Accounting News

2018 Budget

Budget 2018 - Top 5 changes for clients and business owners

Friday 2 November, 2018

Following this week’s Budget we’ve compiled a short list of the key issues that we think you should be aware of.


1. Business investment - Capital allowances, R&D & amortisation of intangibles

  • AIA is increased to £1m for the two calendar years 2019 and 2020.
  • Immediately, a new Structures & Buildings Allowance (SBA) is introduced at a WDA rate of 2% on new non-residential buildings (this seems to be a re-introduction of industrial buildings allowances but extended to offices and farm buildings).
  • From April 2019 the plant and machinery that qualifies for special rate allowances will receive relief at 6% (reduced from 8% currently). This also applies to integral features of buildings and may mean the SBA introduction is fairly neutral in many cases.
  • From April 2020, a restriction on the amount of R&D tax credit repayable on the surrender of a loss to the amount limited to three times the PAYE / NIC payable.
  • From April 2019, a new targeted relief for the cost of goodwill on the acquisition of businesses (more details expected on 7 November).   

 
2. Business disposals - Entrepreneurs’ relief changes

  • From April 2019 the qualifying period for entrepreneurs’ relief will increase from 12 months to 2 years.
  • Immediately, two new conditions are added to the definition of “personal company”, in addition to the existing share capital and voting rights conditions. These are:
    - The individual must be entitled to at least 5% of the company’s distributable profits, and
    - 5% of its assets available for distribution to equity holders in a winding up.


  3. Multiple properties - Main residence relief changes

  • From April 2020, the final 18 months deemed occupation period reduces to nine months.
  • From April 2020, lettings relief (currently worth a maximum of £40,000 relief or £80,000 for joint owners) will be restricted to when the owner is in shared occupation with the tenant only, however 
  • Shared occupancy test for rent-a-room relief has been shelved/delayed for now.


 4. Profit extraction and income planning

  • From April 2019, personal tax allowance increases to £12,500, basic rate band increases to £37,500 which makes the higher rate threshold £50,000. These amounts are unchanged for 2020/21 and are set to increase in line with inflation from 2021/22.
  • From April 2020, corporation tax reduces to 17% (already legislated).
  • Profit Fragmentation - from April 2019 a new anti-avoidance regime targets arrangements where business profits are shifted out of the UK by UK resident individuals and / or companies.

 
5. Personal services companies

  • From April 2020, the responsibility for applying the IR35 rules will be put onto larger private sector employers rather than just public sector bodies as currently.

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