What Can We Expect From The Autumn Budget 2018?
This year the Chancellor has been tasked with securing £26bn for the NHS. Stating that “nothing was off the table”, there have been predictions aplenty about where this funding will come from and who is likely…
10 Minute Read
Updated: 29 Oct 2018 Created: 29 Oct 2018
This year the Chancellor has been tasked with securing £26bn for the NHS. Stating that “nothing was off the table”, there have been predictions aplenty about where this funding will come from and who is likely to be hit the hardest.
With this in mind, we wanted to highlight the five changes that are likely to affect those with earnings outside of PAYE.
Self-employed to face increase in National Insurance contributions
The Treasury is aiming their crosshairs at self-employed workers again, specifically those who position themselves as a “personal service company”. The plan to overhaul these tax rules is a reincarnation of a proposal to increase National Insurance contributions from the self-employed in March 2017, which was later scrapped.
Full employees pay a higher level of National Insurance compared to the self-employed. The Treasury believe that a third of those claiming self-employment status are in fact not self-employed. They stated that, without reform, this level of non-compliance would cost HMRC £1.2bn a year.
If you currently operate as a personal service company, the government is looking to demand that firms who hire you take legal responsibility. These businesses will need to ensure that contractors not on the payroll toe the line when it comes to the rules set out by IR35.
Incentives for buy-to-let landlords
There has been heavy speculation that landlords will be encouraged to offer longer-term tenancies through tax breaks in the past year. As a result, it has been expected to feature in the Autumn Budget.
As part of a proposal from the think tank Onward, the policy would supposedly benefit approximately half a million households – with an average capital gain of £15,000 per property and motivating tenants to transition to homeowners.
Furthermore, there would be an additional tax break included. Landlords and tenants would receive this tax relief once a property is sold to an active tenant of over three years. Landlords are currently paying up to 28% on profits for Capital Gains Tax.
Pension tax relief to be cut
It has been largely speculated that pension tax relief is up for review. Zurich announced that savings dramatically increased throughout September 2018. The insurer claimed that one-off contributions skyrocketed to 161% higher than average, and that total cash flow into their pension accounts doubled.
Currently you are able to save up to £40,000 a year into a pension and still benefit from tax relief. While the government claimed that they have rejected any changes to the current pension tax relief system, it is best to be proactive ahead of any announcements.
With the pressure of delivering the promised cash boost to the NHS, the Chancellor has announced that in order to allow a well-funded NHS there would need to be “more tax to fund it” – and the current cost of pension tax relief stands at £39bn a year.
Possible end to freeze on fuel duty
Fuel duty has been perhaps the most discussed of potential Autumn Budget topics. The proposed end to the freeze on fuel prices is likely to cause harm to those who complete Self Assessment forms. Fuel duty has been 57.95p a litre since 2011 and, according to Conservative MP Robert Halfon, businesses could be hit the hardest by the thaw.
Sole traders that travel to service their clients (such as tradespeople, hairdressers and cleaners) will incur higher travel costs and may need to amend their budgets to accommodate the change.
Although, in her conference speech in October 2018, the Prime Minister confirmed that “the Chancellor will freeze fuel duty again.” Making it highly unlikely that motorists would be facing a hike in road travel costs this year.
Tax-free dividends to be cut further
If you are the director of a limited company, beware of further cuts to tax-free dividends. The Federation of Small Businesses (FSB) argued that this could “clobber” SMEs and that the total cost to investors could be as high as £3.9bn over the period 2018-2022 should businesses lose the dividend entirely.
It’s predicted that the Treasury would gain an extra £1.3bn from this by 2022 – as well as the initial £2.6bn estimated to have been saved from the initial cut.
These are the five key concerns facing anyone who needs to complete a Self Assessment. What are you looking out for in the Chancellor’s Autumn Budget? Head to our Twitter page to join the conversation.
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