Autumn Budget Overview • Measures to stimulate house building • SDLT abolished for first time buyers up to £300,000 • More money for infrastructure projects • Measures to discourage diesel cars and encourage electric and hybrid cars • Indexation of gains frozen for companies • VAT threshold held at £85,000 for 2 years • More on tax evasion and avoidance
Income tax and NIC 2018/19 45%, 38.1% (div) N I C b a n d s (SE, E’ee , E’er ) £150,000 2%, 2%, 13.8% I n c o m e t a x b a n d s 40%, 32.5% (div) UEL £46,350 £46,350 20%, 7.5% (div) 9%, 12%, 13.8% Personal £11,850 Earnings £8,424 allowance threshold
Income tax and NIC 2020/21 45%, ?38.1% (div) N I C b a n d s (SE, E’ee , E’er ) £150,000 2%, 2%, 13.8%? I n c o m e t a x b a n d s 40%, ?32.5% (div) UEL £50,000 £50,000 20%, ?7.5% (div) 9%, 12%, 13.8% ? Personal £12,500 Earnings ???? allowance threshold
Falling corporation tax rates: FY2016 FY2017 FY2018 FY2019 FY2020 • 20% • 19% • 19% • 19% • 17%
G20 Corporation Tax rates
Tax driven incorporation?
Huge increase in tax-driven incorporation • Government concerned about rise in new companies • Just for tax reasons? • Looking to level the playing field • No mention of “Look - through” entity proposal • Considering extending IR35 public sector rules to private sector • Budget 2017 - from 2018/19: • £5,000 dividend allowance cut to £2,000
Public sector workers “Off payroll” 'Client' 'Intermediary' Service company/partnership 'Worker'
Public sector workers “Off Payroll” • Government departments, legislative bodies, armed forces • Local government • NHS ( but not GPs) • Schools and further and higher education institutions • Police forces • Other public bodies (such as BBC, Channel 4)
Public sector workers “Off Payroll” • From April 2017 , individuals working through a personal service company (“PSC”) in the public sector will no longer be responsible for deciding whether the intermediaries legislation applies • The public sector employer/agency will have to decide if the rules apply to a contract and, if so, account for and pay the liabilities through RTI and deduct the relevant tax and NICs.
Taylor report on “Gig” Economy • House of Commons Work and Pensions Committee • “bogus” self -employment practices- burden welfare state but reduce the tax contributions to sustain it. • Followed an inquiry into companies such as Uber, Amazon, Hermes and Deliveroo. • The Committee recommended a default assumption of “worker” status , rather than “self - employed” • Taylor report focussed more on workers rights and recommended new status of “dependent contractor”
Employee v Self employed v Own co. 16/17 Employee Self-employed Own company Salary/ fees £40,000 £40,000 £40,000 Income tax 20% 5,800 5,800 NIC 3,833 3,020 350 NIC – ERs 4,401 (398) Corporation tax 5,721 Dividend tax 1,341 Total taxes 14,034 8,820 7,810 NET for worker £30,367 £31,180 £32,190
H & W companies – 2018/19 • £11,850 salary each • Then dividends, say £34,500 each (£46,350) • No tax on salary (just ‘EEs NIC – 2018/19 £411) • Just £2,000 dividends tax free • Then 7.5% on £32,500 = £2,437 each • £4,875 IT for the couple = £87,003 net • Corporation tax on £69,000 PAT = £16,185 (19%) • PBT £85,185 + salaries = £108,885 (20.1% tax and NI) • Note: No £3,000 employment allowance for single director companies 14
H & W partnership 2018/19 • £108,885 profit, say £54,442 each • £11,850 @ Nil • £34,500 @ 20% = £6,900 ) • £8,092 @ 40% = £3,237) IT £10,137 each • Class 2 (last year) £153 each) • Class 4 : • 9% on (£46,350 - £8,424) = £3,413 ) £3,723 each • 2% on £8,092 = £157 ) • Net, after income tax, NIC = £81,164 (25.5% Tax + NI) • Same if company taxed on “Look Through” basis?
