Autumn Budget 2017 Explained

As predicted in our previous blog post, the Autumn Budget was a relatively quiet affair.

There were no major decisions on taxation and no change to pensions, except the expected increase of £30,000 to the Lifetime Allowance which was mentioned in the Spring Budget, taking it from £1,000,000 to £1,030,000. Although it is worth noting that before 2006 there was no limit to an individual’s maximum pension savings. ISA limits will remain unchanged at £20,000 for 2018 to 2019.

Below is an overview of the main decisions which will affect both investors and businesses:

Personal tax
The personal allowance for 2018/19 will rise to £11,850. The basic rate band will be increased to £34,501 and, in turn, the threshold at which the higher 40% rate band applies will be £46,350. The additional rate of 45% remains payable on taxable income above £150,000.

EIS and VCTs
The chancellor introduced various measures in support of research and development and technological innovation. The government is keen to encourage investment in knowledge-intensive companies under the EIS and VCT schemes.

EIS investment limits will be doubled from £1m to £2m for certain companies following the Autumn Budget, provided that the amount invested over £1m is in knowledge-intensive companies. In addition, the annual investment limit under the EIS and from VCTs for knowledge-intensive companies will be raised from £5m to £10m, although the lifetime limit remains at £20m.

Measures are to be introduced to ensure that venture capital schemes focus on growth investments. Relief under the schemes will focus on companies where there is a risk to the capital invested.

The government will also legislate to drive VCTs towards higher risk investments.

Business
The VAT threshold for small businesses will remain at £85,000.

Changes to business rates
From April, rates will rise in line with the lower Consumer Prices Index (CPI) measure of inflation, in a move away from the Retail Prices Index (RPI). In his speech, Mr Hammond said that the decision was made to help the UK’s small businesses which show “extraordinary vibrancy and resilience” but “are feeling under pressure right now”.

‘Staircase tax’
A change was promised for those businesses which are currently forced to pay higher rates bills, as if they were separate premises, due to the fact that their office space spans several floors in communal blocks, or is divided by corridors shared with other businesses or tenants.

IHT residence nil rate band
The nil rate band remains unchanged at £325,000. From 6 April 2020, some surviving spouses will be able to add £350,000 in respect of the residence nil rate band. This will mean that they are entitled to a total nil rate band of £1 million. It is therefore an opportune time to look again at your will to ensure that, where relevant, the relief will be best utilised.

Stamp Duty
First time buyers will celebrate the abolition of stamp duty for properties up to the value of £300,000. For first time buyers paying £300,000-£500,000 for a property, stamp duty will be set at 5% for the amount payable over £300,000 only. Above the £500,000 threshold, stamp duty for all buyers will remain at the current rates. The new rules come into effect from property completion dates from 22 November 2017.

Looking forward, there will be a consultation paper on the taxation of trusts, with the purpose of simplifying and making the taxation of trusts fairer and more transparent.

HMRC has also commissioned research into the decision-making process which people go through when considering inheritance tax (IHT) planning. This may indicate an upcoming review of IHT planning in the UK.

If you would like to discuss how any of these changes may affect your investments, please contact your Finura Partners adviser.

Sources: Old Mutual Wealth, Cantelowes Accountants, bbc.co.uk, www.ftadviser.com

The value of investments, pensions and the income from them can fall as well as rise.

EIS and VCT’s invest in assets that are high risk. They can be difficult to sell. They are only suitable for experienced investors who understand the risks involved.

Tax treatment depends on your individual circumstances and is subject to change.