Budget 2018: Key Points

The Chancellor of the Exchequer, Philip Hammond has delivered the 2018 Autumn Budget. In this blog post, we highlight the key points of his speech.

Business

• £900m has been allocated to small businesses in the form of business rates relief. £650m has also been allocated to rejuvenate British High Streets
• A new digital services tax at 2% will be imposed on big tech companies from April 2020
• The amount that small companies must contribute to the apprenticeship levy is to be reduced from 10% to 5%
• Annual investment allowance will increase from £200,000 to £1m for two years
• Business rates for retailers with a rateable value of £51,000 or less to be cut by third over two years. This measure will benefit 90% of independent shops, pubs and restaurants, cutting bills by £8,000
• Private Finance Initiative (PFI) contracts to be abolished
• Entrepreneurs relief retained but qualifying period increased to 2 years.
• IR35 – new rules applied to government sector last year from April 2020 to apply to the private sector, large and medium-sized businesses only.
• HMRC to be preferred creditor in business insolvencies
• New mandatory business rates relief for all lavatories made available for public use, whether publicly or privately owned
• A new tax on plastic packaging that has been made with less than 30% recycled materials
• No tax on takeaway coffee cups but this will be reconsidered if the industry doesn’t make enough progress

Personal Tax

• The personal allowance will rise to £12,500 (currently £11,850) from April 2019
• Higher rate threshold will rise to £50,000 (currently £46,350) from April 2019
• Afterwards, the two rates will rise in line with inflation.

Wages

• Wages growth at its highest in nearly a decade
• National living wage will increase by 4.9% to £8.21 per hour from April 2019

Economy

• The growth forecast for 2018 has been upgraded from 1.5% to 1.6%
• Forecasted growth of 1.4%, 1.4%, 1.5% and 1.6% for subsequent years.
• 3.3 million more people in work since 2010 and 800,000 more jobs forecast by 2022

Brexit

• An extra £500m for preparations for leaving the EU
• Next years Spring Statement may be upgraded to a full Budget
• A commemorative 50p coin will be created to mark the UK’s exit from the EU

Transport & Infrastructure

• £30bn for improvements to England’s roads
• 30% growth in infrastructure spending
• Opening the use of e-passport gates at airports to include USA, Canada, New Zealand, Australia and Japan

Welfare

• An additional £1bn package over a period of 5 years will enable the introduction of additional protections
• Work allowance under Universal Credit will increase by £1,000 per year
• 2.4 million working families with children to benefit by £630 a year

Housing

• First-time buyers buying shared equity homes of up to £500,000 will be exempt from stamp duty
• £500m for the Housing Infrastructure fund, to enable an extra 650,000 homes to be built
• Capital gains tax lettings relief limited to properties where the owner is in shared occupancy with the tenant from April 2020, last 18-month disregard period reduced to nine months
• Guarantees of up to £1bn for smaller house-builders

Alcohol, Tobacco & Fuel

• Beer, cider and spirits duties will be frozen
• Wine duty to rise in line with inflation
• Tobacco duty will continue to rise by inflation plus 2%
• Fuel duty is to be frozen for the ninth consecutive year

Closing Thoughts

Our specialist Tax Consultant shares some of his thoughts on this year’s Autumn Budget:

The Chancellor delivered a highly complex and technical budget, claiming that the era of austerity is at an end, the economy has turned a corner, and his fiscal rules have been met three years earlier than originally forecast.

His speech was peppered with announcements of extra monies for various projects, £10 million to support the air ambulances, £400 million as a one-off payment to schools for Capital  items, £650 million for Grant funding of English Local authorities in 2019/2020, £420 million immediately for filling potholes in the road, £1bn for defence, specifically Naval projects, an extra £950 million for Scotland, £550 million for Wales and £320 million for Northern Ireland, £675 million to support plans to transform high streets to residential use, £10 million to clean up abandoned waste, to name but a few.

The Chancellor did make a significant hike on Annual Investment allowances up from £200,000 to £1 million which will help businesses and stimulate growth with other measures to support Universal Credit. The increase in Personal Allowances to £12,500 with Higher rate tax starting at £50,000 is effective from April 2019 and is brought in a year early, a welcome boost to taxpayers. The increase in the National living wage by 4.9% to £8.21 an hour will be welcomed by many, though I suspect there will be those who say he could have gone further.

Clearly, the Chancellor felt buoyant as he gave his budget, throwing numerous jibes at the Labour party and including a slice of ‘toilet’ humour as he announced mandatory business rates relief for public lavatories. However, he made a number of references to the details being in the ‘red book’, and one always finds that the ‘devil is in the detail’. We’ll have to take a look at the Chancellor’s red book to see if there is anything significant hidden behind the announcements that will affect the general taxpayer.