By now we know the Budget basics – the headline-grabbers that the Chancellor spent an hour whetting our appetites for this week.
We know that first-time buyers appear to have been handed a poisoned chalice in the form of abolished stamp duty.
We know about the fuel-duty freeze (again) and that, from April, we get a couple more of those newfangled pounds in our pocket before HMRC comes knocking.
But the Budget document itself is far more than just the Chancellor’s speech, at 240 pages – and that’s considered quite short.
So what’s within them? Here are the important bits:
Not North of the border
The small boost to our take-home pay is already a well-known bonus with the personal tax allowance increasing to £11,850 and the higher rate tax threshold rising to £46,350 from April.
At least, for some of us.
“Scottish and the rest of the UK higher-rate income tax bands continue to diverge, as the Scottish band is currently £43,000, and unlikely to catch up any time soon,” says Kate Smith, Head of Pensions at Aegon.
“This means that some people resident in Scotland and the rest of the UK, but earning the same amount, will not only pay different levels of income tax, but also benefit from different pension tax relief on their contributions.”
What are you?
Down on page 32 of the Budget report there’s a potentially sticky section for millions of self-employed workers as IR35 – the measures to clamp down on employment tax avoidance – are changed.
The IR35 changes that were brought in to the public sector to tighten up tax avoidance could now be extended to the private sector.
“Hammond has opted for the middle ground and announced a consultation on applying off-payroll rules in the private sector as has been done in the public sector,” says James Poyser, chief executive, of inniAccounts, an online accounting service for self-employed professionals.
“In February, the Chancellor made it the responsibility of public-sector organisations hiring contractors to decide if the contractor needed to comply with IR35. If the client decides IR35 does apply then the contractor will be taxed at source as though they were an employee, but they will not receive any of the rights that an employee would.
“It’s very complex to understand whether someone is in IR35 or not, so [some organisations] actually advise their people to assume IR35 applies regardless of whether it does.
“Contractors are really under the tax microscope,” adds Martin Upton, of the Centre for the Public Understanding of Finance.
“They are more likely to find themselves treated for tax and NICs purposes as though they are normal employees. This on top of hiking NICs for the self-employed from 9 per cent to 11 per cent over the next two years.”
The backlash over the £300,000 first-time buyer stamp duty threshold was rapid and extensive, with many arguing that the move will not only fail to help those who aren’t in a position to buy right now, but will probably cause first home prices to increase even further.
But recent campaigning over the inclusion of rental payments in tenants’ credit scores may still bear fruit, with the inclusion of a £2m prize to incentivise tech companies to find a solution.
“This is something better-off tenants will welcome, as it will help them secure better terms for a mortgage if they are aiming to buy in future,” says Sam Hurst of online lettings agent Openrent.
“But tenants who already struggle to pay historically high rents will be worried about the effect of this to their credit scores. This is especially worrying if we consider that lower-paid renters are much more likely to take loans to cover key living expenses.
“Like the other housing measures in the budget it seems like it will only help the aspirational, doing nothing to help those truly at the bottom of the UK’s broken housing system.”
Investors who plump for the Enterprise Investment Scheme (EIS) in a bid to better manage their tax liabilities have had a pleasant surprise, with the Chancellor announcing plans to doubt the amount an individual can invest under the scheme to £2m in any tax year as long as £1m is invested in at last one “knowledge-intensive” company.
With some specialists in this field concerned the Budget would bring cuts to such tax benefits, this was a somewhat unexpected move.
“The additional £1m EIS tax relief means individuals may be able to claim income tax relief of up to £600,000 if invested in knowledge-intensive companies,” notes Ben Faulkner, communications director at EQ Investors. “It’s an attractive opportunity for those looking to supplement their £40,0000 annual pension contributions.”
If you’re one of those employees who fails miserably to claw back your expenses due to lost receipts, the Chancellor may have just handed you a get-out-of-jail-free card.
“From April 2019, employers will no longer be required to check receipts when reimbursing employees for subsistence using benchmark scale rates,” notes law firm Ashurst. “The existing concessionary accommodation and subsistence overseas scale rates will be placed on a statutory basis.
“HMRC also plans to improve the guidance on employee expenses, particularly on travel and subsistence and the process for claiming tax relief on non-reimbursed employment expenses.”
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