Budget 2018: our take

Today’s headlines are all about the ‘end of austerity’, income tax cuts and the Chancellors ‘sense of humour’ from the dispatch box – but we’ve done a breakdown of the key things you need to know as a business owner following yesterday’s budget.

There were some interesting changes to the tax regime which we feel are worth highlighting, including some that were somewhat of a surprise:

The upsides: 

The annual investment allowance (AIA) has shot up to £1m from £200k with effect from January 2019. Provisionally for two years, this is a great improvement and will facilitate lots more tax planning and investment for our clients with plant and machinery and other capital-intensive businesses.

2% tax allowance on the cost price of commercial buildings will (hopefully) stimulate more owner occupier acquisitions so if you are looking to buy commercial premises there is a clear incentive to do so under the new regime. If you are thinking of buying your commercial property, talk to us about the effect of this allowance.

The uplift in personal allowances and the higher rate tax threshold from 6th April 2019 are modest, but greatly appreciated by all our clients and their staff. Put simply:

  • The personal allowance threshold, the rate at which people start paying income tax at 20%, to rise from £11,850 to £12,500 in April – a year earlier than planned.
  • The higher rate income tax threshold, the point at which people start paying tax at 40%, to rise from £46,350 to £50,000 in April.

The downsides:

R&D tax relief is to be restricted for loss making businesses and will be linked to three times the PAYE/NIC paid by the company.  This may stifle investment in creative industries in particular. We’ll be keeping a close eye on the impact of this for our growing portfolio of creative and digital clients.

Entrepreneurs’ relief will be subject to a holding period of 2 years (currently 1 year) for disposals made after 6th April 2019. This means that careful planning should be undertaken by those businesses considering an exit in the future. Some of our clients who are seeking to exit their business should pay close attention to this and make sure they speak to our team about the impact of this.

And finally…

In summary, we will be working with our client base of entrepreneurs to ensure that the changes introduced in yesterday’s budget work positively for them and where there are downsides, working to minimise the impact.

For a more detailed breakdown of all the issues from Budget 2018, you can see our detailed budget summary page here.

If you have any concerns with anything you have read about the budget and what it means for you or your family, don’t hesitate to contact Murray and the team.