Budget Summary 2019/20

Trick or Treat?

Philip Hammond joked that he had avoided giving his speech on Halloween night itself because it would have been simply too tempting for the caption writers, and had avoided Christmas because he did not want to appear in cartoons disguised as Santa Claus. Even so, he was determined to honour the Prime Minister’s recent declaration that austerity was over. He repeated again and again that ‘the British people’s hard work has paid off’ and the fiscal rigour of the past eight years has allowed him at last to share out some of the benefits.

Mrs May had already committed £20 billion of spending to the NHS, but Mr Hammond still managed to raise tax allowances to the level promised for 2020 in the election manifesto a year early, a tax ‘giveaway’ of nearly £3 billion next year. Other big figures include the freeze on fuel duty for the ninth successive year, help for the transition to Universal Credit, a temporary increase for tax allowances on plant and machinery, and extra relief from business rates for small retailers. Very few tax raising measures were announced, even in the small print of the mass of information that is released on the internet when the Chancellor sits down. There really has not been a Budget like this in recent years.

The great unknown, of course – not quite an elephant in the room, because the Chancellor did refer to it – is the outcome of the negotiations with the EU on the terms of our leaving. If we get a good trade deal, as the Chancellor confidently expects, there will be a ‘double dividend’ – an end of uncertainty, and no more need for the reserves he has been holding back in case we do not reach agreement. If ‘no deal’ is the outcome, he hinted that the outlook would then be so different that it might be necessary to upgrade the Spring Statement to a full ‘fiscal event’ – another Budget with a different plan.

An opposition MP shouted that Mr Hammond ‘won’t be here next year’. He affably responded that she had made the same interjection during his previous two Budgets as well. He clearly expects to implement the plans that are summarised in this booklet. In the meantime, we will be happy to discuss the impact of his proposals on you and your finances.

Significant points
  • Manifesto pledge to raise Personal Allowance to £12,500 and higher rate threshold to £50,000 fulfilled a year early, in 2019/20.
  • Off payroll working reforms to be extended to private sector engagers from April 2020.
  • No changes to pension relief apart from inflation uplift to Lifetime Allowance.
  • Tightening of CGT rules on Entrepreneurs’ Relief and Main Residence Exemption.
  • Annual Investment Allowance for plant and machinery increased to £1 million for two years from 1 January 2019.
  • New capital allowance for construction of commercial buildings introduced for expenditure from 29 October 2018.
  • First-time buyers’ relief from Stamp Duty Land Tax extended to shared ownership schemes.

 

New Advisory Fuel Rates

HMRC have announced new fuel rates for journeys on or after 1st September 2018. For the month of September, either the old rates or the new rates can be used. Hybrid cars are treated as petrol or diesel cars for this purpose. These rates can also be used for VAT purposes but receipts must be retained by the employer. In addition to these rates, the advisory rate for full electric cars is 4p per mile, and electricity is not a fuel for car fuel benefit purposes.

The new rates are :

Petrol           :          1,400cc or less 12p ; 1,401cc to 2,000cc 15p ; over 2,000cc 22p.

LPG             :          1,400cc or less 7p  ;  1,401cc to 2,000cc 9p   ; over 2,000cc 13p.

Diesel          :          1,600cc or less 10p ; 1,601cc to 2,000cc 12p ; over 2,000cc 13p.

Abolition of Class 2 NIC Halted

The proposed abolition of Class 2 National Insurance Contributions has been scrapped by the Government. The reasons behind the abolition is that it would hit the lowest earners in society most.

For those wanting to build up an entitlement to contributory benefits such as the state retirement pension would have to pay the higher rate of Class 3 National Insurance Contributions.

The reform was supposed to have taken effect in April, but the implementation had been delayed because of these same concerns.

Making Tax Digital—Spread sheets

Following on from our recent client seminars on the subject of Making Tax Digital, we are now aware of compatible software for those who prefer to keep their records on a spread sheet, rather than accounting software.

Absolute Accounting Software Limited have developed an Excel VAT filer, and the software enables users to keep spread sheets and submit this data in the required MTD format to HMRC.

The software uses HMRC’s API and is MTD compliant; it is said to be easy to use; it doesn’t require any other software; is backed up by a support team; and is cost effective. Pricing starts at £40+VAT for a 13 month period.

We are not promoting this product in any way, and you must make your own decisions on what is best for your own business.

But more information can be obtained direct from Absolute Accounting Software Limited, including a video demonstration, by going to www.absoluteexcelvatfiler.co.uk or calling 01869 255797 or email at sales@absolutetax.co.uk.