Budget 2018 – Personal Changes

The Income Tax personal allowance will be increased to £12,500 from £11,850 on 6 April 2019. 

For higher rate taxpayers, the threshold above which higher earners start paying 40% tax is being increased to £50,000 from £46,350 in 2019-20.

The annual subscription limit for Junior ISAs and Child Trust Funds for 2019/20 will be increased in line with CPI to £4,368.

The Government has increased the limit of individual donations made under the Gift Aid small donations scheme from £20 to £30. 

The capital gains tax (CGT) annual exempt amount for individuals rises to £12,000 from £11,700 on 6 April 2019.

Corporation tax changes

The Government announced plans to reform the off-payroll working rules – known as IR35 – in the private sector from April 2020. Responsibility for operating the off-payroll working rules will move to the firm engaging the worker.  Small organisations will be exempt to ease the administrative burden for the vast majority of engagers, while medium and large organisations will be given support and guidance by HMRC.

In order to provide support to the high street, the Government is to reduce business rates by one-third for many retail properties with a rateable value below £51,000 for two years from April 2019, subject to state aid limits. The move is expected to save these struggling businesses £900m. Support for British high street will be supported by a £675m Future High Streets Fund to redevelop empty shops as homes and offices. There will be a new mandatory 100% business rates relief for public lavatories.

Stamp Duty Land Tax (SDLT) first-time buyers relief

…will be extended in England and Northern Ireland to apply to all first-time buyers purchasing residential property worth up to £500,000 through a qualifying shared ownership scheme. The relief will also apply to shared ownership property buyers who have already paid SDLT on the initial equity stake and rental amount since the introduction of the relief on 22 November 2017. They will have a year to make a backdated claim for the relief. This measure will be effective from 29 October 2018.

Currently lettings relief can be claimed by individuals who let out a property that is, or has in the past been, their main residence. From April 2020, the government will reform lettings relief so that it is only available to individuals in shared occupancy with a tenant.

Currently, the final period exemption means that people do not have to pay CGT on gains made in the final 18 months of ownership. From April 2020, the exemption will be reduced to 9 months. There will be no changes to the 36 months final period exemption available to disabled people or those in a care home. 

Individuals who replace their main residence can reclaim the SDLT where the new home was purchased before selling the old, subject to the old residence being sold within 3 years of the new home purchase.

The residence nil-rate band (RNRB) increases to £150,000 from £125,000 from 6 April 2019 and to £175,000 from 6 April 2020; allowing some couples to leave up to £950,000 to future generations free of IHT.

HMRC issued an updated criminal investigation policy

…which describes the kind of circumstances in which HMRC will launch a criminal investigation. As a revenue collection agency, HMRC focuses on dealing with fraud in the most cost-effective way possible, which usually means using its civil fraud procedures wherever appropriate.

Key Points:

  • National Crime Agency and HM Revenue & Customs have both stated they will focus on the role of the professional adviser in allegations of money laundering
  • HMRC received a boost to its criminal powers following the introduction of the failure to prevent the facilitation of tax evasion offences
  • HMRC wants to increase the number of criminal investigations that it undertakes into serious and complex tax crime

Criminal investigation tends to be reserved for cases where HMRC needs to send a strong deterrent message or where the conduct involved is such that only a criminal sanction is appropriate.

HMRC’s policy gives examples of circumstances in which it will pursue criminal rather than civil investigations and makes specific reference to cases involving money laundering, with a particular focus on advisers, accountants, solicitors and others acting in a “professional” capacity.

Incorporation Relief. What it is and when it applies.

Incorporation relief applies where a person, who is not a company, transfers a business to a company as a going concern, together with the whole assets of the business (or together with the whole of such assets other than cash) and the transfer is made wholly or partly in exchange for shares issued by the company. In such a case, a chargeable gain on disposal of the old assets does not arise, as there is deemed to be no disposal, but the cost of the new assets is that of the old assets. The legislative provisions are included in section 162 TCGA 1992.

Continue reading “Incorporation Relief. What it is and when it applies.”

EIS deferral relief

Capital gains tax arising on the disposal of any type of asset can be deferred by a subscription for EIS shares. To qualify for the relief the investment must be made during a period covering one year before the gain arose and three years thereafter.

The tax on any gain deferred in this way only becomes due on the subsequent disposal of the EIS shares or if the investor ceases to be UK resident within three years of issue of the shares. However, the gain can be deferred again by using the sale proceeds to make another EIS subscription.

There is no limit on the amount that can be invested in EIS shares but only the first £1,000,000 investment in a tax year will be entitled to income tax relief at up to 30% (for 2017-18).

Government Bereavement Payments

…for deaths on or after 6 April 2017, bereavement payments are replaced by a new bereavement support payment. This is worth £3,500, plus £350 a month for 18 months, for claimants with dependent children (£2,500 plus £100 a month for other claimants). To qualify, the surviving partner must be under the state pension age, and the deceased must have paid ‘sufficient’ National Insurance contributions.

The bereavement support payment is not taxable and is disregarded in the calculation of other means tested benefits.

With effect from 6 April 2016 dividends and bank and building society interest are paid gross

…and, from 6 April 2017 interest payments from OEICs, authorised UTs, investment trusts and peer-to-peer loans are also paid gross. All individual taxpayers (so not trustees) are entitled to a £2,000 dividend allowance (was £5,000 in 2017/18) and to a personal savings allowance of £1,000 (basic rate taxpayer) or £500 (higher ratetaxpayer). On income in excess of these allowances basic rate for dividends is 7.5%, higher rate is 32.5% and additional rate and trust rate is 38.1%. Equivalent income tax rates on savings income are 20%, 40% and 45%.