The Chancellor Philip Hammond, delivered an Autumn Budget Speech which contained few surprises which was inevitable given the Government’s weak parliamentary majority and the uncertain future ahead as we prepare to leave the European Union.
Here are the main points:
Stamp duty land tax (SDLT)
Stamp duty has been abolished on homes under £300,000 for first-time buyers and they will not pay stamp duty on the first £300,000 for homes worth between £300,000 and £500,000. They will pay the normal rates of stamp duty on the price above that. This will save £1,660 on the average first-time buyer property. This change is effective from 22nd November 2017.
The Office for Budget Responsibility has said that the stamp duty cut will push house prices up. It says it expects this policy to increase prices by 0.3% with most of this effect occurring in 2018.
The government will amend SDLT higher rates for additional properties with immediate effect. The changes will benefit those increasing their share of their own home, families affected by a divorce court order, and cases where properties are held in trust for children subject to Court of Protection orders. The government will also remove a potential opportunity for avoidance.
Income Tax and National Insurance
The government is committed to raising the Personal Allowance (PA) to £12,500 and the Higher Rate Tax (HRT) threshold to £50,000 by 2020 and announces that in 2018/19 the PA and HRT will increase to £11,850 and £46,350 respectively.
The Marriage Allowance allows taxpayers to transfer up to 10% of their unused PA to their partner, reducing their tax bill by up to £230 a year in 2017/18. The government will now allow claims in cases where a partner has died before the claim was made. These claims will be able to be backdated by up to 4 years.
As previously announced, the government will delay implementing a series of NICs policies by one year. These are the abolition of Class 2 NICs, reforms to the NICs treatment of termination payments, and changes to the NICs treatment of sporting testimonials.
From April 2018, there will be no benefit in kind charge on electricity that employers provide to charge employees’ electric vehicles.
As previously announced, the government will no longer proceed with an increase to the main rate of Class 4 NICs from 9% to 10% in April 2018, and to 11% in April 2019.
Capital Gains Tax
The introduction of the 30-day payment window between a capital gain arising on a residential property and payment will be deferred until April 2020.
To align the UK with other countries and remove an advantage which non-residents have over UK residents, all gains on non-resident disposals of UK property will be brought within the scope of UK tax. This will apply to gains accrued on or after April 2019. The government intends to include targeted exemptions for institutional investors such as pension funds.
Investments
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.
Employees on maternity and parental leave will be able to take up to a 12 month pause from saving into their Save As You Earn employee share scheme, increased from 6 months currently. The change will take effect from 6 April 2018.
From April 2019, tax relief for employer premiums paid into life assurance products or certain overseas pension schemes will be modernised to cover policies when an employee nominates an individual or registered charity to be their beneficiary.
The annual allowance for people investing in knowledge-intensive companies through the Enterprise Investment Scheme (EIS) and the annual investment those companies can receive through EIS and the Venture Capital Trust scheme will be doubled, a new test will be introduced to reduce the scope for and redirect low-risk investment.
Pensions
The Budget papers confirmed that the lifetime allowance for pension savings will increase in line with CPI, rising to £1,030,000 for 2018/19.
The basic State Pension will be increased by the triple lock. The rise in April 2018 will be 3%, a cash increase of £3.65 per week for the full basic State Pension. The benefits of the triple lock uprating will also be passed on to the poorest pensioners through an increase to the Standard Minimum Guarantee in Pension Credit to match the cash rise in the basic State Pension. This will be paid for through an increase in the Savings Credit threshold – the Savings Credit starting point. The full new State Pension will also be increased by the triple lock, rising by £4.80 per week.
Corporate tax
To bring the UK in line with other major economies and broaden the tax base through removing relief for inflation that is not available elsewhere in the tax system, the corporate indexation allowance will be frozen from 1 January 2018. Accordingly, no relief will be available for inflation accruing after this date in calculating chargeable gains made by companies.
From April 2020, income that non-resident companies receive from UK property will be chargeable to corporation tax rather than income tax. Also from that date, gains that arise to non-resident companies on the disposal of UK property will be charged to corporation tax rather than CGT.
VAT
In response to the Office of Tax Simplification’s report Value Added Tax: Routes to Simplification, the government will consult on the design of the threshold, and in the meantime will maintain it at the current level of £85,000 for two years from April 2018.
National Living Wage and the National Minimum Wage
The National Living Wage for those aged 25 and over will increase from £7.50 per hour to £7.83 per hour from April 2018. The National Minimum Wage will also increase:
| 21 TO 24 YEAR OLDS | 18 TO 20 YEAR OLDS | 16 AND 17 YEAR OLDS | APPRENTICES |
| £7.38 per hour | £5.90 per hour | £4.20 per hour | £3.70 per hour |
Universal Credit
Households who qualify for Universal Credit will be able to access a month’s worth of support within five days, via an interest-free advance, from January 2018. This can be repaid over 12 months.
Claimants will be eligible for Universal Credit from the day they apply, rather than after seven days. Housing Benefit will continue to be paid for two weeks after a Universal Credit claim.
Tax evasion and the hidden economy
The government will publish a consultation response on the proposed requirement for designers of certain offshore structures that could be misused to evade taxes, to notify HMRC of these structures and the clients using them. This work will be taken forward in conjunction with the OECD and EU.
Assessment time limits for non-deliberate offshore tax non-compliance will be extended so that HMRC can always assess at least 12 years of back taxes without needing to establish deliberate non-compliance, following a consultation in spring 2018.
Tax avoidance
The government has found evidence of some employers abusing the Employment Allowance to avoid paying the correct amount of NICs, often by using offshore arrangements. To crack down on this, HMRC will require upfront security from employers with a history of avoiding paying NICs in this way. This will take effect from 2018 and raise up to £15 million a year.
The government will tackle disguised remuneration avoidance schemes used by close companies – companies with five or fewer participators – by introducing the close companies’ gateway, revised following consultation, and measures to ensure liabilities from the new loan charge are collected from the appropriate person.
Tax administration and compliance
As announced in July and legislated for in the Finance (No. 2) Act 2017, no business will be mandated to use Making Tax Digital (MTD) until April 2019. Only those with turnover above the VAT threshold will be mandated at that point, and then only for VAT obligations. The scope of MTD will not be widened before the system has been shown to work well, and not before April 2020 at the earliest.
Late Submission Penalties and Late Payment Interest – The government will reform the penalty system for late or missing tax returns, adopting a new points-based approach. It will also consult on whether to simplify and harmonise penalties and interest due on late payments and repayments. This will ensure that the system is fair, simple and effective across different taxes. Final decisions on both measures will be taken following this latter consultation.
HMRC will use new technology to recover additional Self-Assessment debts in closer to real-time by adjusting the tax codes of individuals with Pay As You Earn (PAYE) income. These changes will take effect from 6 April 2019.