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The Chancellor Philip Hammond has delivered his Autumn Budget 2018.

It was a budget which was not necessarily predicted to have any significant announcements in terms of taxation. Therefore as Mr Hammond or ‘Fiscal Phil’ continued through his speech this afternoon, the surprises started and continued.

This was a budget for the entrepreneurs, to keep Britain open for business, and with Brexit looming this budget was clearly aimed at small businesses. Furthermore, it was aimed at workers- with the unexpected increase in the personal allowance and higher rate tax threshold coming into effect earlier than expected.

Today, Spirare welcomed this budget.

We have summarized the key highlights as follows:

Personal Taxation

  • Personal allowance, the rate at which people start paying income tax, to rise from £11,850 to £12,500 in April 2019- a year earlier than planned
  • The higher rate income tax threshold to rise from £46,350 to £50,000 in April 2019- again a year earlier than planned
  • After that, the two rates will rise in line with inflation
  • National Living Wage increasing by 4.9%, from £7.83 to £8.21 an hour, from April 2019
  • IR35 private sector- extension of changes to the way self-employment status is taxed, from the public sector to medium and large private companies, from April 2020

Businesses

  • New digital services tax (2%) on UK revenues of big technology companies, from April 2020 (This will only apply to profitable companies with global sales of more than £500m) - Small tech start ups will not be subject to the new digital services sales tax
  • Private finance initiative (PFI) contracts to be abolished in future
  • Annual investment allowance to be increased from £200,000 to £1m for two years
  • Contribution of small companies to apprenticeship levy to be reduced from 10% to 5%
  • Business rates bill for companies with a rateable value of £51,000 or less to be cut by a third over two years. The measure is expected to benefit 90% of independent companies, cutting their bill by £8,000
  • Refunds arising from research and development claims will be restricted to the PAYE paid by the company. This will restrict the benefit of R&D claims by companies that do not have employees
  • VAT threshold of £85k turnover to remain the same for the next two years
  • Entrepreneurs’ Relief: minimum qualifying period - from 6 April 2019 the minimum period throughout which the qualifying conditions for relief must be met will be extended from 12 months to 24 months
  • Employment Allowance reform – From April 2020 the government will restrict access to employers with an employer National Insurance contributions (NICs) bill below £100,000 in their previous tax year. The EA provides businesses and charities with up to £3,000 off their employer NICs bill.
  • Capital allowances special rate reduction (8% to 6%) – from April 2019, the capital allowances special rate for qualifying plant and machinery assets will be reduced from 8% to 6% to more closely match average accounts depreciation
  • Corporate capital loss restriction –  the tax treatment of corporate capital losses will be brought into line with the treatment of income losses. From 1 April 2020, the government will restrict the proportion of annual capital gains that can be relieved by brought-forward capital losses to 50%. The measure will include an allowance that gives companies unrestricted use of up to £5 million capital or income losses each year, meaning that 99% of companies will be unaffected
  • Intangible fixed assets regime – the government will seek to targeted relief for the cost of goodwill (the amount paid for a business that exceeds the fair value of its individual assets and liabilities) in the acquisition of businesses with eligible intellectual property from April 2019. With effect from 7 November 2018, the government will also reform the de-grouping charge rules, which apply when a group sells a company that owns intangibles, so that they more closely align with the equivalent rules elsewhere in the tax code

Property

  • All shared equity purchases of up to £500,000 to be exempt from stamp duty
  • Capital gains tax on the sale of let property –from April 2020 the government will reform lettings relief so that it only applies in circumstances where the owner of the property is in shared occupancy with the tenant. The final period exemption will also be reduced from 18 months to 9 months. The government will consult on these changes. There will be no changes to the 36 months final period exemption available to disabled people or those in a care homes

Other Announcements

  • £675m to rejuvenate high streets
  • Beer, cider and spirits duties to be frozen
  • Cost of a bottle of wine duty to rise by 8p, in line with inflation, in February
  • Tobacco duty will continue to rise by inflation plus 2%
  • A packet of 20 cigarettes will go by 33p at 18.00 GMT
  • Fuel duty to be frozen for ninth year in a row
  • Remote Gaming Duty to increase to 21% for online gambling on "games of chance" from 2019
  • Structures and buildings allowance (SBA) – new non-residential structures and buildings will be eligible for a 2% capital allowance where all the contracts for the physical construction works are entered into on or after 29 October 2018
  • Lifetime allowance for pensions – the lifetime allowance for pension savings will increase in line with CPI for 2019-20, rising to £1,055,000
  • Starting rate for 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 2019-20
  • Taxation of self funded work related training- the government is launching the National Retraining Scheme and skills pilots to help those in work, including the self-employed, develop the skills they need to thrive
  • New mandatory business rates relief for all lavatories made available for public use, whether publicly or privately owned
  • An extra £1bn for armed forces, for cyber-capabilities and the UK's new nuclear submarine programme
  • £10m for mental health care for veterans, to mark the centenary of World War One Armistice
  • £1.7m in Holocaust education programmes to mark the 75th anniversary of the liberation of Bergen-Belsen concentration camp, in northern Germany
  • Confirmation of an extra £20.5bn for the NHS over the next five years
  • A new tax on non-recycled plastic packaging (on manufacture and import of plastic packaging that is 30% recyclable or less)
  • No tax on takeaway coffee cups but this will be reconsidered if the industry doesn't make enough progress

Should you have any queries on the above, please do not hesitate to contact a member of the Spirare team.