“The UK will be prepared for every possible Brexit outcome.” “At this Budget we choose a balanced approach.”
There was a lot of talk about encouraging innovation and technology but not a lot of real substance or new money/incentives. Investment in 5G and fibre broadband, and Artificial Intelligence. Yes, a few changes to EIS and R&D but is it enough?
A lot of detail on new industries and cash for different parts of the country – but is it enough given the productivity and growth decline?
Setting the scene
Philip Hammond’s first and last (?) autumn Budget was never going to be easy. Mr Hammond had very little room for manoeuvre – both politically and financially. The first Budget after a General Election is usually radical and far-reaching, but the Chancellor had no such freedom this time.
Quite a lot has changed in the time since the Spring Budget: the UK has triggered Brexit and begun negotiations on the terms of its departure from the EU.
Economic conditions have changed too, although there is fierce debate about how much of this is attributable to uncertainty and negativity over Brexit.
Inflation has risen to 3%, its highest level in five years, while growth has slowed down. But productivity is even worse than was thought. All the other announcements need to be taken in the light of this, which really is pretty bad news.
However, borrowing levels are at a 10-year low, giving Mr Hammond more flexibility, whilst employment remains at record levels.
So, what were the key announcements and what is either in the small print or likely to emerge over the coming days?
Vehicle Excise Duty: to be increased for most polluting diesel cars from 2018 (not vans). But £400m for electric car charging infrastructure. Electric car charging at work will not be a benefit-in-kind.
Personal allowance to rise to £11,850 from April 2018. Higher rate threshold to rise to £46,350 from April 2018.
Tax avoidance is yet again a theme. Further detailed and targeted package of measures forecast to raise £4.8billion by 2022/23.
Corporation tax on capital gains – indexation allowance abolished after January 2018.
R&D – the R&D expenditure credit (RDEC) to rise from 11% to 12% on 1 January 2018.
Enterprise Investment Scheme – changes for knowledge-intensive companies
- Double the annual individual investment allowance to £2million
- Double the annual investment that knowledge-intensive companies can receive to £10million
- Further flexibility for these companies over how the 10-year maximum company age test for the first investment is applied
Entrepreneurs’ Relief – changes to qualifying rules to remove the disincentive to take on external investment.
VAT threshold (£85,000) NOT to be reduced (frozen for next two years at least) as widely expected but there will be consultation, particularly over “cliff-edge” problem.
Business rates increases set by CPI rather than RPI from 2018.
Royalty payments – income tax to be applied on UK sales where payments go to low tax jurisdictions even if not taxable in UK under domestic rules: from April 2019. Aimed at the large digital companies.
Corporate tax and the digital economy: a position paper has been published looking at the challenges imposed by the digital economy for the international corporate tax framework. Overall theme is that the value created by the participation of users in certain digital business is recognised in determining where those business’ profits are subject to tax.
Stamp Duty Land Tax (SDLT): First time buyers SDLT abolished on purchases up to £300,000. Also on first £300,000 of price up to £500,000. Equivalent to £5K cut for most first-time buyers. But if price over £500K there will be no relief at all.
- Consultation on employment status following the Taylor Review
- Consultation on the taxation of trusts to make simpler, fairer and more transparent
- NIC changes delayed a year, so Class 2 NICs continue for at least another 12 months
- Rent-a-room- relief to be looked at
- Taxation of employee business expenses – some changes
- ISA annual savings limit remains at £20,000
- Pensions lifetime allowance to rise in line with CPI to £1,030,000 for 2018/19
- Technical changes to SSE and share reorganisation provisions to prevent unintentional triggering of gains