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The Autumn Budget 2018 (and other matters)

Mr Hammond presented his third budget today, the first budget speech to be delivered on a Monday since 1962. Although much was made of this, the immediate relevance was not obvious. Mr Hammond spoke for 1 hour 12 minutes and said that it was a ‘Budget for Britain’s Future’. He said that austerity was coming to an end and this was due to the hard work of the British People (in fact he said this a number of times).

As was the case last year, there seemed very little in his speech that related to the normal day to day activities of the smaller business. Some of the tax changes had been announced in advance so he took the opportunity to update economic results and statistics (all of which can be found in the Budget Speech link below).

The Chancellor announced a large number of spending commitments, the main one being to the NHS, but there was also extra funding for new homes, high streets, schools and ……… potholes. The main source of government income was to be from the introduction of a new Digital Service tax to be levied on global tech giants who currently earn annual revenues in £billions from British trade, but only pay tax in low £millions.

After the speech we were probably left thinking that the corner had been turned, our sacrifices were worthwhile, and the future at last seemed promising. Unfortunately, as always seems to be the case, Mr Corbyn ‘rubbished’ much of what the Chancellor had said, and told us that things were actually worse!

As usual, we will comment on the more relevant points in the Budget a little later but for anyone who cannot wait, the full budget speech can be found at:- https://www.gov.uk/government/speeches/budget-2018-philip-hammonds-speech

There are loads of other links to interesting parts of HM Treasury website for those looking for more information on the country’s finances. In addition all the Budget Notes, Press Releases and other supplementary documents are available from here:-

https://www.gov.uk/government/collections/budget-2018 and here:- https://www.gov.uk/government/organisations/hm-treasury and here:- https://www.gov.uk/government/news/budget-2018-24-things-you-need-to-know

For now, we take the opportunity to deliver some bullet point reminders from previous years’ letters, together with a few new ones. Please take a few minutes to read through them.

For now, we take the opportunity to deliver some bullet point reminders from previous years’ letters, together with a few new ones. Please take a few minutes to read through them.

  • Self Assessment Tax Returns and Filing Notices to us please.
  • Please let us have copies of any Notices of Coding you receive if you have a PAYE tax code, and we also complete your Self Assessment Tax Return (or, indeed, if you simply want us to check it).
  • Please keep/obtain certificates for all interest and dividends received (even though most interest is now paid gross). Please do this as soon as possible, and chase up any that do not arrive during the normal course of things. In all cases the certificates should be for the Tax Year ended 5 April 2018 (2017/18).
  • Please keep records of business/private mileage if making a claim for business use of vehicles. This is increasingly important as recent HMRC enquiries have identified this as an area where taxpayers have inadequate records. Evidence suggests that some clients are still not keeping adequate records – please ensure that you do. The consequences of not being able to prove ‘business use’ can be severe particularly as HMRC can ‘go back’ six years and charge interest and penalties on the underpaid tax (as well as demanding the tax, of course!). Please note that HMRC treat travel from home to predictable and regular places of self-employment as being personal, not business, mileage.
  • Please keep all business records for a minimum period of six years (or longer if space and circumstances permit) but be aware of the requirements of the GDPR (see later).
  • Please let us have copies of any Self-Assessment Tax Calculations or Statements of Account that you receive from HMRC.
  • If your spouse works within your business, he/she must be treated like any other employee. Any salary paid should be taxed and NIC’d if appropriate, and the net pay must actually be paid and entered in your books. It is not acceptable simply to make a transfer at the end of the year, when we are preparing the accounts. This is another area where HMRC continues to be increasingly active!
  • We do not carry out Tax Credit work but suggest that all clients review their situation at least once a year as there are fixed time frames during which claims must be made. Universal Credit replaces some existing Tax Credits and benefits. An outline of the system can be accessed at http://www.hmrc.gov.uk/taxcredits/universal-credit.htm. The system and claims procedure is far from simple but we suggest that everyone ‘takes a look’ to see whether they might qualify.

For further detailed information please visit http://www.hmrc.gov.uk/TAXCREDITS

  • Most employers are now required to file their PAYE information under the Real Time Information (RTI) rules which came in from 6 April 2013. Information on the PAYE Scheme can be found at:-

http://www.hmrc.gov.uk/payerti/getting-started/paye-basics/rti.htm

Please read all HM Revenue & Customs (HMRC) correspondence and email notifications that you receive as, normally, you will not have been sent anything, unless it applies to you.

  • All employers are legally required to provide workplace pensions to certain of its employees (under the process known as ‘Auto Enrolment’). If you are an employer, you should by now have received details of the new requirement and have been advised of your ‘staging date’ (the date by which the new automatic enrolment duties come into force for your business).

The rules apply even if you only have one employee (this can be you if you are a one man/woman company). Details of the scheme can be found at:-http://www.thepensionsregulator.gov.uk/en/employers

  • We offer, through two independent financial advisers, a full range of investment, pension and financial services. If you would like a free consultation and appraisal of your current arrangements, then please telephone to arrange an appointment. In particular, we recommend that you review your pension arrangements, and life and accident insurance cover once a year, as well as ensuring that you have an up to date and valid Will in place.
  • In January 2016 the Government introduced a requirement for private landlords to make ‘right to rent’ checks on prospective tenants aged 18 or over before the start of a new tenancy entered into on or after 1 February 2016. Details of what is required can be found at https://www.gov.uk/check-tenant-right-to-rent-documents/who-to-check
  • Please remember that we, like all accountants, solicitors, banks and building societies etc., are required, by law, to comply with the Proceeds of Crime Act and the Money Laundering Regulations. Amongst other things, we are obliged to report any evidence (or suspicion) of criminal activity, to the National Crime Agency (NCA) who pass the information on to HM Revenue & Customs (HMRC) and/or (if appropriate) the Police. For an insight into NCA, Please visithttp://www.nationalcrimeagency.gov.uk/
  • Please remember that all U.K. residents must include on their U.K. Tax Returns details of all their ‘worldwide’ income and gains. There is no de minimis level so everything must be disclosed even if it has been reported in the host country.

