How does the Autumn Budget affect you?
As usual, the Annual Budget speech given by Chancellor Philip Hammond contained an array of different elements. Their impact on your personal and business finances depends on your specific situation. Here’s our round up of the points that we think affect most of us living the UK.
According to the Treasury, 31 million people pay income tax in Britain. The way government structures income tax policy is crucial to the country’s overall income. The main points announced during the Budget speech are:
- Personal Allowance amount going up to £12,500
- Higher rate threshold also rising, to £50,000
- Average annual tax saving for Basic Rate taxpayer will be £130
- Average annual tax saving for a Higher Rate taxpayer will be £860
- Average annual tax saving for an Additional Rate taxpayer will be £600
These arrangements will stay the same for the following year and then may go up according to inflation.
Changes to National Insurance Contributions (NICs) were not part of the Budget speech, but in the full text of the Budget document itself. This is presumably because the changes to NICs will cancel out some of this tax saving for higher rate taxpayers.
These changes only apply in England, Northern Ireland and Wales. The Scottish Government will announce their Budget in December.
Annual Investment Allowance (AIA)
The Annual Investment Allowance gives 100% tax relief on any plant and machinery investment you make. It doesn’t include car purchase and the current ceiling is £200,000 per year. This Budget sees this ceiling temporarily raised to £1m, from January 2019 to December 2020. This is to stimulate business investment.
HMRC think that one third of people declaring as self employed as personal service companies should actually be classified as employed. This is massively controversial, with many self employed people feeling this is another attack from the government. If their status changes, the government will get more NICs and income tax from these taxpayers. The public sector are already in line with this thinking and large and medium sized companies will be required to follow suit from April 2020.
National Living Wage
This is the lowest hourly rate you can pay those over 25 years old. It is going up to £8.21 in April 2019, an increase of 38p.
If you purchase you first property within a shared ownership scheme, you will be entitled to the same Stamp Duty relief as those not using such a scheme. This relief is only available on properties that cost under £500,000. It will be backdated to include those new homeowners that bought within a shared ownership arrangement in the last year.
Fuel and Roads
It has already been confirmed by Theresa May that fuel duty is frozen for this coming tax year. The Budget did reveal £420m, for distribution between local councils, to be spent on pothole repairs.
Many charities that help those in debt crisis are supportive of the new announcement to extend the ‘breathing space’ before legal action commences. If you find yourself in a repayment mess, you will now have 60 days to sort yourself out before lawyers get involved. This is currently only six weeks.
The Budget speech also announced an investigation into setting up a no-interest loan scheme for those in the most difficult financial circumstances who have sudden, essential household costs. At the moment, the commitment is only to figuring out the details of a potential pilot scheme.
Alcohol and tobacco
Different alcohol has a different rate:
- Some high strength drinks will rise, like white ciders
- Wine will go up in line with inflation
- Spirits, cider and beer are frozen at the same rate
Tobacco duty is staying the same, inflation plus 2%.
In last year’s Budget, it was announced that the 1p, 2p and £50 notes were going to be taken out of circulation. This was not followed through. The only changes to our actual cash mentioned in the Budget involve a new 50p coin to commemorate the UK leaving the EU. The design includes the Queen’s head and 29th March 2019 on one side and Friendship with all nations written on the other.
The controversial roll out of Universal Credit continues with little additional detail in this year’s Budget. Basically, the freeze on many benefits continues into its fourth year. This includes: Child Benefit, some Housing Benefits, Jobseekers’ Allowance, Employment and Support Allowance.
The reform aims to amalgamate several separate state benefits into one monthly payment to the recipient. It is an extremely complex process to administer and has been severely criticised so far. The Chancellor said the transition period will take up to five years and that work allowances will go up once it is fully implemented. Work allowances define how much you can earn before your benefits are cut.
Other known policies that are already in place will continue and take effect in April 2019, in line with their original terms. This includes: the decreasing mortgage relief for buy-to-let landlords, changes to Inheritance Tax on property and taxation regulations on company cars, employee loans and company cars.
We’ll be reporting on a change to the R&D tax credits system as reported in the budget soon.