Phillip Hammond has delivered his third budget as Chancellor. What does the budget mean for you?
Personal taxation and wages
National living wage will be increased by 4.9%. It will go from £7.83 to £8.21 an hour in April 2019.
The personal allowance threshold, the rate at which people start paying income tax at 20%, will rise from £11,850 to £12,500. It is a year earlier than planned and will take effect from April 2019.
Class 2 NI increases from £2.95pw to £3.00pw = £153.40pa to £156pa
Class 4 threshold will be £8,632, increased from £8,424
The VAT registration threshold (£85,000) will remain frozen until April 2020
NIC threshold for Employer and Employees will rise from £162 to £166 per week.
The higher rate income tax threshold, the point at which people start paying tax at 40%, to rise from £46,350 to £50,000 in April 2019.
Capital Gains Tax (CGT)
The Annual CGT exempt amount is increasing from £11,700 to £12,000 from April 2019
The allowable period for PRR (Private Residence Relief) is reducing. It is currently “the period of occupancy as a main residence plus 18 months”. The 18-month extension will be reduced to 9 months. It was 24 months until a year ago.
Letting relief will be limited to properties where the owner is in shared occupancy with the tenant. Landlords will no longer be able to claim the £40,000 lettings relief on their capital gains tax (CGT) Bill when they sell a property except for periods where the owner of the property is also living in the property.
Corporation Tax is still set to fall to a rate of 17% from April 2020
Extra Business Rates Relief was announced for retailers. Where the retail premises have a rateable value less than £51,000, a 33.33% reduction will be implemented.
AIA (Annual Investment Allowance) will increase from its current £200,000 to £1 million from January 2019. If you are thinking of purchasing an expensive asset, it might be prudent to wait until January.
The VAT registration threshold will remain fixed at £85,000 until, at least April 2020. There was pressure to reduce the threshold significantly to bring more businesses into VAT but the chancellor just chose to keep the threshold the same. This will mean that, because of inflation, more businesses will find themselves having to register for VAT.
From October 2019, the Construction Industry will be hit with further measures to prevent fraud. A “VAT Reverse Charge” scheme will be introduced to ensure that VAT money gets to HMRC. Full details haven’t yet been announced, probably because they haven’t been worked out yet. However, the chancellor did say, “This will require a significant change of systems for those affected, both as suppliers and customers”. Something to look forward to.
These changes must be approved by parliament and there could be amendments.
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