8th November 2018 Posted by - Alexander Accountancy
To be fair it is hardly surprising the budget failed to give a clear financial plan for the future, when we may be heading down one of many routes.
Though there are a few items hidden in the small print that are worth noting.
Private Residence Relief – If you vacate your private residence before selling it, this is the time you have until any additional gain becomes subject to Capital Gains Tax rules. In recent years this has changed a number of times loosely related to how quickly the property market is moving. However in last month’s budget it has now been reduced from 18 months to nine months, with an exception to 36 months if the owner is moving in to a care home. This is effective from April 2020, when many analysts believe the market has slowed due to Brexit.
Entrepreneurs’ Relief – This is really the modern day equivalent of the old Retirement Relief, affording tax relief to business owners who treat their business as their pension provision. In what appears to be an attempt to restrict this to more genuine cases the rules are being tightened up slightly. Previously there had to be a holding of at least 5% of the voting rights and the vendor had to be an employee or officer of the company, and both conditions had to be met for a minimum of one year before the sale. From April 2019 there is an additional requirement to be entitled to at least 5% of the distributable profits and net assets of the company, and this must be for a minimum of two years.
Personal Tax Allowances – This was almost a headline item, but it would have had more impact if it had not been promised by previous governments. So really it left us feeling it has taken a long time to arrive. The personal tax free allowance will be increasing to £12,500, with the basic rate band increasing to £37,500. Meaning higher rate taxes will not be paid unless the individual has a taxable income in excess of £50,000
Other items – Included a lot of noise about Business Rates Relief, but the proposals are quite complex. Plus in many cases when you have read the small print what is being given with one hand is being taken away with the other. The National Living Wage is again being increased, from £7.83p per hour to £8.21p per hour, a jump of 4.9%. Whilst the social justice argument supports this strategy the negative impact on costs, wage differentials and ultimately inflation appear to be largely ignored.
There was also the final caveat that dependent on the Brexit negotiations there may be a spring budget to take in to account the additional knowledge we will have at that point. So really the October budget appears to have been little more than a holding exercise.
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