The 2018 Budget and how it affects you
Yesterday Philip Hammond presented his second Autumn Budget “for hard working families”, heralding the coming to an end of austerity.
A range of spending measures were announced, together with a number of tax changes, which are set out in our budget summary below.
Key Summary Points from yesterday’s budget
Wages and Tax Rates
- The National Living Wage will rise in April from £7.83 to £8.21.
- No changes were announced to income tax rates however the personal allowance rises to £12,500 and the higher rate threshold to £50,000 by April 2019 (and then will stay the same for the following year).
Corporate Tax & Spending
- UK Digital Services Tax expected to raise over £400m a year but Hammond stressed that it will target established tech giants rather than start-ups.
- IR35 payroll rules for contractors to be extended to the private sector in April 2020 targeting large and medium sized firms. This may affect some contractors working in the private sector at that stage although we note that it will have no impact on small firms. HMRC will launch a consultation in the summer of 2019 to consult with key stakeholders and in the meantime we will be working with our agency clients, insurers and accountants to be best placed to assist when more details become apparent after the consultation.
- For smaller firms taking on apprentices, Apprenticeship Levy will be slashed in half
- Entrepreneurs’ Relief is staying although there have been some changes to ensure that the relief is being used for genuine entrepreneurial situations
- VAT registration threshold is to remain unchanged
- Hammond said the Government was at a “pivotal moment” in EU negotiations, saying that they were “confident but not complacent” that a Brexit deal with dividends will be secured.
However, Hammond added that the government continues to plan for “all eventualities”.
£2.2bn in funding has been set aside for Government departments for Brexit preparations, a further £1.5bn was allocated in the last Autumn Budget for 2019/20.
Alcohol, Tobacco & Fuel
- Fuel duty frozen for ninth successive year.
- Price of tobacco to rise at the rate of inflation plus 2%.
- Beer and cider duties to stay the same.
Stamp Duty & Housing
- Stamp duty relief to be extended for all first time buyers of shared ownership properties valued up to £500,000.
- £500m more allocated for the Housing Infrastructure Fund to build 650,000 homes.
Welfare & Pensions
- Work allowances for universal credit to be increased by £1.7bn
- 4 million working families with children to benefit by £630 a year
- An extra £1bn to help welfare claimants transfer to the new consolidated benefit
The State of economy
- The Chancellor proclaimed that the “era of austerity is finally coming to an end.”
- Growth forecast for 2019 to improve from the 1.3% forecast at the Spring Statement to 1.6%.
- Then: 1.4% in 2020 and 2021; 1.5% in 2022; and 1.6% in 2023.
- 3 million more people in work since 2010 and 800,000 more jobs forecast by 2022.
- Government borrowing this year expected to be £11.6bn lower than forecast at the Spring Statement.
- This is set to fall from £31.8bn in 2019/20 to £26.7bn in 2020-21, £23.8bn in 2021/22, £20.8bn in 2022/23 and £19.8bn in 2023-24 – its lowest level in more than 20 years.
- National debt peaked in 2016/17 at 85.2% of GDP. It then falls in every year of the forecast from 83.7% this year to 74.1% in 23-24.
- Confirmation of an extra £20.5bn for the NHS over the next five years
- A minimum pledge of £2bn a year for mental health services
- New mental health crisis centres, providing support in every accident and emergency unit in the country
- More mental health ambulances and a 24-hour mental health crisis hotline.
- An extra £700m for councils, for care for the elderly and those with disabilities
- £10m for air ambulances
- The Annual Investment Allowance will be raised from £200,000 to £1m for two years.
- £200m will be given to the British Business Bank to replace access to the European Investment Fund if required.
- Start-up loans funding to be extended to 2021
- For smaller firms taking on apprentices, the government will halve the amount they have to contribute through the apprenticeship levy from 10% to 5%.
- Government has pledged £675m to help high streets transform.
- The funding will be used to create a Future High Streets Fund to support councils drawing up formal plans for the transformation of their high streets.
- For the next two years all retailers in England with a rateable value of £51,000 or less will have their business rates bill cut by a third – meaning an annual saving of “up to £8,000 for up to 90% of all independent shops, pubs, restaurants and cafes”.
- £160m more to go to police counter-terrorism battle in next financial year.
- An additional £1bn for the Ministry of Defence to be spent this year and next to help battle against cyber warfare and support submarine programme.
Increase in the Transforming Cities Fund of £2.4bn to support Northern Powerhouse Project