Chancellor Philip Hammond delivered today (Monday 29 October) the most keenly watched and important Budget of his career.
It was a Budget delivered through the lens of Brexit and set out the Government’s vision for what the UK might look like once we have left the European Union.
Here are our winners and losers.
Loser – private individuals letting their home.
Jo White, tax consultant said: “The previously generous lettings relief that was available to homeowners who had let their home will only be available to individuals who have shared occupation with their tenants. Furthermore, a reduction in the final period of deemed occupation for Capital Gains Tax relief will reduce to nine months from 18 months. The 36 months of deemed occupation will remain in place for individuals who have moved into care homes. Both of these changes will take effect from April 2020.”
Winner – individual tax payers
The Chancellor announced that with effect from 6 April 2019 the tax-free personal allowance will increase to £12,500 and the higher rate tax threshold will increase to £50,000. This is in-line with the Conservative manifesto but is 12 months earlier than expected.
Daniel Grainge, a partner specialising in private client tax, said: “On average, a basic rate taxpayer will save £66, a higher rate taxpayer £387 and an additional rate taxpayer £236 per year as a result of these changes.
“The personal allowance is withdrawn where an individual has income over £100,000 at the rate of £1 for every £2 of income, resulting in an effective 60% tax rate. The increase in the personal allowance potentially increases the income subject to 60% tax to £25,000. If you have income of just over £100,000 we would recommend that you review whether there are any tax planning opportunities available to you.”
Winner – the environment
A new tax on plastic packaging that does not contain at least 30% recycled material, together with £60m for planting new trees on England means the environment is a winner. Jo White said: “The Government has shied away from a tax on single-use coffee cups, but has said they are in its sights, giving the sector a year to make significant steps towards greater recycling or alternatives.”
Winner – road users
Potholes are the bane of road users across London and the South East. A £30bn package of road and infrastructure improvement (including £420m to repair potholes) will be particularly welcome, even more so if we face another hard winter.
Loser – global online businesses
The Government, as predicted, has announced a new digital services tax. The tax will target global online businesses but will not include online content providers and TV/broadcasting services.
Laurence Parry, Tax Partner said: “Leaving aside that this might mean online giants like Netflix will presumably not fall into this tax, where would Facebook sit? Is it a digital platform or a content provider? And how will the Government ensure that Amazon’s income is split so that Amazon’s Marketplace is caught but Amazon Prime isn’t? Also, how will the Government obtain access to this data, when it is by definition held outside of the UK?”
Winner – The High Street
Our struggling high streets have been given two potential lifelines, says Jo White. “The £900m business rates relief and the promise of a full review in 2021 will be welcome by both large and small retailers and will make a difference.
Together with new measures to review restrictions on redundant retail spaces making it easier to convert to residential space make our high streets potential winners.”
Winner - Business looking to invest
Businesses making investment will welcome the significant increase in the annual investment allowance. For two years from 1 January 2019 the allowance will be increased from £200,000 to £1m. Laurence Parry said: “Those businesses with significant investment plans would do well to make sure they can make that investment in this two-year window.”
Loser – individuals trading through personal service companies
The use of personal service companies has increasingly come under the spotlight, so it no surprise that the Government has taken steps to make them more unattractive in the private sector. Laurence said: “Under the IR35 rules, contractors could see PAYE and National Insurance contributions deducted by their end client, leaving such arrangements commercially unviable.”
Loser – business wanting to borrow
The government has reinstated HMRC as a preferential creditor if a business fails. This is likely to make banks that lend money to businesses with large numbers of employees, such as the leisure and hospitality businesses, more nervous. If they collapse they are more likely to build up significant PAYE debt, leaving little for other creditors, such as the banks.
In light of the Autumn Budget announcements if you need accountancy advice or support, contact our team here.