Against a backdrop of downgraded growth prospects and dismal productivity expectations, the Chancellor managed to present an upbeat budget with bullish forecasts for investments and the house building market. We review the key announcements and how they may affect you and your business.
Personal Taxation
Personal taxation and wages
- Tax-free personal allowance on income tax to rise to £11,850 in line with inflation in April 2018
- Basic rate tax band increased to £34,500 (2017-18 £33,500)
- Higher rate threshold increased to £34,501
- The current £5,000 tax-free dividend allowance will, as previously announced, be reducing to £2,000 from April 2018.
- Marriage Allowance increased marginally to £1,185 from April 2018 enabling unused personal tax allowance to be transferred between spouses, or civil partners, if the person receiving the transfer is not a higher rate tax payer. From 29 November 2017, the Government will also allow Marriage Allowance claims on behalf of deceased spouses and civil partners, and for the claim to be back dated for up to four years.
- National Living Wage to rise in April 2018 by 4.4%, from £7.50 an hour to £7.83
- The pensions lifetime allowance will increase to £1,030,000 from April 2018
Stamp duty and housing
- Stamp duty to be abolished immediately for first-time buyers purchasing properties worth up to £300,000
- First-time buyers of homes worth between £300,000 and £500,000 will not pay stamp duty on the first £300,000. Saving on average £1,660 for first-time buyers.
- £44bn in overall government support for housing to meet target of building 300,000 new homes a year by the middle of the next decade
- Councils given powers to charge 100% council tax premium on empty properties
- Compulsory purchase of land banked by developers for financial reasons
- New homelessness task force
Business Tax changes
- VAT threshold for small business to remain at £85,000 for two years
- Corporation Tax maintained at 19%, HMRC with indexation allowance frozen on corporate capital gains for disposals after 1 January 2018.
- From April 2018, business rates will rise by Consumer Price Index (CPI) rather than the Retail Prices Index (RPI). The change has been brought forward two years.
- Rates revaluations will now take place every 3 years rather than the current 5 years. This will start after the next rates revaluation due during 2022.
- Pubs with a rateable value up to £100,000 will continue to receive a £1,000 discount next year.
- The ‘staircase tax’ has been scrapped and business owners will have their original bills reinstated.
- £500m support for 5G mobile networks, full fibre broadband and artificial intelligence
- £64m for construction and digital training courses
- R&D expenditure credit to increase from 11% to 12% in January 2018, to support business investment in R&D.
- The diesel car supplement is to be increased from 3% to 4% from 6 April 2018, increasing the company car tax and car fuel benefit charge. Affecting all diesel cars registered on or after 1 January 1998 that do not meet the Real Driving Emissions (Step 2) standards.
Partnership tax
A more flexible allocation of profit share to be introduced in 2018-19, helping to avoid administrative burdens for taxpayers.
Venture Capital Schemes
Changes to the Enterprise Investments Scheme, the Seed EIS and Venture Capital Trusts have been introduced to encourage Venture Capital Schemes towards higher risk investments will include:
- removing certain ‘grandfathering’ provisions that enable VCTs to invest in companies under rules in place at the time funds were raised, with effect on and after 6 April 2018;
- requiring 30% of funds raised in an accounting period to be invested in qualifying holdings within 12 months after the end of the accounting period, with effect on and after 6 April 2018;
- increasing the proportion of VCT funds that must be held in qualifying holdings to 80%, with effect for accounting periods beginning on and after 6 April 2019;
- increasing the time to reinvest the proceeds on disposal of qualifying holdings from six months to 12 months for disposals on or after 6 April 2019;
- introducing a new anti-abuse rule to prevent loans being used to preserve and return equity capital to investors, with effect on and after Royal Assent of Finance Bill 2017-18.
EIS and VCTs will also see increased limits for investments in knowledge-intensive companies:
The Government will legislate to:
- double the limit on the amount an individual may invest under the EIS in a tax year to £2 million from the current limit of £1 million, provided any amount over £1 million is invested in one or more knowledge-intensive companies;
- raise the annual investment limit for knowledge-intensive companies receiving investments under the EIS and from VCTs to £10 million from the current limit of £5 million. The lifetime limit will remain the same at £20 million;
- allow knowledge-intensive companies to use the date when their annual turnover first exceeds £200,000 in determining the start of the initial investing period under the permitted maximum age rules, instead of the date of first commercial sale.
The changes will have effect on and after 6 April 2018. This measure is subject to normal state aid rules.
Other Tax Changes
- For 2018, the fuel duty will remain frozen, for the eighth consecutive year.
- Introduction of a new railcard for the 26 to 30 age group from Spring 2018
- Duty frozen on beer, wine, cider and spirits to be frozen
- The duty on cigarettes will increase by 2% above inflation and hand-rolling tobacco by 3% above inflation, with effect from 6pm, 22 November 2017.
- £1.5bn package to “address concerns” about the delivery of universal credit with the seven-day initial waiting period for processing of claims to be scrapped
- From April 2018, the first year VED (vehicle excise duty) rate for diesel cars that don’t meet the latest standards will go up by one band. Tax hikes do not apply to van owners
- Proceeds from VED to fund a new £220m clean air fund for pollution hotsspots.
- Short-haul air passenger duty rates and long-haul economy rates to be frozen, paid for by an increase on premium-class tickets and on private jets