BUDGET 2018: Overview
The 2018 Budget was delivered by the Chancellor, Philip Hammond, on 29 October 2018.
With less than six months to go before the UK leaves the EU, it was hardly surprising that the shadow of Brexit would loom over this Budget. If the UK leaves the EU without a deal, there will almost certainly be another full Budget in Spring 2019.
- In view of growing concern about the death of the high street, he announced some further relief from business rates for smaller businesses: one-third off the rates bill for retail businesses with a rateable value below £51,000.
- As had been widely trailed, the Chancellor has decided that the amended IR35 rules that currently apply only to those in the public sector will be extended to the private sector. However, this change will be introduced with effect from 6 April 2020 rather than 2019 as had been feared.
- On the business investment front, the Chancellor announced a major increase for a two-year period in the annual investment allowance, up from £200,000 to £1m for investments made on or after 1 January 2019.
Taxing digital services
Given the current environment perhaps the biggest surprise, although not entirely left-field, was the announcement of a proposed tax on digital services. The Chancellor had stated previously that, while he preferred a global solution to this problem, he would not be afraid to act unilaterally, and the government consulted on what such a tax might look like.
He has clearly lost patience with the slow progress on the international front and has announced that the proposed new tax will be introduced with effect from April 2020. However, it will only be aimed at the largest internet businesses with global revenues from in-scope business activities of more than £500m. The amount raised looks to be very modest at only £400m per annum, small change in the greater scheme of the UK government finances..
With Making Tax Digital (MTD) due to take effect from 1 April 2019, it always looked unlikely that the VAT registration threshold of £85,000 would be reduced, and this has been confirmed.
The government’s manifesto commitment to raise the personal allowance to £12,500 and the higher rate threshold to £50,000 by 2020 has been brought forward a year and will now happen with effect from 6 April 2019 rather than 2020 as planned.