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Budget 2018: First Thoughts

Matthew Hall

29 October 2018

This afternoon, the Chancellor delivered his last Budget before Brexit, and still he managed to produce a few surprise measures among the inevitable re-announcements. The most significant measures included:

GDP growth forecast

2019                     1.6%

2020                     1.4%

2021                     1.4%

2022                     1.5%

2023                     1.6%

Public sector net borrowing

2019-20               £31.8 billion

2020-21               £26.7 billion

2021-22               £23.8 billion

2022-23               £20.8 billion

2023-24               £19.8 billion

National debt as share of GDP will fall from 83.7% this year to 74.1% by 2023-24.

Tax and NIC

  1. Entrepreneurs’ Relief – minimum qualifying period to be extended from one to two years for disposals made on or after 6 April 2019.
  2. Entrepreneurs’ Relief – definition of “personal company” tightened with immediate effect.
  3. Annual Investment Allowance to increase from £200,000 to £1 million for two years, from January 2019.
  4. New Digital Services Tax – from April 2020, profitable companies with over £500 million a year in global revenues will pay 2% tax on their UK revenue.
  5. Relief for the cost of acquiring IP-rich businesses.
  6. R&D tax credits – from April 2020, the amount of payable credit that a qualifying loss-making SME can receive through the relief in any one year will be capped at three times the company’s total PAYE and NIC liability for that year.
  7. Income tax – planned increases of personal allowance to £12,500 and higher-rate threshold to £50,000 will be brought forward from 2020 to April 2019.
  8. Apprenticeship levy – contribution of small companies to be reduced from 10% to 5%.
  9. New Structures and Buildings Capital Allowance (SBA) of 2% for new non-residential structures and buildings.
  10. Reduction in “Special Rate” Capital Allowance from 8% to 6% per annum.
  11. Restrictions to Capital Gains tax exemption for main residence – from April 2020, lettings relief only available for shared occupation, and “deemed occupation” reduced from 18 months to 9 months.
  12. Restrictions to use of corporate capital losses in line with income loss restrictions.
  13. IR35 Reforms for public sector being extended to include medium and large private businesses from April 2020.
  14. Employment Allowance to be targeted at small and medium businesses with an Employer NICs bill under £100,000 a year from April 2020.
  15. Insolvency – HMRC to become a preferred creditor.

Business rates

  1. Rates for companies with a rateable value of £51,000 or less will be cut by third over two years.
  2. £900 million in relief for small businesses.

Spending

  1. Schools – £400 million to help schools buy kit. It will be a one-off capital payment worth an average of £10,000 per primary and £50,000 per secondary school.
  2. £420 million to local highway authorities for road repairs.
  3. Abolishing PFI and PF2 but will honour commitment to existing contracts.
  4. Start-up loan funding to be extended to 2021, helping 10,000 entrepreneurs. Contribution of smaller firms to apprenticeship levy to be reduced from 10% to 5%.

Property

  1. SDLT abolished for all first-time buyers of shared-ownership properties up to £500,000. Will be applied retrospectively date of the last Budget.
  2. £500 million for the Housing Infrastructure Fund, designed to enable a further 650,000 homes to be built
  3. £1 billion of British Business Bank guarantees to support smaller housebuilders.

About Matthew Hall

Matthew Hall

Matthew specialises in advising owner managers and their businesses, with particular emphasis on tax planning and structuring. He has considerable expertise in advising growing businesses on a range of issues including the development and drafting of Employee Share Schemes.

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