AN END TO AUSTERITY?

Welcome to our KMA Budget Newsletter! To make it super easy for you I’ve summarized the bits of the Budget which are most relevant to family run business owners into this bite sized Budget Newsletter. Whilst I remain to be convinced about ‘the end of austerity’ I feel the 2018 Budget is on the whole GOOD NEWS.

INCOME TAX ALLOWANCE & 40% TAX THRESHOLD UP From 6th April 2019 (i.e. 2019/20) there will be two sizeable rises which will benefit most people: -

• tax free personal allowance is rising by £650 to £12,500.

• the higher rate tax threshold is rising by £3,650 to £50,000.

The personal allowance rise also nudges up the amount that can be transferred from spouse / civil partner to the other to £1,250.

NO CHANGE IN DIVIDEND TAX Contrary to pre-Budget fears of an increase, dividend tax rates remain unchanged at 7.5%, 32.5% and then 38.1% depending upon a taxpayer's level of income. Remember from this year (i.e. 2018/19) only the first £2,000 of dividend income is tax free.

ISA UPDATE The annual ISA investment limit is unchanged at £20,000 although for Junior ISAs the limit nudges up to £4,368 Remember dividends on shares held within an ISA are tax free.

CORPORATION TAX TO REDUCE TO 17% As previously announced the current 19% rate is still scheduled to fall by 2% to 17% from 1 April 2020. RATES RELIEF FOR HIGH ST RETAILERS To help independent retailers compete with internet traders the Chancellor has announced a 33% cut in business rates. The cut will last for 2 years starting April 2019 and will benefit small businesses with premises with a ratable value less than £51,000. IR35 “OFF-PAYROLL” RULES COMING TO THE PRIVATE SECTOR

Recent IR35 rule changes affecting the Public Sector will be rolled out to the Private Sector starting April 2020.

It means that in the future the contractor is responsible for checking the employment status of their sub-contractors and will be at risk if they get it wrong.

The good news is that small businesses who are the contractor are EXEMPT from this significant change.

2018 BUDGET The bite sized summary for business owners

Please contact me or a member of the team if you would like to discuss any of the issues raised. Call: 0161 929 4763 Email: kim@kmaaccountancy.co.uk

2018 BUDGET (continued)

NATIONAL MINIMUM WAGE GOING UP From April 2019 the hourly rates are going up to: - Age 25+ £8.21 (up 38p) Age 21-24 £7.70 (up 32p) Age 18-20 £6.15 (up 25p) Age under 18 £4.35 (up 15p) Apprentice £3.90 (up 20p) Whilst being good for staff many businesses will now have to budget for sizeable increases in their payroll cost next year.

VAT - REGISTRATION LIMIT FROZEN

The VAT registration limit of £85,000 and de-registration limit of £83,000 will be frozen until March 2022. VAT – CONSTRUCTION INDUSTRY It was confirmed that the VAT rules in this sector will be changing in October 2020. Whilst the exact rules have yet to be confirmed it appears that the main effect will be the creation of an accounting headache for VAT in instances where a business is NOT dealing with the ‘end’ customer.

CAPITAL ALLOWANCES The amount a business can claim 100% tax relief on capital expenditure in a year has risen ‘temporarily’ from £200k to £1m - from 1 April 2019. A NEW capital allowance (worth 2% a year) will come in for the cost of construction or renovation of commercial buildings and structures. This tax break is for both trading businesses and commercial property landlords.

R&D TAX CREDIT CAP The amount of repayable R&D tax credits small & medium sized businesses can claim will have a new cap from April 2020. The new limit will be set at three times the company’s total PAYE and NIC payments for the period. Any unused tax credits arising because of the cap won’t be lost as it will be carried forward and offset against future business profits.

TAX DEBTS & INSOLVENCY From 6th April 2020 insolvency rules will be changed that will mean HMRC (for PAYE and VAT which is owed) becomes a preferential creditor on winding up - that means more cash for HMRC and less for unsecured suppliers.

RENTAL PROPERTY – MORE TAX CHANGES From April 2020 the following three Capital Gains Tax (CGT) changes are set to come in: -

• The tax-free exempt period will be halved from 18 to 9 months

• Lettings Relief will be severely restricted (worth up to £40,000 if you are selling a rental property but which has been your main home)

• A payment on account

for CGT due on the sale of residential property will be payable within 30 days of completion

These changes will probably see more CGT being paid after April 2020 on the sale of rental properties.

ENTREPRENEURS’ RELIEF CHANGES Two changes to this CGT relief were announced and will make it harder to claim: -

• The minimum qualifying period for entrepreneurs’ relief to be claimed will double to 24 months for disposals on or after 6 April 2019.

• Claimants must have a 5% interest in the net assets and distributable profits of the company on disposals after 29th October 2018.