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Autumn Budget 2018 – Impact on individuals

Personal allowance and income tax threshold
The personal allowance for 2019/20 is set at £12,500 (£11,850 in 2018/19), and the basic rate limit will be increased to £37,500 (£34,500 in 2018-19). As a result, the higher rate threshold will be £50,000 in 2019/20. The additional rate threshold will remain at £150,000 in 2019/20. From 2021/22 onwards, the Personal Allowance and basic rate limit will be indexed with the Consumer Price Index (CPI). Changes to the basic rate limit, and higher rate threshold, will apply to non-savings, non-dividend income in England, Wales and Northern Ireland, and to savings and dividend income in the UK.

The marriage allowance will rise from £1,190 in 2018/19 to £1,250 in 2019/20.

Blind person’s allowance will rise from £2,390 in 2018/19 to £2,450 in 2019/20.

Savings allowance and rate
The 0% band for the starting rate for savings income will be retained at its current level of £5,000 for 2019/20 and will not be uprated in line with inflation.

For 2019/20, the personal savings allowance will remain at £1,000 for basic rate taxpayers and £500 for higher rate tax payers.

Individual Savings Account (ISA) and Child Trust Funds annual subscription limits
The ISA subscription limit for 2019/20 will remain unchanged at £20,000. The annual subscription limit for Junior ISAs and Child Trust Funds for 2019/20 will be uprated in line with the Consumer Prices Index to £4,368.

Van benefit charge and fuel benefit charges for cars and vans from 6 April 2019
From 6 April 2019, the flat-rate van benefit charge will increase to £3,430 (from £3,350 in 2018/19), the multiplier for the car fuel benefit charge will increase to £24,100 (from £23,400 in 2018/19), and the flat-rate van fuel benefit charge will increase to £655 (from £633 in 2018/19).

Legislating the existing tax treatment of expenses for unpaid officeholders
The government will legislate in Finance Bill 2019/20, so that expenses paid or reimbursed to unpaid office-holders are exempt from income tax when incurred because of their voluntary duties. This places the existing concessionary treatment on to a statutory basis, providing certainty for those organisations engaging unpaid office-holders. Corresponding legislation will also be introduced to mirror the income tax exemption for National Insurance contributions. The change will have effect on and after Royal Assent of Finance Bill 2019/20.

Increasing compliance with the off-payroll working rules in the private sector (“IR35”)
To increase compliance with the existing off-payroll working rules (known as IR35) in the private sector, businesses will become responsible for assessing an individual’s employment status. The reform does not apply to the self-employed or introduce a new tax. It brings the private sector in line with the public sector. The reform will not apply to the smallest 1.5 million businesses, and large and medium businesses will have longer to adjust, with the changes being introduced in April 2020.

The reform will bring the private sector in line with the public sector, where evidence suggests compliance has improved since the reform was introduced in 2017. HMRC estimate the reform has raised £550 million in income tax and NICs in its first year.

Pensions lifetime allowance uplift
The lifetime allowance for pension savings will increase in line with the Consumer Prices Index (CPI), rising to £1,055,000 for 2019/20.

Gift Aid Small Donations Scheme
Currently the Gift Aid Small Donations Scheme (GASDS) applies to donations of £20 or less made by individuals in cash or by contactless payment. This limit is to be raised to £30. Contactless donations have been included in GASDS from April 2017. The limit for contactless payments in the UK is £30 and raising the small donations limit for GASDS to £30 will be in line with this. The increase is subject to approval by a resolution of the House of Commons and is expected to take effect from 6 April 2019.

Private Residence Relief: changes to ancillary reliefs
From April 2020, the government will change two ancillary reliefs that provide relief on rented property and on gains made in the final period of ownership, regardless of occupancy.

Lettings relief
Lettings relief currently provides up to £40,000 of relief (£80,000 for a couple) to those who let out a property that is, or has been in the past, their main residence. This means that individuals can claim the relief on a property even if they have not lived in it for a long time.

From April 2020 the relief will change and only be available to those who are in shared occupancy with a tenant. This change will not affect owner-occupiers or landlords who have never lived in the property they are renting out.

Final period exemption
Final period exemption currently means people do not have to pay CGT on gains made in the final 18 months of ownership, even if they are not an owner-occupier during that period. However, a long exemption period means that more relief can accrue on two properties (an unsold one and a new one) simultaneously. This is out of line with the intention of the exemption, which is meant to protect those who move to a new main residence but are unable to sell their original home immediately. From April 2020, the exemption will be reduced to 9 months. This is still twice the length of an average property transaction. The special rules that give those in or moving into care homes, and people with a disability, 36 months of exemption will not change.

Capital gains tax: annual exempt amount
For 2019/20, the capital gains tax annual exempt amount will rise from £11,700 for individuals and personal representatives and £5,850 for most trustees of a settlement, to £12,000 and £6,000 respectively.

Taxing gains made by non-residents on UK immovable property
The scope of the UK’s taxation of gains accruing to non-UK residents is to be extended to include gains on disposals of interests in non-residential UK property. The charge on gains on disposals of interests in residential property is also to be extended to diversely held companies, those widely held funds not previously included, and to life assurance companies. The legislation will also be amended to tax non-UK residents’ gains on interests in UK property rich entities (for example, selling shares in a company that derives 75% or more of its value from UK land).

The changes will have effect for disposals made on or after 6 April 2019, subject to the anti-forestalling rule detailed in a Technical Note published at Autumn Budget 2017.

Entrepreneurs’ relief: definition of a ‘personal company’
Two new tests are to be added to the definition of a ‘personal company’ for entrepreneurs’ relief. Both conditions, as well as the existing ‘share capital’ and ‘voting rights’ conditions must be met throughout the specified period in order for relief to be due. The new conditions require the individual to be beneficially entitled to at least:

– 5% of the company’s distributable profits
– 5% of its assets available for distribution to equity holders in a winding up

The new tests will have effect for disposals on or after 29 October 2019.

Entrepreneurs’ Relief: minimum qualifying period extension
The minimum period throughout which certain conditions must be met to be eligible for Entrepreneurs Relief is to be increased from one year to two years in respect of disposals on or after 6 April 2019. However, 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.

IHT: changes to Residence Nil Rate Band
Minor technical amendments are to be made to the residence nil rate band (RNRB) for IHT purposes. The amendments seek to clarify the working of the downsizing rules, and provide certainty over when a person is treated as ‘inheriting’ property. Finance Bill 2018/19 will include provisions to ensure that the value of any part of a residence that is inherited by an exempt beneficiary is taken into account in determining a person’s lost relievable amount. New provisions will also ensure that where a residence forms part of a person’s estate immediately before their death as a gift with reservation of benefit (in accordance with FA 1986, s 102(3)), it will only be treated as being inherited by a direct descendant if the property became immediately comprised in the direct descendant’s estate as a result of the original gift. These changes will have effect for deaths applying on or after 29 October 2018.

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