During this blog, partners Jack Posner and Darren Stone of Leon and Company chartered accountants write about the recent Budget.
Last month, the Chancellor, Mr Hammond, outlined his Conservative Budget for the coming year. The Chancellor’s headline is that the era of austerity is ‘finally coming to an end’ – but we obviously do not yet know how the upcoming Brexit on 29 March 2019 will affect this. We have selected some key points we believe would be of interest to business owners and individuals with personal tax requirements:
Selected points for individuals:
Tax-free allowance: The personal tax allowance will increase from £11,850 in 2017/18 to £12,500 from April 2019. The 40% higher-rate threshold will increase from £46,350 to £50,000 at the same time. After that, these thresholds will rise in line with inflation.
Dividends: In 2018/19, the first £2,000 of dividends were chargeable to tax at 0%. This will remain in the coming year. Dividends received over this allowance are taxed at 7.5% (for basic rate taxpayers), and 32.5% and 38.1% for higher and additional rate taxpayers respectively. It is essential that you speak to your accountant to carefully plan your tax affairs around these rates.
Selected points for business taxes:
Corporation tax: The corporation tax rate continues it downward trajectory. The current 19% tax rate is set to reduce to 17% from 1 April 2020.
Class 2 and Class 4 National Insurance contributions: It has been confirmed that Class 2 NICs (this is the one that counts towards the state pension!) will not be abolished for the lifetime of this current Parliament. Moreover, it has also been confirmed that Class 4 NICs will not increase either during this Parliament.
Making tax Digital (MTD): As previously announced, the Government will push ahead with MTD. Essentially all businesses with a turnover above the VAT threshold (currently £85,000), must keep digital records and provide their VAT return information to HMRC using MTD compatible software. This comes into effect from 1 April 2019. There are also plans for all aspects of tax to be filed in this way, but the roll out of this will not be any earlier than April 2020.
This is not an exhaustive list of all the budget announcements, but just a selection of key changes that we believe would be of interest to individuals and business owners.