The U.K. has Double Taxation Agreements with many other countries to ensure that the same income is not taxed more than once, so the fact that you may already have paid tax abroad does not relieve you of the obligation to declare the income on your U.K. Tax Return.

  • We offer a fee protection service which covers the cost of our fees in the event of you being subject to an HMRC enquiry. Please let us know if you would like details of what is (and what is not) covered by the scheme, and the costs involved.

Just before the Budget an update on:-

Making Tax Digital for Business (MTD)

We will not repeat all our previous references to MTD as the timetable for its implementation is continually changing.:-

However we will take the opportunity to restate that it is still the government’s intention that all people (and companies) with business or property rental income in excess of £10,000 per annum WILL eventually need to comply with the requirements of MTD. This will bring the most significant change ever to the way businesses with manual business systems record and report their business transactions. We first reported on the government's intention to change the way in which small businesses and landlords record and report income to HMRC, in our 2015 Spring Budget Letter.

The original intention was that the new system would be introduced from 6 April 2018 (i.e. the current year) but the government has been persuaded that this was an unrealistic target for smaller business so they announced a one year deferral (to April 2019) from the mandating of MTD for unincorporated businesses and unincorporated landlords with turnovers below the VAT threshold (£85,000).

This temporary relaxation has been further extended so that only VAT registered traders with a taxable turnover above the VAT registration level (currently £85,000) will be required to keep their accounting records digitally and file their VAT Returns through the MTD system. For those that have turnovers in excess of the VAT threshold the commencement date will be with effect from the start of VAT periods which begin after 5 April 2019. Businesses, self-employed people and landlords with turnovers of under £10,000 are currently exempt from these requirements, altogether.

HMRC are hoping to write to all VAT registered traders, who are immediately affected, by the end of November 2018. As with all similar government 'initiatives' there are fines and penalties for getting it wrong or for other non-compliance, although we are promised that these will not be applied during the first year. This is the latest phase of the government's commitment to reduce the administrative burden on small business (similar to the RTI reporting of PAYE, the Auto Enrolment of employees into an employer’s pension scheme, and GDPR etc.).

Earlier this month the government reviewed the progress being made with the MTD project and issued an update which can be found here:- https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital

Of course it is possible that there will be further delays and changes, but we think it would be wise to assume that the implementation dates will be as above.

General Data Protection Regulation (GDPR)

The new set of rules (GDPR) for people holding or processing personal data came into effect on 25 May 2018. Full details were given in last year's letter so it is to be hoped that all those affected will have taken the necessary action.

A general overview can be found here (together with links to more detailed information):- https://ico.org.uk/for-organisations/guide-to-the-general-data-protection-regulation-gdpr/

The Budget

TAs usual, the Budget has been covered extensively in the news, news programmes and in the press and, as mentioned above, the full text and a recording can be accessed on the HM Treasury website. There were no significant tax changes but there were a few surprises, so please keep reading.

The main Budget Proposals can be summarised as follows:-

Income Taxes

The standard personal allowance has been increased by £650 (from £11,850 to £12,500) for 2019/20. This fulfils a manifesto pledge a year early. The Personal Savings Allowance continues to make the first £1,000 of interest received on bank and building society accounts 'tax free' for basic rate taxpayers. For 40% taxpayers the allowance is £500 per annum, but there is no allowance for 45% taxpayers. The first £2,000 of dividend income will again be taxed @ 0% from 6 April 2019. After that, basic rate taxpayers will pay tax @ 7.5%, higher rate taxpayers @ 32.5%, and additional rate taxpayers @ 38.1%.

Capital Gains Tax

The Capital Gains Tax annual exempt amount increases from £11,700 to £12,000 for 2019/20. The rates of tax remain unchanged at 10% for basic rate taxpayers, and 20% for higher and additional rate taxpayers. However, gains on chargeable residential properties (buy to lets, and second homes) continue to be taxed @18% and 28% as at the moment.

Corporation Tax

As announced previously, the main rate of corporation tax fell from 20% to 19% from 1 April 2017 for three years. It was also confirmed that the rate would fall further to 17% from 1 April 2020.

Inheritance Tax

There are no changes in the main rates or allowances, and the nil rate band of £325,000 will remain until at least 5 April 2021. The residential property enhancement to the nil rate band (when a family home is left to a direct descendant) was introduced from 6 April 2017, starting at £100,000 and rising in stages to £175,000 by 2020/21 (as previously announced).

National Insurance

The proposed abolition of Self-employed Class 2 contributions has been postponed.

VAT

There were no changes to the main rates, or either the registration threshold of £85,000 or the deregistration threshold of £83,000.

Employment

As mentioned last year, the rules surrounding the taxation of company cars (whether owned or leased) remain complicated. Fortunately there were no fundamental changes in the Budget meaning that the changes announced previously ‘kick in’ as planned.

Savings and Investment

There were no changes to pension tax relief or the annual allowance, as earlier speculation had suggested might be the case.

Finally Some Timely Reminders

As reported in previous years, please remember that fines and penalties are now imposed on the late filing of returns and payments of PAYE, National Insurance and CIS deductions, and just about everything else to do with HMRC. If there is any possibility that payment might be delayed it is important that HMRC is contacted before the due payment date, so that an arrangement can be made.

N.B. This page was produced shortly after the Budget Speech, so please contact us before making any decisions based on information outlined above


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