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.

 

March 2018 Fuel Rates

HMRC have announced new fuel rates, which will apply for all journeys from 1st March 2018, until further notice. For the one month of March, either the old rates or the new rates can be applied to business journeys. Hybrid cars are treated as either petrol or diesel for this purpose. These amounts can also be used for VAT purposes but employers will need to keep receipts.

The rates are :

Petrol     :     1,400cc or less 11p ; 1,401cc to 2,000cc 14p ; over 2,000cc 22p.

Diesel    :      1,600cc or less  9p ; 1,601cc to 2,000cc 11p ; over 2,000cc 13p.

LPG       :      1,400cc or less  7p ;  1,401cc to 2,000cc  8p ; over 2,000cc 13p 

 

Minimum Wage Increases

From 1st April 2018 both the National Living Wage ( NLW ) and the National Minimum Wage ( NMW ) will be increasing. These rates are the legal minimum that you must pay your workers. An employee can report an underpayment of wages via a straightforward online form, and also make a claim at Tribunal for the underpayment. The Tribunal fees have also now been removed, meaning it will cost an employee nothing to commence the claim.

The NLW will rise from £7.50 per hour to £7.83 per hour. This is an increase of 4.4% and is the biggest rise since 2008. The NLW applies to workers aged 25 and over.

The NMW increases as follows :

  • a) workers aged 21-24 : from £7.05 to £7.38 per hour
  • b) workers aged 18-20 : from £5.60 to £5.90 per hour
  • c) workers over compulsory school age but not yet 18 : from £4.05 to £4.20 per hour
  • d) apprentice rate  :   from £3.50 to £3.70 per hour  

All employers MUST ensure that they comply with this legislation to avoid back payments, penalties, Tribunal claims, and being named on the Government Register for all to see!

Salary Sacrifice and Cars

Company car salary sacrifice arrangements have changed from 5th April 2017, if the car has CO2 emissions of 76g/km or more.

If a salary sacrifice arrangement on such a car began, or changed, after 5th April 2017, then PAYE and NI must be deducted on the greater of the car benefit in kind, or the salary given up in exchange.

HMRC have recently confirmed that the amount of salary sacrificed to be used for the comparison is the figure for the car only. So, you must ignore any part of the salary sacrifice which relates to other costs such as fuel, maintenance, and other attributable services.

When structuring a salary sacrifice on a car, you should ensure that the documentation separately identifies the constituent amounts for the car and the other costs.

Abolition of Class 2 NIC’s – Delayed

HM Treasury has confirmed that the abolition of Class 2 NIC’s has been delayed by 12 months, and will now take effect in April 2019.

Once Class 2 NIC’s are abolished, self employed persons with profits below the small profits threshold will have to pay Class 3 NIC’s in order to build up an entitlement to state benefits such as the state pension.

Directors Tax Returns

HMRC say that it is necessary for a company director to file a self assessment tax return. The guidance issued by HMRC says that a company director should submit a tax return each year without prompt from them. They may impose a penalty for a late tax return.

Following a recent tax case ( M Kadhem TC5929 ) this guidance is not correct. The judge in the Tribunal case said that the guidance issued by HMRC which stated ” as a director of a limited company you must……register for self assessment……and send a personal self assessment tax return “, did not have the force of law and a taxpayer was not obliged to follow it.

Consequently, where there is no tax liability arising, an appeal should be submitted against any late penalty notices issued by HMRC for a late tax return, simply because you were a company director.

Auto Enrolment Update

As from 1st October 2017 there is no longer a staging date for auto enrolment purposes. Where a new PAYE scheme is set up after this date, then the employer’s legal duties with regards auto enrolment start immediately from the first pay date for employees.

It is still possible to postpone the employer’s duties for a period of 3 months from the start of employment.

For all new employers we would strongly recommend that you seek professional advice on the subject of auto enrolment to avoid potential penalties.