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Autumn Statement 2017
Below is a summary of the main points on upcoming changes which may affect you from either a business or personal perspective. This summary does not go into significant detail, but highlights the main points arising. If there are any matters for which you require further explanation, in connection with your individual circumstances, then please get in touch with your usual LB Group contact.
Income Tax 2018/19
The basic personal tax-free allowance will be £11,850 (restricted for income in excess of £100,000)
The first £34,500 of taxable income is to be taxed at 20% (or 7.5% for dividends after the first £2,000). The Chancellor has now confirmed the reduction in the dividend allowance from the first £5,000 of dividend income being taxed at 0% being reduced to the first £2,000 of dividend income taxed at 0%.
The next £115,500 is taxable at 40% (or 32.5% for dividends). The balance over £150,000 is taxable at 45% (or 38.1% for dividends).
The tax rate applicable to trusts income (excluding dividends) is 45%.
Transferable tax allowances for married couples
For 2018/19, a spouse or civil partner who is not liable to income tax above the basic rate can transfer up to £1,185 of their personal allowance to their spouse/civil partner provided the recipient of the transfer is not liable to higher rate tax.
This will generally only be beneficial where one spouse is non-working or a lower rate taxpayer
Marriage Allowance Claims for Deceased
An individual whose spouse or civil partner has died will be able to make an application for marriage allowance, and the claim can be backdated for up to four years where the entitlement conditions are met.
Class 1 NIC – Employee & Employer – rates & thresholds per week unless stated:
Lower Earnings Limit – £116.00
Upper Earnings Limit (UEL) for employees’ primary Class 1 NICs- £892.00
Primary Threshold – £162.00
Secondary Threshold – £162.00
Upper Secondary Threshold for U21’s – £892.00
Employee’s (primary) Class 1 contribution rates
Weekly earnings above £162.01 to £892.00 (12%)
Weekly earnings above £892.00 (2%)
Employer’s (secondary) Class 1 contribution rates
Weekly earnings above £162.00 (13.8%)
Class 2 NIC
Self employed NIC – £2.95
Small earnings annual exemption level – £6,025
It had been announced previously that class 2 NIC would be abolished from 6 April 2018, however this has now been delayed by a year until 6 April 2019.
Class 4 NIC
Annual profits below lower profits limit of £ £8,424 (Nil)
Annual profits above £8,164 but below £46,350 (9%)
Annual profits above upper profits limit of £46,350 (2%)
Pension Lifetime Allowance
The lifetime allowance for pensions will increase from £1 million to £1,030,000 from 6 April 2018.
Corporation Tax Rates
No changes have been made in respect of corporation tax rates that were announced in the budget of last year. The corporation tax rate is currently 19% and will fall to 18% from 1 April 2018 and again to 17% from 1 April 2020.
Corporate Tax – Indexation Relief
Indexation allowance has always been available to companies disposing of capital assets such as properties. This relief was abolished for individuals some years ago. Accordingly to bring both regimes in line with one another, indexation for companies will be frozen at 1 January 2018, preventing further relief for inflation for gains arising after this date.
Individual Savings Accounts (ISAs)
The ISA limit subscription for 2018/19 will remain at £20,000. For Junior ISA’s and Child Trust Funds the subscription limit will be uprated in line with CPI to £4,260.
The Employment Allowance will remain at £3,000 in 2018/19.
The expected significant reduction in the VAT registration threshold did not happen. Instead, the VAT registration limit has been frozen at £85,000 for two years from April 2018. The de-registration limit has also been frozen at £83,000.
Online marketplaces are to be made jointly responsible for the unpaid VAT of sellers who use their website.
A VAT domestic reverse charge will be introduced to tackle VAT fraud in labour provision in the construction sector. This will be consulted on and is expected to be introduced after 1 October 2019.
It has been proposed that designers of certain offshore structures that could be used to evade taxes will be required to notify HMRC of them and the taxpayers using them.
