The chancellor made a number of tweaks to income tax rates, rules and allowances.
The following changes will be implemented from April 2018:
Personal Allowance increase
Personal allowance has been increased from £11,500 to £11,850. This means higher rate tax rates will now apply only when income net of personal allowance reaches 46,350. National Living Wage will rise from £7.50 an hour to £7.83.
Marriage allowance extension – deceased partners
Marriage allowance permitting a transfer of 10% of a spouse’s or civil partner’s personal allowance is now extended to personal allowances of deceased spouses or civil partners.
Mileage allowance for unincorporated property landlords
The use of mileage allowance of 45p and 25p per mile will be made available to property rental businesses. Individuals and partnerships (with individual members only), running property business will now be given an option to choose between a mileage allowance or deducting actual running costs and claiming capital allowances. This will be available in respect of existing as well as newly purchased vehicles.
General mileage rates will not be available in respect of vehicles for which capital allowances have already been claimed, or for which expenditure in acquiring the vehicle has been deducted in a business using the cash basis. However, transitional arrangements will apply, allowing the preservation of capital allowances already claimed between years 2013/14 – 2016/17. Any further capital allowances will be denied. Instead, from 2017/18 onwards, landlords will be able to claim the mileage allowance.
Benefit in kind exemption on charging electric cars
Electricity used as fuel for electric cars, paid for by employers, will not constitute a benefit in kind when there is an element of private use of such cars.
Increase in benefit in kind for diesel cars
The diesel supplement rate to calculate the benefit in kind arising on private use of company cars is increased form 3% to 4%. This applied solely to diesel cars (not hybrid cars) registered on or after 1 Jan 1998 with no NOx emission value or those which exceed RDE2 standard (80mg/km). The maximum percentage for cars including any diesel supplement will remain at 37%.
The diesel supplement charge is completely removed for diesel cars certified up to the RDE2 (80mg/km).
Increase in benefit in kind for private use of company vans and fuel for private use of company cars
From 2018 the value of the taxable benefit will rise in line with the September 2017 RPI to:
- flat rate benefit charge will be increased from £3,230 to £3,350
- the flat-rate van fuel benefit charge will increase from £610 to £633
- the multiplier for the car fuel benefit charge will increase from £22,600 to £23,400.
Increase of the EIS and VCT personal investment limit and loosening of anti-avoidance
Investment limit in EIS and VCT qualifying shares is increased from £1m to £2m, provided that amounts over and above £1m are invested in one or more knowledge-intensive companies (the maximum tax advantaged investments such companies can receive is £10m).
In addition a number of qualitative changes have been introduced to the EIS and VCT schemes. These largely relate to the qualifying conditions applying to companies which will be able to offer EIS tax reliefs to investors (for example the risk level of such investments) and anti-avoidance measures.
The anti-abuse rules are intended to prevent multiple claims of income tax relief on what is, in effect, the same investment. The current rules are that income tax relief is denied on a VCT share subscription if that investment takes place six months after a share disposal in the same VCT vehicle or another VCT, where those VCTs merge. This previously applied to all mergers, including those which take place several years after the subscription, or are carried out purely for commercial reasons and are not tax driven.
From 2018 the merger restriction on claiming income tax relief will not apply if merger takes place more than two years after the subscription, or less than two years if at the time of the subscription the individuals subscribing for the shares could not reasonably be expected to know that the merger or restructuring was likely to take place, or obtaining a tax advantage was not one of the main purposes of the merger.
Changes to the NIC system
Increase to Class 4 NIC rate from 9% to 10% and 11% in 2018 and 2019 respectively has been abandoned. The reform of the NIC system has been put on hold. The abolition of Class 2 NICs, reforms to the NICs treatment of termination payments, and changes to the NICs treatment of sporting testimonials are being delayed by one year.
Tax free accommodation allowance for members of the armed forces
Income tax exemption is granted for payments made to members of the armed forces to help meet the cost of private accommodation purchased or rented, in addition to the benefit-in-kind free accommodation provided by the ministry of defence.
Future changes announced in the budget and expected to be implemented following a consultation process
There has been no further news relating to the extension of the IR35 to the private sector. The outcome of an expected a consultation process and a research project commissioned by the government are expected to be announced in 2018.
Rent a room relief may be subject to changes; however, no specific details were given by the chancellor.
Article from ACCA In Practice
