The chancellor gave a tax cut to basic and higher rate taxpayers and announced an extra £1 billion to ease the introduction of Universal Credit. What else did the Budget include?
The main tax change is the rise in the personal allowance by more than was expected.
- The personal allowance will rise from £11,850 to £12,500 from April 6th This means a basic rate taxpayer will pay £130 less tax a year – or a little over £2 a week.
- The higher rate tax threshold will rise from £46,350 to £50,000 from April 6th. This will mean higher rate taxpayers are £860 better off, although it will be less once National Insurance is taken into account.
SAVVY TIP: The tax thresholds will stay at that level in 2020-2021, and will then increase by CPI (consumer prices index). Scotland sets its own income tax rates and thresholds.
- Capital gains tax threshold – this will increase from £11,700 to £12,000 from April 6th 2019. It will increase from £5,850 to £6,000 for trusts.
- VAT – the threshold at which businesses and sole traders have to register for VAT will remain frozen at £85,000 until April 2022. The threshold at which you can deregister from VAT will stay the same at £83,000. Once a Brexit deal has been agreed (or we know we’ll be leaving with no deal), the government will look again at the possibility of making some changes to the way the VAT threshold operates.
- Fuel duty – rates will be frozen (it’s the 9th successive year). The government says that drivers will pay £1,000 a year less, on average, due to freezes in fuel duty since 2010.
- Car tax – rates for vehicle excise duty (VED) for cars, vans and motorbikes will rise by RPI (retail prices index) from 1st April 2019.
- Alcohol duty – rates on beer, cider and spirits will be frozen. This will save 2p off the price of a pint of beer, 1p off the price of a pint of cider and 30 off the price of a bottle of spirits. But duty on wine and higher strength sparkling cider will rise by RPI from February 2019. Different rates will apply to other types of high strength cider.
- Tobacco – duty rates on tobacco products will increase by RPI plus 2% until the end of this Parliament. Hand rolling tobacco will rise by 1% over RPI. These changes came in at 6pm on Budget Day.
- Vaping tobacco – From July 1st 2019, vaping tobacco will have the same duty rate as hand rolling tobacco.
- Air passenger duty – the rates for long haul flights will rise by RPI inflation on 1st April 2020. The rate for short haul flights won’t increase. The rates will start at £13 (for economy short haul flights) and £78 for first class. These are unchanged. If you’re on a long haul flight you’ll pay APD of £80, £176 or £528, depending on the class you travel in (economy, business or first class).
- Gift Aid – from next April, you’ll be able to make cash or contactless donations to charity of up to £30, and the charity will be able to claim Gift Aid. Currently, the limit is £20.
- Tax and insolvent businesses – from April 2020, if a business is insolvent, taxes such as VAT, PAYE and employee National Insurance will be paid to HM Revenue and Customs, rather than to creditors.
- Tax abuse by company directors – directors who are involved in tax avoidance or evasion will be jointly and severally liable for company tax liabilities, where the company looks like it will deliberately declare itself insolvent to avoid paying the tax.
- ‘Disguised self employment’– From April 2020, the rules on private sector workers working through their own companies, rather than being direct employees, will be tightened up. This change has already happened in the public sector.
- ISA limits – these are unchanged in tax year 2019 – 2020 at £20,000.
- Junior ISA limits – these will rise in line with CPI inflation from April 6th to £4,368. Child Trust Fund limits will rise by the same amount.
- Child Trust Funds – the government will publish a consultation next year into the regulations on what happens to Child Trust Funds once they mature.
- Starting rate for savings – This allowance remains unchanged at £5,000. It’s a bit complicated, but in essence, if you earn up to the personal allowance (£11,850 in the current tax year), you can also earn up to £5,000 in interest from your savings. If you earn more than the personal allowance, the £5,000 allowance is reduced by £1 for every £1 you earn over the personal allowance.
- NS&I Premium Bonds – the minimum amount you can save in one will be reduced from £100 to £25. NS&I will introduce a new app and relatives other than a parent or grandparent will be able to give Premium Bonds to children.
- NS&I index-linked savings certificates – these will pay interest based on CPI (consumer prices index), rather than RPI, from May this year. This was announced at the end of last week.
- Credit unions – there will be a new prize-based savings account to encourage more people to save through a credit union.
Pensions and social care
- Pensions Dashboards – these are tools that will let you see all your pensions in one place. The government says that the Department for Work and Pensions (DWP) will consult on the detailed design of these dashboards later this year. What we know is that they will have to include your state pension.
- Pensions cold calling – the government will bring in a ban on pensions cold calling. This means that a company will only be able to call you if it is regulated by the FCA and if you have consented to the call or if you are already its customer and could reasonably expect to be called by it.
- Pensions if you’re self employed – the DWP will set out the government’s plans to get more people who are self employed to save for their retirement.