Assessment time limits for non-deliberate offshore tax non-compliance will be extended so that HMRC can always assess at least 12 years of back taxes without needing to establish deliberate non-compliance, following a consultation in spring 2018.
The government has found evidence of some employers abusing the Employment Allowance to avoid paying the correct amount of NICs, often by using offshore arrangements. To crack down on this, HMRC will require upfront security from employers with a history of avoiding paying NICs in this way. This will take effect from 2018 and raise up to £15 million a year.
The government will tackle disguised remuneration avoidance schemes used by close companies by introducing the close companies’ gateway, revised following consultation.
The government will consult in 2018 on the best way to prevent UK traders or professionals from avoiding UK tax by fragmenting their UK income between unrelated entities.
The Government have announced another consultation in 2018 to look at making trust taxation simpler, fairer and more transparent…..watch this space
No changes announced but the Government published research into the influence of inheritance tax relief and exemptions. This research sought to understand the motivations, behaviours and attitudes underlying individuals’ decision-making process on Inheritance Tax matters and the use of reliefs and exemptions in that process
Life assurance and overseas pensions
From 6 April 2019 tax relief for employer premiums into life assurance products and certain overseas pension scheme will be modernised where the employee nominates an individual or registered charity.
Enterprise Investment Schemes
The limit for investment in EIS companies will increase from £1m to £2m provided anything in excess of £1 million is invested in knowledge intensive companies.
From 6 April 2018 companies and arrangements intended to provide capital preservation will be excluded from qualifying.
Stamp Duty Land Tax
SDLT will be abolished for first time buyers of properties up to £300k. First time buyers of properties up to £500k will also benefit from the first £300k not being subject to SDLT
Taxing gains made by non-residents on immovable property
To align the UK with other countries and remove an advantage which non-residents have over UK residents, all gains on non-resident disposals of all UK property will be brought within the scope of UK tax. This will apply to gains accrued on or after April 2019. The government intends to include targeted exemptions for institutional investors such as pension funds.
Research & Development – RDEC
The government is committed to supporting businesses investing in research and development. Whist no increase has been announced for the small and medium sized enterprise scheme, the Treasury has confirmed a 1% increase in the tax credit from 11% to 12% for large companies qualifying under the RDEC scheme.
Royalties & Withholding Tax
The Treasury has announced that from April 2019 companies will be subject to withholding tax obligations in respect of royalty payments, and payments for certain other rights, that are made to low or no tax jurisdictions in connection with sales that have arisen to UK customers. The rules will apply regardless of where the payer is located.
Intangible Fixed Asset Regime
Whilst no changes have been announced, the government has confirmed that the tax treatment of intellectual property will undergo a consultation. The aim of the consultation will consider whether there is an economic case for specific changes with the aim of providing greater support UK companies investing in intellectual property.
Autumn Statement 2017
Non Resident companies receiving UK based Property Income
Historically non-resident companies receiving income from UK land and property have always been subject to income tax at 20%. From April 2020, such companies will be subject to corporation tax at the prevailing rate of 17%. Additionally, capital gains arising from the disposal of property held by such companies will also be subject to corporation tax as opposed to capital gains tax.
Corporate Capital Gains & Substantial Shareholdings Exemption
The substantial shareholdings exemption rules and Share Reconstruction rules are to be relaxed where historically unintended gains had arisen following situations where a UK company incorporates a foreign branches in exchange for shares in an overseas company.
As mentioned previously, the above highlights the basic points of the 2017 Autumn Statement. For more detailed advice in connection with your own circumstances you should contact your usual LB Group Contact.
LB Group takes every care in preparing material to ensure that it is accurate. However, no responsibility can be accepted by LB Group for loss occasioned to any person acting or refraining from acting as a result of the material herein.
These proposals are subject to amendment during the passage of the Finance Bill.
Autumn Statement 2017
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