October 2018 Budget Summary

Cabinet Office Blog ImageOn 29th October 2018, the Chancellor, Philip Hammond delivered the Autumn Budget.

Whilst this budget was overshadowed for the most part by the UK’s upcoming departure from the European Union, there were a number of announcements that will impact both individuals and businesses in the UK.

Find out more about the key announcements and how they may affect you.

Personal Allowance Increases

From April 2019, the personal allowance threshold will increase, meaning that people can earn more before being taxed at the basic rate of 20%, the higher rate threshold will also be increasing. This change was already planned for April 2020 but was announced a year early.

  Current Planned
Personal Allowance  £11,850 £12,500
Higher Rate Threshold £46,350 £50,000

These changes will mean savings for individual taxpayers, with basic tax rate taxpayers saving an estimated £130 per year, £860 for higher rate taxpayers and £600 for additional rate (45%) taxpayers.

This will not have a negative impact on employers, as the deficit will be made up by the Treasury. In fact, businesses may actually benefit as consumers will have more to spend.

New Minimum Qualifying Period for ER on CGT

From April 2019, the qualifying period for Entrepreneurs Relief (ER) on Capital Gains Tax (CGT) will increase from 12 months to two years. The change is being made in a bid to encourage long-term investment in the economy and will not impact 95% of ER claimants.

VAT Registration Held at £85,000

The UK has the highest VAT threshold in the EU, where the average is £20,000. After some speculation that the VAT threshold would be reduced, it was confirmed that the VAT registration threshold would remain at £85,000 for two more years.

This announcement has been welcomed by some small businesses, who feared that they would not have the administrative infrastructure to deal with the reporting VAT through Making Tax Digital (MTD) that a lower threshold would make them liable for.

Changes To Apprenticeships

A number of changes to apprenticeships were announced as part of the budget, one of which was the reduction of contributions towards paying for apprenticeships for small businesses; from 10% to 5%.

This reduction is expected to make apprentices less costly to businesses and, coupled with a 5.4% increase in basic pay, make apprenticeships more attractive to those interested in them.

Increased NMW and NLW

From April 2019, the National Living Wage (NLW) will increase to £8.21, a 4.9% increase on the current rate of £7.83 which will mean an extra £690 p/a for a full-time worker.

Additionally, the Government have accepted the recommendations for increases in the National Minimum Wage (NMW), the recommendations are as follows:

Current Rate Rate From April 2019 Increase (%)
NLW £7.83 £8.21 4.9%
NMW – 21-24 Rate £7.38 £7.70 4.3%
NMW – 18–20 Rate £5.90 £6.15 4.2%
NMW – 16-17 Rate £4.20 £4.35 3.6%
Apprenticeship Rate £3.70 £3.90 5.4%

Talk To The Experts

The budget held many announcements that impact both individuals and businesses. If you’re struggling to keep on top of ever-changing rules and regulations, we can help.

We offer specialist accounting and payroll services to a range of different businesses in Bristol and surrounding areas, giving our clients more time to focus on their businesses. For more information, give one of our friendly team a call today on 0117 379 0810.

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Steph

Steph is a Chartered Accountant with many years’ experience working in audit compliance and general accountancy. She is a Fellow of the ICAEW and has extensive knowledge of accountancy and tax for the self employed.
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