Budget 2018

Budget 2018

A Budget unlike anything we've seen before 

Discover the key budget announcements and RSM’s insights on the potential impact to individuals and businesses.

Budget 2018 | Overview of the announcements

Whilst there were a couple of references to Brexit, what the Chancellor didn’t say was that all of the numbers we heard were based on the implementation of the Chequers plan. The three primary areas for businesses were the reduction in the corporation tax rate, the increase in the annual investment allowance and the mention of a digital services tax. On the personal tax side there was some tweaking to the entrepreneurs’ relief, plus the threshold for the personal allowances and higher rate band have come in a year early.

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Budget 2018 overview
Budget 2018

Overview of corporate tax changes

This was a budget aimed at encouraging investment for the long term through tax measures for trading businesses investing in plant, equipment and trading premises. 

As expected, there will be targeted measures aimed at companies that generate value through user interaction – known as the ‘digital services tax’. These have been directed at very large businesses and was an expected measure. Great care will however be needed to ensure the legislation is fit for purpose.

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Private client overview

Whilst there were rumours of tax rises for individual taxpayers, none of the expected increases took place. Pension tax relief remained, inheritance tax was unchanged and the main rate of capital gains tax didn’t increase.

Instead, the personal allowance surprisingly increased to the promised £12,500 and the basic rate band was widened, both a year earlier.

Some changes have been made to Entrepreneurs’ Relief, but the lifetime allowance and the ten per cent tax rate remains.

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Budget 2018
Budget 2018

VAT overview

No doubt Philip Hammond will hope that the only press coverage around VAT focuses on the range of donations to good causes. 

Many small businesses will note that by freezing the VAT registration threshold until April 2022, the Chancellor has in fact increased expected exchequer revenue in 2021 and 2022, as inflation will bring more organisations into the VAT system. However, it is his measures to stop unfair outcomes that has led to the greatest tax windfall for the Exchequer, with well over £1bn expected to be generated over the next five years across five measures. 

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Employment tax overview

The Government has announced reforms to the off-payroll working rules (otherwise known as IR35) in the private sector. 

From 6 April 2020 medium and large businesses will need to decide whether the off-payroll working rules apply. Where they do, the business, agency, or third-party paying the worker’s intermediary will need to deduct income tax and employee’s NIC, as well as paying employer’s NIC and where applicable the Apprenticeship Levy. 

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Budget 2018

Tax facts 2019/20

Your easy-to-use comprehensive guide to all the tax rates, facts and figures you need to know.

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Tax facts 2019/2020