The 2018 Budget

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budget

Budget 2018

The main changes from last year have been heavily trailed in the press, but for completeness the main points are; an increase in the personal allowance to £11,850 and with it an increase in the personal transferable allowance for couples to £1,185; the 40% tax band is raised to £45,000 (but beware of the dividend trap); those married couples over 80 can transfer between themselves £8,445 of unused allowances; and there is an increase in the limit for paying National Insurance Contributions to £45,000. Business rates will increase even though the start point has been raised to £12,000. Corporation Tax will remain at 19% until financial year 2020 when it is expected, but not certain, to drop to 17%. The Rent-A-Room relief will be reviewed to give support for longer term lettings but currently stands at £7,500.

On the claw back side a reduction in the tax free dividends for director shareholders to £2,000, changes in the way that Benefits in Kind are taxed from 6th July 2017, and significant changes to what HMRC call disguised remuneration and most people call IR35. This will impact heavily on many people. Employers will pay NIC on that part of a termination payment which is over £30,000.

Transfers into a Qualifying Recognised Overseas Pension Scheme (QROPS) will now be taxed at 25%. Those who undertake part surrenders and part assignments of life insurance policies will have their gain recalculated on what HMRC call a just and reasonable basis.

What wasn’t in the budget was the change to reporting for limited companies. All limited companies which fall under the audit liability levels will now have to report using either Financial Reporting Scheme 102 or 105. If a company has two of the following three then it must report under FRS102, if not, then the simpler FRS 105: turnover more than 632,000; balance sheet (bottom line) more than 315,000; over 10 employees including directors. Also we now know that the rise in class 4 NIC has been postponed (Note: not cancelled) so a rise to 12% can be expected for tax year 2020/21. New cars are now being taxed at a significant increase in both New Car Tax and Excise Duty (the former tax disc).

The House of Lords committee dealing with Making Tax Digital (MTD) have recommended a further delay in the introduction to MTD. Their Lordships really don’t like MTD however HM Revenue & Customs have ignored both MPs and their Lordships and have pressed ahead. As it stands now, MTD will come in on 1st April 2019 for everyone who is VAT registered or above the VAT registration threshold, and from 1st April 2020 for all others.

It might be worth remembering that as a country, we owe £1,700,000,000,000 and that the government would like you to help them pay it off.

Eric Moss-Wright

Partner

Wright, Lilley & Co.