- Lifetime Allowance – this is a limit on the amount you can receive in payouts from your pension. If you have several pensions, it’s the combined value of all those pensions. The Budget confirmed that the Lifetime Allowance would rise from £1,030,000 to £1,055,000 (an increase in line with the CPI).
- Social care – the government will provide an extra £420 million over the next two years for adult social care. This is mainly to free up NHS beds over the winter. There’s a further £410 in 2019 – 20 for adult and children’s social care.
- Stamp duty for first time buyers – first time buyers in England and Northern Ireland don’t pay stamp duty on properties costing up to £300,000. This will be extended to shared ownership homes costing up to £500,000. This comes into effect from Budget day, but is also applied retrospectively to purchases of shared ownership properties since the Budget last year (November 22nd). This doesn’t affect first time buyers in Wales or Scotland, where there’s a different system of land tax.
- Help to Buy Equity Loan – this will run until March 2023. However, from April 2021, there will be regional price caps introduced in relation to the price of properties you can use it to buy. The loan will only be available to first time buyers who buy properties costing up to £186,100 in the North East of England to a maximum of £600,000 in London. The price caps are set at 1.5 times the regional average first time buyer price.
- Shared ownership – the government wants ideas on how to deliver a new wave of shared ownership homes.
- Discounted homes – the government wants to let up to 500 parishes grant permission for homes to be sold at a discounted price to local people.
- Flood risk – the government will allocate £13 million to pilot projects to make sure that property owners have the best information about how to protect their homes from flooding. It will also expand the flood alert system to an extra 62,000 homes at risk of flooding.
- Breathing space – people who are struggling to pay back their debts will be able to get a 60-day break when charges will be frozen. The idea is that it gives them time to try and work out what to do. They will only qualify for breathing space if they have contacted a debt adviser and have been assessed as being in ‘problem debt’. They also wouldn’t be able to get breathing space if they’d already done this in the last 12 months. However, if they have mental health problems, they wouldn’t have to have seen a debt adviser. The breathing space may be triggered by them being seen by the crisis mental health team. How it works is currently under consultation.
- No-interest loans – the government is looking at trialling a scheme for no-interest loans to help those who would otherwise turn to payday lenders.
- Social landlords and affordable credit – the government will change the rules so it’s easier for social landlords to refer tenants to credit unions and other alternatives to payday lenders and doorstep loans.
- Financial inclusion – a new independent body will be responsible for promoting financial inclusion – namely, making sure that more people have access to bank accounts and other financial products. The government is making £55 million available from the dormant bank account fund. This was announced in August.
- Affordable credit challenge – the government will provide £2 million to help fintech (financial technology) companies to provide tech solutions to support community lenders such as credit unions. Basically, at the moment, lots of credit unions rely on people coming into their branch to make deposits for savings or to withdraw money. Some are much more high tech, but the government thinks there’s scope for more improvement.
- National Living Wage – this will rise by 4.9% from £7.83 an hour to £8.21 an hour from April 2019. It’s only paid to those aged 25 and over. The rate for 21- 24 year olds will rise from £7.38 to £7.70 an hour, the rate for 18 – 20 year olds will rise from £5.90 to £6.15 an hour and the rate for 16 – 17 year olds will rise from £4.20 to £4.35 an hour. Apprentices will get an extra 5.4% – taking their hourly rate from £3.70 to £3.90 an hour.
- Universal credit – the government is giving £1 billion to help the introduction of Universal Credit. It will also increase the Work Allowance by £1,000 from April 2019. Currently the Work Allowance is between approximately £200 and £400 a month. It’s the money you can keep if you’re in work.
- Brexit coin – the Royal Mint will produce a coin to commemorate Britain leaving the EU. It will be available next spring.
- RBS – The government plans to sell its remaining share in RBS by 2023-20204. This will be 15 – 16 years after the bank was bailed out.
- UKAR – (the ‘bad bank’ part of Bradford and Bingley and Northern Rock) – the government expects to sell the rest of its stake in Bradford and Bingley and Northern Rock AM by March 2020. Interestingly (to me, at least!) the Budget documents say that companies that buy UKAR assets will have to sign up to the financial regulator, the FCA’s ‘treating customers fairly’ principles. There’s been some criticism recently of one of the US-based companies that bought some of UKAR’s assets over the way they’ve treated some customers and the interest rates they’ve charged.
- Financial Ombudsman Service – this isn’t a new announcement, but the Budget does mention the financial regulator, the FCA’s plans to give companies with a turnover of up to £6.5 million the ability to take complaints about financial companies to the Financial Ombudsman Service. It’s also consulting on increasing the maximum redress that the FOS can award, from £100,000 to £350,000.
- Food waste – the government will give £13 million to charities to enable them to distribute food that would otherwise go to waste.
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