Other personal tax measures • £1,185 (10%) of unused personal allowance can be transferred to spouse if basic rate taxpayer • Now applies in year spouse dies (backdated 4 years) • Buy to let landlords can claim mileage allowance (45p) for visits to property • Changes to taxation of partnership profit alloacation • EIS tax relief doubled for knowledge based companies • EIS and VCT relief will exclude companies and arrangements intended to provide ‘capital preservation’
EIS tax relief doubled for Tech Cos. • Normal EIS annual investment limit £1 million – 30% • EIS annual investment limit £2 million provided any amount over £1 million is invested in one or more knowledge-intensive companies. • The annual investment limit for knowledge-intensive company will be increased to £10 million (from £5m) • Lifetime limit raised by such companies £20 million
Employment tax changes • Government will consult in 2018 on how to tackle non- compliance with the intermediaries legislation (IR35) in the private sector. Extend public sector rules? • Termination payments – foreign service relief abolished • Diesel car benefit supplement 4% from 2018/19 • No benefit if employees charge own electric car at work • Note major car benefit changes 2020/21…
Tax and NIC on termination payments • From April 2018 : • all PILONs will be subject to tax and NICs as earnings; • all other post-employment payments which would have been treated as general earnings if the employee had worked their notice period will be subject to tax and Class 1 NICs, including employer's NICs; and • payments relating directly to the termination of the employment will have a £30,000 income tax and employer NICs exemption . Unlimited employee NICs exemption on termination payments to continue?
Car Benefit Changes to 2019/20 CO2 g/km 2016/17 2017/18 2018/19 2019/20 Zero 7% 9% 13% 16% 1-50g 7% 9% 13% 16% 51-75g 11% 13% 16% 19% 76-94g 15% 17% 19% 22% Then each 5g +1% +1% +1% +1% 185-189g 34% 35% 36% 37% 37% 190-194g 35% 36% 37% 37% 195-199g 36% 37% 37% Max 200g + 37% 37% 37% 37%
Car Benefit Changes to 2020/21 CO2 g/km 0% Range (miles) % of list price Zero n/a 2% 1-50g >130 miles 2% 70-129 5% 40-69 8% 30-39 12% < 30 miles 14% 51-54g n/a 15% Then each 5g +1% Maximum at 160g+ 37%
Nissan Leaf £21,680 – CO2 Nil, Range 124 miles = 2%
BMW i3 £30,980 – CO2 12g, Range 181 miles = 2%
BMW i8 £104,550 – CO2 49g, Range 22 miles = 14%
Tesla Model S £62,380 CO2 NIL, Range 248 miles 2%
And you’ll need one of these…. 100% FYA
He didn’t touch pensions! • Lifetime limit 2018/19 £1,030,000 • Normal pension annual allowance £40,000 a year • (plus unused relief from previous 3 years) • Tapered for those with high income (£150,000) • If in flexible drawdown annual allowance was £10,000 • £10,000 limit reduced to £4,000 from 6 April 2017 on contributions to money purchase fund where in flexible drawdown
Corporation tax changes • Rate confirmed 19% => 17% FY 2020 • Indexation allowance frozen on corporate Capital Gains for disposals on and after 1 January 2018. (RPI to December 2017) • DTR restricted where the company has received relief in the foreign jurisdiction for the losses of the PE against profits other than those of the PE • R&D expenditure credit (non SMEs) increased to 12%
Tax breaks for innovative companies PATENT INVENTION “Super” profits R&D PHASE 230% relief for costs 10% corp tax (if SME) Patent box 12% credit for non SME
Capital Taxes • Annual CGT exemption increased by £400 to £11,700 • £5,850 available to trustees • No change in rates of CGT • Non-residents to pay CGT on all disposals of immovable UK property (residential from 6 April 2015) • Rules for fund managers’ “carried interest” tightened up • No change in IHT nil rate band £325,000 nor rates • Additional nil rate band for family home £100,000 from 6 April 2017 => £175,000 in 2020
IHT Family Home Allowance • Additional IHT relief for family home, phased in: • £100,000 – 2017/18 • £125,000 – 2018/19 • £150,000 – 2019/20 • £175,000 – 2020/21 • Then increased with CPI
VAT changes • VAT registration limit frozen at £85,000 to 1.4.2020 • Online marketplaces jointly and severally liable for: • VAT that a UK business selling goods via the online marketplace fails to account for after HMRC has issued a notice ensuring that all sellers are in scope • any VAT that a non-UK business selling goods via the online marketplace fails to account for, where the business was not registered for VAT in the UK and that online marketplace knew or should have known that that business should be registered for VAT in the UK
SDLT abolished for first-time buyers • Applies to purchases completed on/after 22 November • No SDLT up to £300,000 • Thereafter 5% • But normal SDLT rates if purchase price > £500,000 • If joint purchase must be first property owned by all buyers • Also – relief from 3% supplementary charge on second homes relaxed for certain transactions
ATED rates from 1 April 2018: Property value ATED charge £500,000 < £1m £3,600 p.a. £1m < £2m £7,250 p.a. £2m < £5m £24,250 p.a. £5m < £10m £56,550 p.a. £10m < £20m £113,400 p.a > £20m £226,950 p.a.
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