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.

Making Tax Digital

Making Tax Digital ( MTD ) will come into force for all VAT registered businesses with turnover above £85,000 with effect from the start of the first VAT return period commencing 1st April 2019 onwards.

From this date, the Government Gateway will be disabled, and no VAT returns will be able to be submitted to HMRC via the Gateway. Every VAT return must then be submitted by MTD compliant software. Currently around 85% of all VAT returns are submitted via the Gateway, and therefore the new legislation will affect a significant number of our own clients.

We have notified all clients already about MTD by way of a newsletter, and we are running in house seminars on MTD for any client who would like more information.

We still have spaces available on our seminars to be held on Wednesday 10th October at 8:00am, and also on Monday 15th October at 5:00pm. If you would like to attend one of these seminars ( which should last no longer than 60 minutes ), then please contact Laura in our offices as soon as possible.

June 2018 Fuel Advisory Rates

HMRC announced new fuel advisory rates in June, which apply to all journeys on or after 1st June 2018. For 1 month from the date of change, you may use either the new rates or the old rates.

Hybrid cars for this purpose are treated as either petrol or diesel, depending upon the type of fuel they use.

These same rates can be used for VAT purposes, but the employer must retain adequate VAT receipts to cover the input tax claim.

The rates are :

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

LPG        :   1,400cc or less  7p; 1,401cc to 2,000cc  9p;  over 2,000cc 14p.

Diesel     :   1,600cc or less 10p; 1,601cc to 2,000cc 11p; over 2,000cc 13p.

New Website

Welcome to our new website. This has taken a little time before we could release it live, so if it has created any problems for you, then we can only apologise.

The new style if fresher and more current.

We hope you like it.

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!

Cryptocurrencies

Bitcoin and other cryptocurrencies are becoming increasingly popular, especially with the high growth in value of Bitcoin over the last year or so ( I should at this point mention that the value of Bitcoin and cryptocurrencies can go down as well as up !!! ). The tax implications are still being thought through, although HMRC business brief 9/2014 outlines HMRC’s approach to the taxation of cryptocurrencies.

If someone buys Bitcoin to hold as an investment, or sets up a business to take payment in Bitcoin, then that person MUST keep proper accounting records, and report any gain or income to HMRC.

Another alternative is that Bitcoin falls into the realms of gambling, where there is no tax implications. For a transaction to be a gambling transaction, the person must be acting in a personal capacity and the other person in the transaction simply held differing views as to which direction the currency would move in. There would be no stake, and there would be a clear winner and a clear loser.

Our own opinion is that HMRC will seek to attribute a clear taxable position on any cryptocurrency activity, and it is therefore essential that all clients keep us informed of any activity they have in cryptocurrency, and they must keep adequate records of all such activity.

As always, investors in cryptocurrencies should seek professional advice and make sure they understand the risks and consequencies of any venture into this area.