THE CHANCELLOR DETAILED A LONG LIST OF TAX CHANGES IN HIS AUTUMN BUDGET, ALTHOUGH HE WAS GENERALLY MORE CAUTIOUS THAN HE WAS IN HIS SPRING ANNOUNCEMENTS.
Back in March last year, Philip Hammond’s Budget debut as Chancellor almost marked his simultaneous finale in the role because of his failed attempt to raise national insurance contributions for the self-employed. This time around seems to have gone more favourably.
STAMP DUTY LAND TAX (SDLT) AND FIRST-TIME BUYERS
For first time buyers (other than in Scotland), from 22 November the first £300,000 slice of their property’s purchase price is exempt from SDLT, provided their home does not cost more than £500,000. That could mean a tax saving of up to £5,000.
The personal allowance will rise to £11,850 and the higher rate tax threshold (excluding that for non-savings, non-dividend income in Scotland) will rise to £46,350 for 2018/19. The missing Scottish threshold awaits finalisation of the Scottish Budget. Both increases are in line with annual inflation to last September. The government’s stated aim is to raise the personal allowance to £12,500 and the higher rate threshold to £50,000 by 2020/21.
Despite many pre-Budget rumours about cuts to allowances and even the rate of tax relief, the Chancellor made no changes to reduce pension tax benefits. Doing nothing meant that the lifetime allowance will rise by default to £1,030,000 from 6 April 2018. Remember, however, that Mr Hammond’s spring Budget cut the money purchase annual allowance to £4,000 from 6 April 2017.
DIESEL COMPANY CARS
The scale charge surcharge on diesel company cars is currently 3% and will increase to 4% for cars that do not meet the latest emission standards, known as RDE2. Even HMRC recognises that “it is likely that few, if any, cars will meet RDE2 standards in 2018/2019”. The extra 1% will come on top of another 2% addition to most scale charges next tax year.
VENTURE CAPITAL SCHEMES
The Chancellor targeted venture capital trusts (VCTs), enterprise investment schemes (EISs) and seed enterprise investment schemes (SEISs), which have all gained popularity as pension allowances have been reduced. His measures were designed to focus the schemes on growth investment “where there is a real risk to the capital being invested” and exclude arrangements aiming at “capital preservation”.
The overall ISA annual subscription limit of £20,000 and the lifetime ISA (LISA) of £4,000 will be unchanged for 2018/19. The Chancellor may have decided that the forthcoming cut in the dividend allowance from £5,000 to £2,000 was enough of an incentive to invest in ISAs. The junior ISA (JISA) limit, which also applies to child trust funds (CTFs), will rise in line with inflation to £4,260.
CAPITAL GAINS TAX
The annual exemption will increase to £11,700 for 2018/19 – worth a tax saving of up to £3,276 to a higher rate taxpayer on property-related gains. Buy-to-let investors who use companies to hold their properties were less lucky as, from January 2018, the indexation allowance on corporate capital gains will be frozen. The freeze will result in an increased amount of any future gain becoming subject to corporation tax. The change will also affect UK life companies and could reduce future returns on UK endowment and single premium policies. If you have any questions about the financial planning implications, please talk to us as soon as possible. The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice. The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.
IF IT’S JANUARY, IT MUST BE TAX RETURN TIME
Wednesday 31 January is the deadline for submitting your 2016/17 self-assessment tax return online – the paper return deadline was 31 October. Miss the deadline and you could face an immediate £100 penalty, even if HMRC owes you money. Since September HMRC has started to remove some taxpayers – mainly pensioners – from the self-assessment return regime by the introduction of ‘simple assessment’. Under this system, HMRC uses data it already holds to calculate the tax due and issues the taxpayer with a tax calculation. Be warned: if you receive an HMRC calculation, you have only 60 days to raise any queries. The Financial Conduct Authority does not regulate tax advice and tax laws may change.