On 29 October, Chancellor Philip Hammond delivered the last Budget before Brexit. There were no surprises, with the Chancellor focusing on measures to stimulate business investment in Britain post Brexit. Here is a summary of the key points of interest to you:
- From April 2020, the Government will reform the off-payment working rules, known as IR35, for the private sector, bringing them in line with the changes made to the rules in the public sector last year. (IR35 prevents contractors, who are to all intents and purposes employed by a single employer, to claim they are self-employed to reduce tax and national insurance). Last year’s Budget shifted the onus to public sector employers to determine whether national insurance contributions and income tax applied to the self-employed contractors working for them. These new changes apply to medium-sized and larger businesses only. Smaller firms will not have to determine a contractor’s employment status and it remains up to the contractor to disclose their income in the correct way.
- The personal allowance and higher rate threshold will increase one year earlier than expected, from April 2019, to £12,500 and £50,000 respectively. The income tax rates and bands for Scottish taxpayers will be announced in the Scottish Budget on 12 December.
- The Chancellor announced that, later this year, the Department for Work and Pensions (DWP) will consult on the details for the proposed pensions’ dashboards project. The DWP will also examine how an industry-led approach, including consultation with fin tech firms, could make best use of innovation, while protecting consumers. Extra funding of £5m will be provided in 2019/20 to help make this a reality.
- The Government also confirmed that the DWP will shortly publish a paper setting out its approach to increasing pension participation and savings among the self-employed. This follows the 2017 review of the automatic enrolment rules.
- A ban on pensions ‘cold calling’ will come into force early in 2019 to help protect consumers from pension fraudsters.
- The DWP will also consult on the function of the workplace charge cap to ensure that investment strategies are not unduly restricted by the use of performance fees within default pension schemes, while maintaining member protections. This consultation is expected to open in 2019.
- The widely anticipated fall in the turnover level above which a business must enter the VAT system and charge the tax on its sales was not announced. The Chancellor confirmed it will stay at £85,000 until at least 2022, after which time it will be reviewed.
- The Budget unveiled a cut in business rates by a third for all retailers in England with a rateable value of £51,000. The Chancellor added this measure would save the vast majority of independent shops, pubs and cafes up to £8,000 per year.
Entrepreneurs’ relief qualifying period
- To support longer-term business investments, from 6 April 2019 the minimum period which business interests must be held in order to qualify for the reduced 10% rate of Capital Gains Tax is to be extended from 12 months to 24 months.
Business and digital
- From April 2020, the Government will introduce a digital services tax of 2% on the revenue of certain digital businesses with global annual revenues in excess of £500m. This will ensure the amount of tax paid in the UK is reflective of the value these digital businesses get from UK users.
Other key points of interest from the Budget
- PFI contracts will be abolished, but existing contracts will be honoured.
- The Government will introduce a tax on the production and import of plastic packaging from April 2022. Subject to consultation, this tax will apply to plastic packaging that does not contain at least 30% recycled plastic.
- An extra £500m has been set aside for preparations for leaving the EU.
Following the Budget, Jamie Jenkins, Standard Life’s Head of Savings Policy, commented: “We didn’t expect any surprises in this year’s Budget. However, on pensions, it was good to see renewed commitment from the Government on the Pensions Dashboard, enrolling the self-employed and the cold calling ban.”
The views expressed in this blog should not be regarded as financial advice.
The value of investments can go up or down and may be worth less than was invested.