Autumn Budget November 2017 Helping you understand how proposed changes might impact you or your business jcca.co.uk jcca.co.uk Contents Your Core Budget Team 3 Foreword by Susie Walker 4 Personal Tax 5 Tax Administration 7 Stamp Duty Land Tax (SDLT) – First time buyers 8 Capital Gains Tax (CGT) 9 Taxation of Trusts 10 Corporate Tax 11 Business Rates 12 Entrepreneurial Taxes 13 Indirect Taxes 13 Employment Taxes 15 Research and Development (R&D) Tax Credits 17 Capital Allowances 17 International Tax 18 A Sector Snapshot 19 Scottish Taxes 20 Your Local Tax Contacts 21 Johnston Carmichael Wealth 22 Appendix 1: UK Rates and Allowances 23 2 Autumn Budget 2017 jcca.co.uk Your Core Budget Team Susie Walker Peter Young Head of Tax Head of Private Client Tax 0131 220 2203 0131 220 2203 [email protected] [email protected] Craig Hendry John McAuslin Managing Director Partner - Corporate Tax Johnston Carmichael Wealth 0141 222 5800 01224 259373 [email protected] [email protected] David Ward Alex Docherty Partner - R&D Partner - Private Client Tax 0131 220 2203 0131 220 2203 [email protected] [email protected] Callum Wilson Paul Cochrane Partner - International Tax Director - VAT 01224 212222 0141 222 5800 [email protected] [email protected] Stuart Thomson Andrew Holloway Director - Corporate Tax Senior Manager - 0131 220 2203 Entrepreneurial Tax [email protected] 0131 220 2203 [email protected] Chris Campbell Senior Manager – Employer Solutions 01343 547492 [email protected] 3 Autumn Budget 2017 jcca.co.uk Foreword by Susie Walker In the Autumn Budget, Chancellor Philip Hammond delivered his Government’s plans to build a Britain that is fit for the future and future- proofed, post Brexit. A Britain that businesses want to invest in and build their future plans around with confidence. His Budget sought to establish a balanced approach around fiscal responsibility and investing in the country’s future, recognising that debt is still too high, although is expected to peak this year. The Government’s strategic goals include significant investment in core education and computer skills, research and innovation, better housing supply and affordability for first time buyers, further clamping down on offshore tax evasion and avoidance, improving Britain’s infrastructure and putting the NHS on a strong and sustainable footing. An additional £3 billion will be set aside over the next two years for Brexit. With a backdrop of slower productivity growth expected over the economic forecast period, the Chancellor’s clear goal was to reset Britain to become a world leader in new technologies and embrace the technological revolution that is upon us. There was something in the Budget affecting everyone and, for those of us north of the border, we will need to await the Scottish Budget on 14 December 2017 to see if there is a response to the favourable Stamp Duty and Income Tax changes announced. In this publication, we have covered in wider detail the changes announced in this Autumn Budget and others previously announced. Should you wish to discuss any aspect in more detail please contact either myself or your usual Johnston Carmichael adviser. Susie Walker, Head of Tax 4 Autumn Budget 2017 jcca.co.uk Personal Tax Personal allowance and higher rate threshold meaning higher rate tax is paid on earned income and rental income, where this exceeds The Chancellor confirmed increases in the £43,000. Scottish taxpayers with income in personal allowance and higher rate threshold to excess of £45,000 currently pay £400 more take effect from April 2018 as follows: income tax than taxpayers in the other parts of the UK. 2017/18 2018/19 The Scottish Government recently published “The Role of Income Tax in Scotland’s Budget”, Personal £11,500 £11,850 designed as a consultation document in advance Allowance of setting Scotland’s Budget for 2018/19. The Basic Rate £33,500 £34,500 publication considers a number of income tax Band options including the introduction of more tax rates and tax bands ranging from 19% to 50%. Higher Rate £45,000 £46,350 Threshold Dividend allowance Additional Rate £150,000 £150,000 The tax-free dividend allowance will remain Threshold at £5,000 for 2017/18. Dividends within this allowance will be subject to tax at 0%. However, The Chancellor reiterated the UK Government’s the tax-free dividend allowance will be reduced plans to increase the personal allowance to from £5,000 to £2,000 from 6 April 2018. £12,500 and basic rate band to £37,500 by 2020. Therefore, following the reduction in the This would mean the higher rate threshold will dividend allowance, taxpayers will be worse off rise to £50,000. as follows: The setting of the personal allowance remains Additional Tax Due the preserve of the UK Government. However, the