Trust Funds will be uplifted to £4,368 in April 2019.
- The overall annual ISA subscription limit will remain unchanged for 2019-20 at £20,000.
State of the economy and public finances
- Era of austerity is “finally coming to an end”, the chancellor says
- 2018 growth forecast downgraded to 1.3% from 1.5% in March, due to impact of bad Spring weather
- But forecast for 2019 raised from 1.3% to 1.6% and annual forecasts raised to 1.4%, 1.4%, 1.5% and 1.6% in 2020, 2021, 2022 and 2023 respectively
- 3.3 million more people in work since 2010 and 800,000 more jobs forecast by 2022.
- Wages growth at its highest in nearly a decade
- Public borrowing in 2018 to be £11.6bn lower than forecast in March, representing 1.2% of gross domestic product, (GDP) the total value of goods produced and services provided
- Borrowing as a share of GDP to rise to 1.4% next year
- Borrowing to total £31.8bn, £26.7bn. £23.8bn, £20.8bn and £19.8bn in next five years
- Debt as share of GDP peaked at 85.2% in 2016-17, falling to 83.7% this year and to 74.1% by 2023-24
- 1.2% annual average growth in departmental spending promised
- Extra £500m for preparations for leaving the EU
- Spring Statement next March could be upgraded to full Budget if needed
Other notable announcements
- All first-time buyers purchasing shared equity homes of up to £500,000 to be exempt from stamp duty
- New 2% digital services tax on UK revenues of big technology companies, from April 2020
- Profitable companies with global sales of more than £500m will be liable
If you have any questions on what the budget means to you and your career, don’t hesitate to get in touch with your accountant who will be more than happy to help.
For a full overview of the 2018 Budget you can read our PDF report here.
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