Budget 2017: Advice from your Accountant

Posted: 23rd Nov 2017 by Nigel Atkinson Budget 2017, Taxation

Budget 2017 – Advice from your Accountant.

What are the key changes in the budget 2017 and how will they impact you?

This is the first Budget in the new annual tax policymaking cycle. According to gov.uk, the government’s aim is to provide greater tax certainty for households and businesses by consulting with taxpayers further in advance of changes and changing taxes less frequently. Further details on this new process will be set out later in 2017.

The main changes in the Autumn Budget 2017 were:

Personal allowance and higher rate threshold to rise
Stamp duty abolished with immediate effect for first time buyers on purchases up to £300,000
Tax free dividends reduction
Mileage & council tax changes that may affect landlords
Increases to the lifetime allowance and child trust funds
VAT Threshold frozen for 2 years
Small businesses to save £2.3 billion with rates switch

Budget updates for individuals

Personal Tax
The personal allowance will be increased to £11,850 and the higher rate band to £46,350. This represents a 3% increase, being the standard CPI increase for the year. This measure should result in £1,075 less tax being paid by most taxpayers than in 2010/11.

Stamp duty land tax (SDLT) abolished on homes under £300,000 for first-time buyers

First-time buyers of homes worth between £300,000 and £500,000 will not pay stamp duty on the first £300,000. According to the government, this will save £1,660‎ on the average first-time buyer property. There will be no relief for those buying properties over £500,000.

Untaxed band for dividend income falls to £2,000.

From 6 April 2018 the level of dividend income received tax-free will be reduced from £5,000 to £2,000. The tax rates applying outside this band remain unchanged. Dividends above the £2,000 threshold will be taxed at 7.5% for basic-rate taxpayers, 32.5% for higher-rate taxpayers, and 38.1% for additional-rate taxpayers.

Taxpayer	Dividend reduction
7.5% Basic-rate taxpayers	£225 worse off a year
32.5% Higher-rate taxpayers	£975 worse off a year
38.1% additional-rate taxpayers	£1,143 worse off a year

Provided the company has sufficient distributable profits, directors should consider accelerating dividend payments to before 6 April 2018 to benefit from the current dividend tax-free allowance of £5,000 before it falls.

Contact us: If you would like to review the potential tax liabilities as a result of the changes, please contact us on 01904 655202.

Budget changes for Landlords

Mileage rates for landlords

The government will extend the option to use mileage rates to individuals operating property businesses, on a voluntary basis, to reduce the administrative burden for these businesses. From 6 April 2017, property owners will have the option of calculating their allowable deductions using the fixed mileage rates. Where capital allowances have not already been claimed on the car/van, a fixed 45p on the first 10,000 business miles and 25p on any excess may be claimed per tax year.

The changes will simplify both the tax computations and motor expense claims for unincorporated businesses as well as harmonising the expense treatment across unincorporated and incorporated businesses.

100% Council tax charges on empty properties

Local government has been given authority to levy 100% premium charges on council tax for properties left empty. This will impact on the reduction in loan interest tax relief and the forecast increases in loan interest rates.

Contact us: if you are a landlord and would like tax advice.

Pensions, Savings and Investments

Enterprise Investment Scheme (EIS) Limits Double and help pension funds to invest

The limit for investment in EIS companies will increase from £1m to £2m. Relief will be restricted, however, to riskier businesses through the application of anti-avoidance measures. The government will encourage greater levels of investment into ‘knowledge intensive’ companies. The Treasury will work with the Pensions Regulator to establish how to allow pension funds to make long-term investments.

Savings

The band of savings income that is subject to the 0% starting rate will be kept at its current level of £5,000 for 2018-19.

Individual Savings Account (ISA) annual subscription limits

The ISA annual subscription limit for 2018-19 will remain unchanged at £20,000.

The annual subscription limit for Junior ISAs and Child Trust Funds for 2018-19 will be uprated in line with CPI to £4,260.

