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Autumn Budget 2018 In a Nutshell

The last Autumn Budget before Brexit has been and gone so let’s take a look at what was announced and what that means for you and your business. This was never going to be a ground-breaking budget but that doesn’t mean that it won’t still have repercussions on our personal and corporate finances in the future.

In this article, the TWP team take a look at 2018’s Autumn budget and how it will affect you.

IR35 is introduced to the private sector

In 2017, contractors in the public sector lost the ability to declare their own IR35 status – instead relying on their clients to do so for them. As of 2020, contractors who work for “medium and large businesses” will face the same treatment, again losing the ability to declare their own IR35 status.

This move is set to be the government’s newest revenue raiser – netting them an additional £1.3 billion a year in taxes by 2023-24. There is no evidence (as of yet) that the IR35 reforms have had any major impact on contractors in the public sector. As time goes on, we will be able to see the extent of the damage this has had on contractors in both sectors, if it has a major effect at all.

Changes to the Personal Allowance

The amount of money you can earn before you are subject to taxes is called the Personal Allowance. As of the 6th of April 2019, this will be raised from £11,850 to £12,500. This means that fewer people on low incomes will be forced to part with 20% of their earnings over the allowance threshold.

Higher tax band moved

Although the tax rates themselves have not been changed this autumn, the bands that people fall into have been changed slightly with the higher rate band being raised.

Previously, the higher rate was at £46,350. Now, to fall into the higher tax bracket means that you must earn at least £50,000 of taxable income.

This change has only affected England, Wales, and Northern Ireland. Scotland has their own tax system, which has not been changed. The tax bands now look like this:

Income bands (Eng/Wal/NI) Qualifying Income Applicable income tax rate
Personal allowance Up to £11,850 0%
Basic rate £11,851 to £50,000 20%
Higher rate £50,001 to £150,000 40%
Additional rate Over £150,000 45%

 

Income bands (Scot) Qualifying Income Applicable income tax rate
Personal allowance Up to £11,850 0%
Starter rate £11,851 to £13,850 19%
Basic rate £13,851 to £24,000 20%
Intermediate rate £24,001 to £43,430 21%
Higher rate £43,431 to £150,000 40%
Additional rate Over £150,000 45%

There has been no indication that the Scottish Parliament intend to raise their higher rate band any time soon. In fact, the mood music from Holyrood has been quite the opposite.

Employment costs rise

If you employ one or more people, you will now have to pay them more. For your employees on the National Living Wage, their hourly rate has risen from £7.83 an hour to £8.21 an hour from the 6th of April 2019. This is applicable to employees who are over the age of 25 who aren’t in their first year of an apprenticeship.

Entrepreneurs’ Relief qualification changes

If you are looking to take advantage of the tax benefits that Entrepreneurs’ Relief brings, then you may have been initially unsettled by this announcement but the change hasn’t been as drastic as some were fearing. From now on, you’ll have to have held shares in the qualifying business for 24 months (previously, the requirement was 12 months) in order to benefit from the tax relief.

This is important for business owners who are looking to conduct a Members’ Voluntary Liquidation which allows business owners to extract all of the cash from their business’ bank accounts with a tax rate of 10%.

The budget, your business, and TWP

If you are concerned about the repercussions that this Autumn Budget will have on your business, get in touch with one of our expert accountants. For more information, call us on 01932 704 700 or at service@twpaccounting.co.uk.

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