Stamp duty land tax
Stamp Duty Land Tax (SDLT) and first-time buyers relief – The government will extend first-time buyers relief in England and Northern Ireland so that all qualifying shared ownership property purchasers can benefit, whether or not the purchaser elects to pay SDLT on the market value of the property. This change will apply to relevant transactions with an effective date on or after 29 October 2018, and will also be backdated to 22 November 2017 so that those eligible who have not previously claimed first-time buyers relief will be able to amend their return to claim a refund.
Consultation on SDLT charge for non-residents – The government will publish a consultation in January 2019 on a SDLT surcharge of 1% for non-residents buying residential property in England and Northern Ireland.
SDLT: higher rates for additional dwellings - minor amendments. This measure applies to individuals liable to higher rates of Stamp Duty for additional dwellings by virtue of buying a new home before selling their old home. It applies solely to purchasers of property in England and Northern Ireland. It extends the time allowed to claim back higher rates for additional dwellings where an individual sells their old home within 3 years of buying their new one. Paragraph 8(3) (a) of schedule 4ZA will be amended so that a successful reclaim must be made by the later of 12 months from selling the old home and a year from the filing date for the SDLT return for the new home. The measure also clarifies the meaning of ‘major interest’ in land for the general purpose of higher rates for additional dwellings. The changes will take immediate effect from 29 October 2018. The time limit changes will apply where the effective date of sale of the old home is on or after that date.
National Living Wage and the National Minimum Wage
National Living Wage (NLW) and National Minimum Wage (NMW) – Following the recommendations of the independent Low Pay Commission (LPC), the government will increase the NLW by 4.9% from £7.83 to £8.21 from April 2019. The government will also accept all of the LPC’s recommendations for the other NMW rates to apply from April 2019, including:
- increasing the rate for 21 to 24 year olds by 4.3% from £7.38 to £7.70 per hour
- increasing the rate for 18 to 20 year olds by 4.2% from £5.90 to £6.15 per hour
- increasing the rate for 16 to 17 year olds by 3.6% from £4.20 to £4.35 per hour
- increasing the rate for apprentices by 5.4% from £3.70 to £3.90 per hour
From April 2019 Universal Credit (UC) claimants will benefit from a £1,000 increase in work allowances. Building on policy changes announced by the government in June, claimants will also benefit from additional support as they move onto UC. In response to lessons from the roll-out of UC to date, and to facilitate the delivery of this package, managed migration will now conclude in December 2023.
Income tax and National Insurance
Personal allowance and higher rate threshold - The Personal Allowance will increase to £12,500 in 2019/20. The basic rate limit will increase to £37,500 meaning that the higher rate threshold will be £50,000 in 2019/20. These thresholds will remain at the same levels in 2020/21 and then increase by CPI from 2021/22 onwards. Changes to the basic rate limit, and higher rate threshold, will apply to non-savings, non-dividend income in England, Wales and Northern Ireland and to savings and dividend income in the whole of the UK.
Off-payroll working in the private sector – To increase compliance with existing off-payroll working rules (IR35) in the private sector, Budget 2018 confirms that businesses will become responsible for assessing an individual’s employment status and determining whether the rules apply. The reform will not apply to the smallest 1.5 million businesses and will be introduced in April 2020, giving firms longer to adjust.
Taxation of self-funded work-related training – Following consultation responses indicating that tax relief is unlikely to be effective in addressing the barriers to learning or incentivising training, the government is maintaining the scope of tax relief currently available to employees and the self-employed for work-related training costs. Instead, the government is launching the National Retraining Scheme and skills pilots to help those in work, including the self-employed, develop the skills they need to thrive.
Rent a room relief and the shared occupancy test – Following consultation on draft legislation, to maintain the simplicity of the system the government will not include legislation for the ‘shared occupancy test’ in Finance Bill 2018-19. The government will retain the existing qualifying test of letting in a main or only residence, and will work with stakeholders to ensure that the rules around the relief are clearly understood.
Employment Allowance reform – To target the Employment Allowance (EA) to support smaller businesses, from April 2020 the government will restrict access to employers with an employer National Insurance contributions (NICs) bill below £100,000 in their previous tax year. The EA provides businesses and charities with up to £3,000 off their employer NICs bill.
National Insurance Contributions Bill – As previously announced in September, the government will not abolish Class 2 NICs during this Parliament, given the potential impacts on some of the lowest earning in society. There are two remaining measures in the draft NICs Bill published on 5 December 2016: reforms to the NICs treatment of termination payments and income from sporting testimonials. The government still intends to legislate for these reforms, which will take effect from April 2020.
Tax treatment of social security income – The government is legislating to confirm the income tax treatment of nine new and existing social security benefits. This includes the five new benefits being introduced in Scotland, which will be treated in accordance with the 2016 agreement between the Scottish government and the UK government on the Scottish Government’s Fiscal Framework.
Charity taxes - Reducing administrative burdens on charities – From April 2019, the government will introduce a package of measures to reduce administrative burdens on charities. These will:
- increase the upper limit for trading that charities can carry out without incurring a tax liability from £5,000 to £8,000 where turnover is under £20,000, and from £50,000 to £80,000 where turnover exceeds £200,000
- allow charity shops using the Retail Gift Aid Scheme to send letters to donors every three years when their goods raise less than £20 a year, rather than every tax year
- increase the individual donation limit under the Gift Aid Small Donations Scheme to £30, which applies to small collections where it is impractical to obtain a Gift Aid declaration
Starting rate band for savings – The band of savings income that is subject to the 0% starting rate will remain at its current level of £5,000 for 2019/20.