The lifetime allowance will increase from April 2018 to £1,030,000.

Pensions

No announcements were made about Pensions tax relief, however higher-rate taxpayers should be taking advantage of topping up their pension contributions, in case any changes are made in future budgets.

Contact us: For trusted independent financial advice on Pensions, savings and investments call us on 01904 655202 or email: nick.lawson@hghwealth.co.uk

Budget 2017 updates for Businesses

VAT Registration Threshold

The VAT threshold has been frozen at its £85,000 turnover level until 2019. Concerns had been raised about the high VAT level being a disincentive for businesses to grow. Phillip Hammond argued that it’s preferable to keep “the majority of small businesses out of VAT altogether”.

Plans have been announced to “consult on whether its design could better incentivise growth”. Unfortunately, the threshold has not been increased in line with inflation in this budget, as has happened previously.

Any changes to VAT should now come after Brexit and Making Tax Digital.

Business Rates

Following lobbying from the British Chambers of Commerce and the Confederation of British Industry, business rates will be revalued more frequently to reduce the size of changes in valuations.

Rates will also be increased annually in line with the consumer prices index (CPI), rather than the higher retail prices index (RPI) from April 2018. The higher the inflation figure, the higher the payments. RPI almost always gives a higher figure for inflation than CPI does.

The Chancellor also announced that business rates would be revalued every three years instead of five years at present, this will start after the next revaluation, currently due in 2022.

The government estimates that it will bring about a benefit of £2.3 billion to small businesses over the next five years.

Pubs in England will continue to receive a £1,000 business rates discount in 2018/19.

Research and Development
An additional £2.3bn will be made available to fund an increase in the research and development tax credit from 11% to 12%. This will take effect from 1 January 2018.

Indexation Relief
There has been an anomaly for some years in that indexation allowance is available on the disposal of assets by companies but not for individuals. To correct this anomaly indexation for companies will be frozen at 1 January 2018.

Contact us: If you are considering disposing of a company asset to discuss the most tax efficient method and timescale for disposal.

Employment Tax

Reprieved class 2 National Insurance Contributions (NICs)

Threshold and contributions up before 2019 abolition.

It was announced earlier in November that the government has chosen to delay the abolition of class 2 national insurance contributions (NICs) by a year until 6 April 2019.

For 2018/19 the small profits threshold limit will be £6,205, with contribution rates above this threshold increasing by 10p to £2.95. The special classes of rates for share fishermen and volunteer development workers remain.

Car and Van Benefits

The amount to which the appropriate percentage is applied in determining the taxable benefit of company car fuel is £23,400 for 2018/19 (£22,600 for 2017/18). The cash equivalent of the benefit of a company van for 2018/19 is £3,350 (£3,230 for 2017/18). The cash equivalent of the benefit of van fuel for 2018/19 is £633 (£610 for 2017/18).

The diesel supplement for company cars will increase from 3% to 4% for 2018/19 onwards. The maximum appropriate percentage for cars (including any diesel supplement) will, however, remain at 37%.

Contact us: If you are considering your options regarding a company car, leasing or purchasing a vehicle, or taking a cash allowance from your business for mileage. We can help find the most cost effective option.

Other budget updates of interest to Yorkshire based businesses:

£64 million for construction and digital training courses

£34 million will go towards teaching construction skills like bricklaying and plastering. £30 million will go towards digital courses using Artificial Intelligence.

Rail passenger communications

The government will shortly consult on commercial options to improve mobile communications for rail passengers to enable trials to install trackside infrastructure along the Trans-Pennine route between Manchester, Leeds and York.

Northern Powerhouse rail

As announced in October 2017, £300 million will go towards ensuring High Speed 2 (HS2) infrastructure can accommodate future Northern Powerhouse rail services. This will enable faster services between Liverpool and Manchester, Sheffield, Leeds and York.