Autumn Budget 2017

Summary of the main tax announcements 

Our summary of the main announcements is largely based upon material made available on the gov.uk website following the Chancellor’s statement.

Income Tax: Rates and allowances

The Government has reaffirmed its commitment to increase the basic personal allowance to £12,500 and the higher rate threshold to £50,000 by 2020.

For 2018-19 the personal allowance and the higher rate threshold will increase to £11,850 and £46,350 respectively.

The £5,000 band of savings subject to the 0% starting rate is unchanged for 2018-19 and so is the £20,000 ISA limit although the limit for Junior ISAs and Child Trust Funds will increase to £4,260.

The lifetime allowance for pension savings will increase to £1,030,000 for 2018-19.

Income Tax: Company cars and vans

The van fuel benefit charge increases to £633 and the flat-rate van benefit charge increases to £3,350 for 2018-19 and the multiplier for the car fuel benefit charge increases to £23,400,

The 3% diesel supplement which is added to the appropriate percentage for calculating taxable fuel benefits is increased to 4% from 6 April 2018 although the maximum percentage is unchanged at 37%. It is estimated 800,000 company car drivers will be affected by this change.

Cars with NOx emissions not exceeding 80mg/Km will not be subject to any supplement although it is thought that few, if any, cars will meet this new EU standard in 2018 or 2019.

 Income Tax: Marriage allowance

The marriage allowance allows taxpayers to transfer up to 10% of their unused personal allowance to their partner giving a potential saving of £230 in 2017-18. Claims will now be allowed where a partner has died before the claim was made and claims will be able to be backdated by up to 4 years. The change comes into force on 29 November 2017.

 Income Tax: Off-payroll working

The off-payroll working rules, usually referred to as IR35, applying to engagements in the public sector were radically reformed in April 2017. The Government claims that compliance in the public sector is much improved as a result and would now like to extend the reforms to the private sector.

A period of consultation is promised before any reforms are introduced.

 Income Tax: Rent-a-room relief

The Government has indicated it wishes to ensure the relief is better targeted at long term lettings.

Income tax: Mileage rates for landlords

In order to reduce the administrative burden on individuals operating property businesses, the option to use approved mileage rates for business travel will be extended to landlords. The new measure will have effect from 6 April 2017.

Income tax: Employee business expenses

Various changes are proposed:

  • The scope of tax relief available to employees (and the self-employed) for work-related training costs is to be extended.
  • From April 2019, employers will no longer be required to check receipts when reimbursing subsistence claims using benchmark scale rates. In addition, the existing concessionary scale rates for overseas accommodation and subsistence claims will be replaced by statute.
  • HMRC will consult to determine how to improve the guidance on employee expenses, particularly travel and subsistence, and on the process for claiming tax relief for non-reimbursed expenses.

 Income Tax: Armed forces personnel

Certain allowances paid to armed forces personnel for renting or maintaining property in the UK private sector will be made exempt from income tax and NICs.

Income Tax: Carers

Qualifying care Relief will apply to expenses incurred when providing care to ensure carers only need keep simple records.

Income Tax: Venture capital Trusts and Enterprise Investment Scheme

Various changes will take effect for investments on or after 6 April 2018 designed to encourage investment in knowledge-intensive companies. For example, the EIS investment limit of £1m is increased to £2m provided any investment in excess of £1m is in a knowledge-intensive company.

Legislation is to be introduced in Finance Bill 2017-18, to take effect from Royal Assent, intended to ensure that tax-advantaged VCTs continue to focus on long-term investment in higher risk growth companies.

Capital Gains Tax: Payment date

The introduction of the proposed 30-day window for paying tax on gains from a disposal of residential property is to be deferred until April 2020.

Stamp Duty Land Tax: Higher rate on additional dwellings

A number of changes are to be introduced including cases where an individual buys a property from a spouse or civil partner and the right to disregard certain property interests retained by a former spouse or civil partner following the dissolution of a marriage or partnership.

Stamp Duty Land Tax: First time buyers

From 22 November 2017, first time buyers paying £300,000 or less will pay no SDLT and on properties costing between £300,000 and £500,000, SDLT will be charged at 5% on the excess over £300,000. SDLT on properties costing in excess of £500,000 will be charged at the normal rates.

Corporation Tax: Indexation allowance

Indexation allowance will be frozen on 1 January 2018 so there is no relief for inflation gains accruing after that date.

Corporation Tax: Non-residents’ property income and gains

From April 2020, income from UK property received by non-resident companies will be chargeable to corporation tax rather than income tax and their gains from disposals of UK property will be chargeable to corporation tax rather than capital gains tax.

Corporation Tax: Intangibles

A consultation in 2018 will examine whether the Intangible Fixed Asset regime can be changed to better support UK companies investing in intellectual property.

 Value Added Tax: Registration threshold

The current level of £85,000 will remain in place for two years from April 2018 while government consults on the design of the threshold.

Value Added Tax: Imports

Businesses currently benefit from postponed accounting for VAT when importing goods from the EU. The Government has said this cash flow advantage will be taken into account when considering changes to be implemented following Brexit.

Value Added Tax: Vouchers

The Government will consult on changes to be introduced intended to ensure that where customers pay with vouchers businesses account for the same amount of VAT as when other means of payment are used.

Annual Tax on Enveloped Dwellings: Rates

ATED charges are increased by 3%, in accordance with rises in CPI, with effect from 1 April 2018. As a result, the entry level charge for properties with a value between £500,001 and £1m rises from £3,500 to £3,600.

Trusts

A consultation on how to make the taxation of trusts simpler, fairer and more transparent will begin in 2018.

Tax Evasion

A number of measures or intended measures have been announced:

  • The Government will publish a consultation response on the proposed requirement for designers of certain offshore structures to provide HMRC with details of the structures and the clients using them.
  • Government will consult in Spring 2018 on proposals to extend the assessing time limit to 12 years for cases of offshore tax non-compliance without first having to establish the non-compliance is deliberate.
  • Following a consultation process, changes are proposed to tackle VAT fraud in construction industry labour supply chains. These changes are intended to take effect from 1 October 2019.
  • Government is to consult on a measure referred to as conditionality intended to make it more difficult to trade in the hidden economy. Conditionality involves making the issue of some public sector licences conditional upon being registered for tax.
  • There are also a number of announcements in connection with online VAT fraud.

Tax Avoidance

A number of measures are announced. Most are targeted at particular abuses or perceived abuses but perhaps two are of more general interest. First is the announcement of a consultation to consider ways of preventing traders and professionals avoiding tax by fragmenting income between unrelated entities. Second is the removal, with effect from 22 November 2017, of the 6-year time limit within which companies must adjust losses arising from depreciatory transactions.

Tax administration and compliance

Changes will take effect on 6 April 2019 enabling the recovery of Self-assessment debts through PAYE codes and a new system of late submission penalties and interest is proposed following consultation. The certificate of Tax deposit scheme will cease on 23 November 2017 although existing certificates will continue to be honoured for a further 6 years.