The Autumn Budget 2018 was heralded by the government as the end of austerity. With less than six months to go until Brexit, borrowing still increasing and the terms of a deal still not reached that is an ambitious statement. However the budget was a sensible one with some important savings for individual taxpayers and businesses.
Our key points are below:
There was positive news for tax payers with an earlier than expected increase in the personal allowance bands (the income that can be earned before tax is paid).The basic rate tax threshold will be raised from £11,850 to £12,500 and the higher rate from £46,350 to £50,000 from April 2019-20. The threshold will remain at the same level in 2020-21.
The planned abolition of Class 2 National Insurance contributions and reforms to Class 4, which were due to take effect from 6 April 2019, will now not go ahead
The National Insurance Employment Allowance for smaller businesses was tweaked . From 2020/21, the £3k Employment Allowance will only be available to employers with a National Insurance bill in the previous tax year of £100,000 or less.
National Living Wage
The living wage was increasing by 4.9%, from £7.83 to £8.21 an hour from April 2019.
This was a big, expected change that’s been mooted for almost 20 years, but finally HMRC are bringing the rules into the private sector on the same basis it’s applied to public sector contracts. What does this mean? It basically means that any medium or large business that engages contractors employed through personal service companies will become responsible for assessing the contractor’s employment status. If they are deemed to be employed then income tax and NI will be deducted from any payments made to them. This makes contracting less attractive as it means higher tax bills without the same access to benefits that employees receive. One bit of good news is that the changes won’t be applied retrospectively by HMRC.
Some notable highlights here are:
- The annual investment allowance to be increasing from £200,000 to £1m for two years
- Business rates bill for firms with a rateable value of £51,000 or less to be cut by third over two years
- Tweaks to Entrepreneurs Relief , there will now be a new minimum two-year period of ownership required for sales made on or after 6 April 2019