Scottish Government can vary tax rates and Basic Rate Taxpayers £225 bands for Scottish taxpayers’ earned income Higher Rate Taxpayers £975 (employment/self-employment income), pensions and rental income. The basic rate band in Additional Rate £1,143 Scotland is currently set at £31,500 for 2017/18, Taxpayers 5 Autumn Budget 2017 jcca.co.uk Rent-a-room relief Allocation of partnership profit – must be allocated between partners in the same ratio The tax-free income threshold increased from as commercial profits. The allocation of profits £4,250 to £7,500 with effect from 6 April 2016. appearing in the partnership tax return will be This applies where individuals let out a room in the allocation that applies for tax purposes for their only or main home. The Government has each partner and there will be a new process to confirmed that it will consult on proposals to allow disputes to be referred to a tribunal. redesign rent-a-room relief. National Insurance and the self employed Partnership taxation: proposals to clarify tax treatment The proposed changes to Class 4 National Insurance Contributions (NIC) were removed New rules for the allocation of partnership from the Spring Finance Bill and now the profits and losses are being introduced in proposed abolition of Class 2 NIC from April 2018/19 to “clarify in particular circumstances 2018 has been delayed by one year. Class 2 where the current rules for partnerships are seen NIC is currently paid at a flat rate of £2.85 per as creating uncertainty”. The new rules cover a week (£148.20 pa) and is collected through Self number of circumstances including: Assessment. This will increase to £2.95 per week for the 2018/19 tax year. Partners in nominee or bare trust arrangements – beneficiaries absolutely entitled to income of Pensions and investments the trust which consists of partnership profits, but are not themselves partners, will be subject There were no major changes to tax reliefs and to the same rules for calculating profits and will allowances for pensions other than to confirm have the same reporting requirements as actual that the Lifetime Allowance will increase by the partners. Consumer Prices Index (CPI) from April 2018 as originally confirmed by the previous Chancellor Partnerships with partnerships as partners in 2015. The new Lifetime Allowance will - Partnerships will be required to report the increase from £1 million to £1,030,000 from April share of income or loss on four possible bases 2018. of calculation unless details of all partners are included on the partnership statement. Individual Savings Accounts (ISA) continue to provide a wrapper for tax free savings. The Partnerships that are partners in other subscription limit for 2018/19 will remain the partnerships - will be required to report profits same as for 2017/18 meaning that up to £20,000 and losses from each partnership interest can be invested. The Junior ISA/Child Trust separately. Fund subscription limit will increase from £4,128 in 2017/18 to £4,260 in 2018/19. Investment partnerships – non-trading partnerships (excluding property business Tax rates on savings partnerships) will not be required to provide tax reference details if that partner is neither liable The starting rate for savings income will remain to income tax or corporation tax in the UK. at £5,000 for 2018/19. On 6 April 2015 the 10% starting rate was abolished and replaced by the 0% starting rate applying to savings income (e.g. bank interest). The 0% band for 2015/16, 2016/17 & 2017/18 is £5,000 and the Chancellor confirmed that this will continue for 2018/19. It is restricted by non-savings taxable income so that none of the band will be available if that income is above your personal allowance (and blind person’s allowance if claimed) plus the £5,000 starting rate. The starting rate of tax is in addition to the Personal Savings Allowance which also applies to income on savings and is taxed at 0%. Basic rate taxpayers can earn up to £1,000 of savings income per year. For higher rate taxpayers, the Personal Savings Allowance is £500 and additional rate taxpayers are not entitled to any Personal Savings Allowance. 6 Autumn Budget 2017 jcca.co.uk Tax Administration Late submission On 1 December 2017, the Government will publish its response to its consultation on proposals for changing and simplifying the rules around penalties and interest for late submission and payment of tax. Making Tax Digital (MTD) The Government confirmed in the Autumn Budget announcement that no business will be required to report digitally to HMRC until April 2019. Only those with turnover above the VAT threshold will be mandated to report quarterly and digitally from this date, and then only for VAT reporting obligations.