Dividend allowance and Personal Savings Allowance - will remain at the same levels in 2019/20 so £2,000 dividend allowance and £1,000/£500 personal savings allowance for basic rate and higher rate taxpayers respectively.
Taxation of trusts – The government will publish a consultation in 2018 on how to make the taxation of trusts simpler, fairer, and more transparent.
Capital Gains Tax
Capital Gains Tax: annual exempt amount for tax year 2019/20 - The Capital Gains Tax annual exempt amount increases to £12,000 for individuals and personal representatives and £6,000 for trustees of settlements for the period 2019/20 (reduced where a settlor has created more than one trust).
Entrepreneurs’ Relief: minimum qualifying period – To support longer-term business investments, for disposals on or after 6 April 2019 the minimum period throughout which the qualifying conditions for relief must be met will be extended from 12 months to 24 months. This could affect individuals who dispose of all or part of their business, individuals who dispose of shares in their personal company on or after 6 April 2019 and trustees who dispose of trust business assets. There are special provisions for cases where the business ceased before 29 October 2018. The measure aims to improve the effectiveness and value for money of Entrepreneurs’ Relief by requiring claimants to have an interest in their business for a longer period of time.
Entrepreneurs’ relief: definition of a ‘personal company’ – this could affect individuals who, on or after 29 October 2018, realise gains on disposals of shares in a company by which they are employed or in which they hold an office. The measure adds 2 new tests to the definition of a ‘personal company’, requiring the claimant to have a 5% interest in both the distributable profits and the net assets of the company. The new tests must be met, in addition to the existing tests, throughout the specified period in order for relief to be due. This measure ensures that the claimant has a true material stake in business in order to claim entrepreneurs’ relief.
Private residence relief – Lettings relief can reduce the capital gains tax on the sale of a property which was at some point used as the taxpayer’s residence but which has since been let out as residential accommodation. To better target private residence relief at owner occupiers, from April 2020 the government will reform lettings relief so that it only applies in circumstances where the owner of the property is in shared occupancy with the tenant. This represents another blow to some landlords.
Private residence relief - The final period exemption for private residence relief (whereby exemption from CGT always applies as long as the home has been the main residence at some time) will be reduced from 18 months to 9 months. The government will consult on these changes. There will be no changes to the 36 months’ final period exemption available to disabled people or those in a care home.
Capital Gains Tax and Corporation Tax: taxing gains made by non-residents on UK immovable property – affects non-UK residents disposing of UK land, or of interests in entities holding UK land; extends the scope of the UK’s taxation of gains accruing to non-UK residents to include gains on disposals of interests in non-residential UK property. It also extends the charge on gains on disposals of interests in residential property to diversely held companies, those widely held funds not previously included, and to life assurance companies. The measure also taxes non-UK residents’ gains on interests in UK property rich entities (for example, selling shares in a company that derives 75% or more of its value from UK land). The measure levels the playing field between UK residents and non-UK residents on disposals of UK immovable property.
Inheritance Tax - changes to the Residence Nil Rate Band (RNRB) - This measure introduces minor technical amendments to the RNRB to clarify the working of the downsizing rules, and provide certainty over when a person is treated as ‘inheriting’ property. It is intended to ensure that the RNRB is working in line with the original policy intent, meaning that it cannot be claimed outside of the intended scope and removing any uncertainty for taxpayers. The measure will have effect for deaths applying on or after 29 October 2018. Legislation will be introduced in Finance Bill 2018-19 to amend:
- Section 8FE Inheritance Tax Act 1984 to ensure that the value of any part of a residence that is inherited by an exempt beneficiary is taken into account in determining a person’s lost relievable amount
- Section 8J Inheritance Tax Act 1984 to ensure that where a residence forms part of a person’s estate immediately before their death as a gift with reservation of benefit, in accordance with Section 102(3) FA 1986, it will only be treated as being inherited by a direct descendant if the property became immediately comprised in the direct descendant’s estate as a result of the original gift
Individual Savings Account (ISA) annual subscription limits – The adult ISA annual subscription limit for 2019/20 will remain unchanged at £20,000. The annual subscription limit for Junior ISAs for 2019/20 will be uprated in line with CPI to £4,368.
Child Trust Funds – The government will publish a consultation in 2019 on draft regulations for maturing Child Trust Fund accounts. The annual subscription limit for Child Trust Funds for 2019/20 will be uprated in line with CPI to £4,368.
Improving NS&I’s offer to customers – NS&I will allow people other than parents and grandparents to gift Premium Bonds to a child. This, alongside a lower minimum investment of just £25 and the launch of a new app, will make saving with NS&I easier.
Annual Investment Allowance (AIA) – The government will increase the Annual Investment Allowance to £1 million for all qualifying investment in plant and machinery made on or after 1 January 2019 until 31 December 2020, to help stimulate business investment.
Digital services tax (DST) – From April 2020, the government will introduce a new 2% tax on the revenues of certain digital businesses to ensure that the amount of tax paid in the UK is reflective of the value they derive from their UK users. The government will consult on the detailed design of the DST and legislate in Finance Bill 2019-20.
VAT registration threshold – Alongside the Budget, the government is publishing a response to the call for evidence on the design of the VAT threshold. The responses to the call for evidence did not provide a clear option for reform. The VAT threshold will therefore be maintained at the current level of £85,000 for a further 2 years until April 2022. The government will look again at the possibility of introducing a smoothing mechanism once the terms of EU exit are clear.