Yesterday afternoon, Philip Hammond delivered his third Budget as Chancellor, after declaring “austerity is coming to an end.”
While the 2018 growth forecast was downgraded in March (1.3% from 1.5%), the 2019 forecast has been raised from 1.3% to 1.6%. The annual forecasts have also been raised to 1.4% (2020), 1.4% (2021), 1.5% (2022) and 1.6% (2023).
As the last Budget before Brexit, Philip Hammond warned the Spring Statement next March could be upgraded to a full Budget if necessary.
See below for a summary of the key announcements.
Significant announcements include:
- Manifesto pledge to raise Personal Allowance to £12,500 and higher rate threshold to £50,000 fulfilled a year early, in 2019/20.
- Off payroll working reforms to be extended to private sector engagers from April 2020.
- No changes to pension relief apart from inflation uplift to Lifetime Allowance.
- Tightening of CGT rules on Entrepreneurs’ Relief and Main Residence Exemption.
- Annual Investment Allowance for plant and machinery increased to £1 million for two years from 1 January 2019.
- New capital allowance for construction of commercial buildings introduced for expenditure from 29 October 2018.
- First-time buyers’ relief from Stamp Duty Land Tax extended to shared ownership schemes.
Reactions from MHA Carpenter Box
“The real estate sector was hoping for announcements to be made in respect of reducing the impact of Stamp Duty Land Taxes that seems to have put a strangle-hold on the market. But the only announcement was for the abolishment of Stamp Duty Land Tax for first-time buyers of properties purchased under shared ownership schemes with values of up to £500,000. Although this will be a headline-grabbing measure, it seems only to be a technicality linked to the freezing of Stamp Duty Land Tax for first time buyers with values up to £300,000 as announced last year.
There was some good news for SMEs in construction with up to £1bn in British Business Bank guarantees being made available to support the smaller housebuilders. On balance, yesterday’s budget seemed lacklustre for the sector.”
Robert Dowling, Head of Construction and Real Estate
“The measures for charities are focused on reducing the administrative burden and allowing charities to save costs in this area. Measures include increasing the donation limit for the Gift Aid Small Donations Scheme and increasing the upper limits for trading before incurring a tax liability.”
Eileen Houghton, Head of Not for Profit
“A pot of £400m has been announced to help schools buy the “little extras” they need, and ease some of the recent budget tightening. This works out to around £10k for the average primary school and £50k for the average secondary school. The budget detail refers to the funding being for equipment and facilities, which would suggest it relates to capital items and premises maintenance. Try not to spend it all at once…”
Robin Evans, Head of Academies
“In yesterday’s budget, the Chancellor in an effort to help working families, announced the higher rate tax threshold would increase to £50,000 from April 2019. The increase has been brought forwards from that previously announced so that middle income earners will feel the benefit of the tax savings a year earlier.
However, the chancellor also announced the National Insurance limits would increase to align with the income tax brackets, which means those middle-income earners will be paying more National insurance on their earned income from April 2019. There is however an overall benefit and those taxpayers earning incomes over £50,000 to £100,000 should see a monthly increase to their net income of just over £40.”
Karen Thomas, Head of Private Client Services
“In a relatively quiet Autumn Budget for the motor retail sector, dealers will be left feeling that this was a missed opportunity for the government to take action to reverse some of the bad press surrounding diesel cars as well as the recent reduction in grants on electric and hybrid vehicles. In what is already an uncertain and challenging market, there is little news to change the minds of buyers or give any further confidence in Alternatively Fuelled Vehicles.
However, there is some relief in the form of frozen fuel duty and business rates reductions for dealerships. The headline for drivers will be the £30bn package for road repairs, but the motor industry needs more than just potholes repaired, especially in the run up to Brexit.”
Chris Reeves, Head of Motor Retail
“The ending of PFI contracts is long overdue so long as replacement investment can be found. The £20.5b announced for the next 5 years is therefore welcome, together with the additional £650m local grants for social care although it is short of the current funding gap. It is a difficult gap to fill with ever growing numbers of people of retirement age and new treatments we all would want for our loved ones proving very costly.
Cross party debate is required to decide how we are going to fund the NHS for the long term. It was also good to see some funding for Mental Health services within the new allocation.”
Jeff Huggins, Head of Healthcare
“The Chancellor has announced that High Street businesses with a rateable value of £51,000 or less, will have their business rates cut by one third. This equates to a saving for 90% of shops, restaurants and cafes.”
Mark McDowell, Head of Retail
“Discounting the controversial Universal Credit and the Women Against State Pension Inequality (WASPI) protest, there was little in the actual budget announcements regarding pension as the Chancellor resisted amending the politically thorny issue of pensions tax relief. This means that higher rate tax payers will still benefit from a total tax saving of 40% on personal pension contributions that fall into the higher rate band.
Since the days of George Osbourne, there has been much talk about the government restricting the level of contributions that can be made to pension plans and/or the rate of tax relief that would apply to payments. Whilst there was no change to the tax reliefs in this budget, there was reference to the fact that the relief is expensive for the treasury, meaning that a future restriction of tax relief is likely.
Individuals who suffer higher rate tax should look to consider the benefit of pension contributions now, whilst the attractive reliefs remain.”
Roy Thompson, Head of MHA Carpenter Box Wealth Management
“As usual the Budget contains a couple of big news items and some tinkering around perceived loopholes. However, we are delighted to see that the Chancellor has listened to industry representations on agricultural buildings. Agriculture is an enormously capital-intensive industry and it is good to see tax rules starting to reflect this with regard to commercial structures.“
John Billings, Head of Agriculture and Rural Business
If you have any queries about how any of the above may impact you or your business please get in touch with a member of our Tax Team on 01903 234094.
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