The Budget – what it means for you
An additional £500m has been allocated for Brexit preparations on top of £2.2bn and £1.5bn which have already been announced. However, Hammond stayed positive, suggesting a ‘double deal dividend’ was on the cards if the UK secures a deal with the EU, as this would free up the emergency fund put aside in case of a no-deal Brexit.
Digital services tax for global giants
From April 2020, a digital services tax will be introduced targeting large online tech giants who do not pay much tax in the UK. Targeting large corporations and not consumers or start-ups, the proposal is for 2% tax to be payable on money made from UK users by companies who generate at least £500m a year in global revenue. This is expected to raise at least £400m per year. Following attempts to introduce international corporation tax, this introduction shows a move forward in line with the digital age.
The personal allowance will rise to £12,500 for the tax year beginning in April 2019 meaning that in general an additional £650 of earnings per year will not be taxable. The higher rate taxpayer threshold will be raised to £50,000, a year earlier than was planned, showing that public finances are in a stronger position than was forecast.
Capital Gains Tax
Entrepreneurs currently benefit from a lower rate of capitals gains tax (10% instead of 20%) above the annual exempt amount when they sell all or part of their business.
From April 2019 to qualify for this relief you will have had to have owned the business for at least two years (instead of one) before you sell. This has been introduced to benefit genuine entrepreneurs and to prevent abuse of the relief.
The annual exempt amount will be increased from £11,700 to £12,000.
There was less welcome news for buy-to-let landlords. From April 2020 lettings relief will only apply if the owner also lives at the property with the tenants. The private residence relief 18-month final exemption period from which landlords of buy-to-lets benefit, will be reduced to nine months.
The income from any UK property business carried on by non-UK resident companies will be subject to corporation tax from 6 April 2020 as opposed to income tax which is currently charged. The reason for this change is to make sure UK and non-UK resident companies are treated similarly for tax purposes and to prevent abuse by companies using non-UK ownership to reduce the amount of tax they have to pay.
For non-property related income, a non-UK resident company will only pay corporation tax in the UK if it has a permanent establishment here. From 1st January 2019 the definition of a permanent establishment will be changed. This should prevent non-UK companies avoiding corporation tax by dividing up their activities in the UK so that none of the activities create a permanent establishment.
Business rates tax relief
Over the next two years business rates will be cut by a third for companies with a rateable value of £51,000 or less. This aims to help small and independent cafes, restaurants and pubs by giving an annual saving of up to £8,000 to around 90% of them.
Stamp Duty Land Tax
Stamp Duty will be abolished for first-time buyers of shared ownership properties valued up to £500,000. This will apply retrospectively to the date of the last budget (22nd November 2017) and aims to help first-time buyers get on the property ladder.
For general Commercial Law advice, please contact our Head of Company Commercial, David Anderson.