At the Budget, the Chancellor announced that increases to the personal allowance and basic rate band for 2019/20.

The personal allowance is currently £11,850. The personal allowance for 2019/20 will be £12,500. Also for 2019/20, the basic rate band will be increased to £37,500 so that the threshold at which the 40% band applies is £50,000 for those who are entitled to the full personal allowance. The additional rate of tax of 45% will remain payable on taxable income above £150,000.

The government had pledged to raise the thresholds to these levels by 2020/21.

Internet link: GOV.UK income tax

The Chancellor Philip Hammond presented his second Autumn Budget on Monday 29 October 2018. In his speech he stated that ‘austerity is coming to an end – but discipline will remain‘. He also promised a ‘double deal dividend’ if the Brexit negotiations are successful but stated that there may be a full-scale Spring Budget in 2019 if not.

We will keep you informed of developments.

Internet link: GOV.UK Budget 2018

The government announced, as part of the Budget, that some changes are being made to the rules for Entrepreneurs’ Relief (ER) with immediate effect for disposals on or after 29 October 2018. Two new tests are to be added to the definition of a ‘personal company’, requiring the claimant to have a 5% interest in both the distributable profits and the net assets of the company. The new tests must be met, in addition to the existing tests, throughout the specified period in order for relief to be due. The existing tests already require a 5% interest in the ordinary share capital and 5% of voting rights.

Minimum qualifying period

The government will legislate in Finance Bill 2018-19 to increase the minimum period throughout which certain conditions must be met to qualify for ER, from one year to two years. The measure will have effect for disposals on or after 6 April 2019 except where a business ceased before 29 October 2018.

Where the claimant’s business ceased, or their personal company ceased to be a trading company (or the holding company of a trading group) before 29 October 2018, the existing one year qualifying period will continue to apply.

Dilution of holdings below 5%

Draft legislation has already been issued to provide a potential entitlement to ER where an individual’s holding in a company is reduced below the normal 5% qualifying level (meaning 5% of both ordinary share capital and voting power). The relief will only apply where the reduction below 5% occurs as a result of the company raising funds for commercial purposes by means of an issue of new shares, wholly for cash consideration.

Where a disposal of the shareholding prior to the issue would have resulted in a gain which would have qualified for ER, shareholders will be able to make an election treating them as if they had disposed of their shares and immediately reacquired them at market value just before dilution. To avoid an immediate CGT bill on this deemed disposal, a further election can be made to defer the gain until the shares are sold. ER can then be claimed on the deferred gain in the year the shares are sold under the rules in force at that time.

The new rules will apply for share issues which occur on or after 6 April 2019.

Please contact us if you would like further information on how this may affect you.

Internet link: GOV.UK ER

The Chancellor Philip Hammond presented his second Autumn Budget on Monday 29 October 2018. In his speech he stated that ‘austerity is coming to an end – but discipline will remain’. He also promised a ‘double deal dividend’ if the Brexit negotiations are successful but stated that there may be a full-scale Spring Budget in 2019 if not.

Main Budget tax proposals

• increases to the personal allowance and basic rate band
• extending off-payroll working to medium/large organisations in the private sector
• a temporary increase to the Annual Investment Allowance
• freezing the VAT registration threshold for a further two years
• changes to Entrepreneurs’ Relief and private residence relief
• measures to tackle the plastic problem.

Previously announced measures include:

• increases in car benefits
• plans for Making Tax Digital for Business
• extending the charge to gains on non-UK residents of non-residential UK property.

Our full report on the Autumn Budget can be found here.

HMRC has announced that they achieved record enforcement results this year, identifying £15.6million of minimum wage underpayments.

The number of workers identified as underpaid was double that in 2016/17 and the highest number since the National Minimum Wage came into force.

The figures reveal:

• a record £15.6 million of underpayment identified for more than 200,000 workers
• employers fined £14 million for not meeting legal obligations
• more than 600 employers named in 2017/18 as part of ‘naming’ rounds.

Business Minister Kelly Tolhurst, said:

‘We are dedicated to stopping underpayment of the minimum wage. Employers must recognise their responsibilities and pay their workers the money they are entitled to.’

‘The UK’s lowest paid workers have had the fastest wage growth in 20 years thanks to the National Living Wage and today’s figures serve as a reminder to all employers to check they are getting their workers’ pay right.’

HMRC has prioritised the social care, retail, commercial warehousing and gig economy sectors for enforcement of the minimum wage. This is alongside employment agencies, apprentices and migrant workers. These are the sectors where HMRC believes non-compliance with National Minimum Wage is more widespread.

For advice on payroll please contact us.

Internet links: GOV.UK news GOV.UK naming