Philip Hammond heralded today’s Budget as a forward looking budget to embrace change, meet challenges head on and seize the opportunities for Britain. The Government is committed to low tax economy, with longer consultation in advance of change and with taxes changing less frequently, and hence little change to the main rates and allowances. Here is a summary of some of the key budget headlines that we think will be of interest to our clients. We will follow-up with further information in our Autumn Budget 2017 guide, which will follow in the coming days as detail is digested.
- Tax-free personal allowance to rise to £11,850 and higher rate tax threshold to £46,350 in April 2018.
- Corporate indexation allowance will be frozen from 1 January 2018, so the inflation element of any gain beyond this point will be taxable.
- Royalties from digital economy sales to UK customers that are paid into low-tax jurisdictions will be taxed at UK income tax rates from April 2019.
- Research & Development expenditure tax relief rates are increasing for larger companies from 11% to 12%. Smaller companies are already entitled to even higher rates.
- Annual Tax on Enveloped Dwellings (ATED) charges will increase by 3% for the period which begins on 1 April 2018.
- Non-residents with commercial property will pay tax on gains accrued on or after April 2019.
- Tax on diesel company cars will rise, but not on vans.
The Chancellor sees two of the major challenges for the country as:
- Poor productivity – funding for skills improvement both in schools and the experienced workforce, particularly for maths and technology skills, will be introduced to help improve productivity rates. This will be welcome news to employers and students alike.
- Slower than anticipated growth rates – investment in skills, sectors and infrastructure was announced to deliver an improvement in growth from 2021 onwards.
Other challenges identified include:
- National Living Wage to increase to £7.83 per hour, which secures better income levels for some, but also pushes employment costs higher for many businesses.
- Rising business rates – changes announced include pegging rises to the Consumer Price Index rather than the Retail Price Index to reduce future percentage increases in the rates.
The Chancellor also announced:
- First time buyers paying up to £300,000 will pay no stamp duty (SDLT). Those paying between £300,000 and £500,000 will pay SDLT at 5% on the amount of the purchase price in excess of £300,000. Purchases above £500,000 will attract SDLT at the normal rates.
- Support for residential housebuilders in the shape of financial aid and changes to planning reforms to make more land available for housing. In particular, this support is designed to encourage SME housebuilders back into the marketplace.
- Enterprise Investment Scheme investment limit will double for knowledge intensive companies.
- A raft of incentives to encourage the use of electric vehicles.
If you have any immediate concerns or queries about the impact of the Budget on your tax affairs, please contact Anne-Maree Dunn or your usual WMT tax advisor.