Personal allowance and income tax threshold

The personal allowance for 2018/19 is set at £11,850 (£11,500 in 2017/18), and the basic rate limit will be increased to £34,500 (£33,500 in 2017-18). The additional rate threshold will remain at £150,000 in 2018/19.

The marriage allowance will rise from £1,150 in 2017/18 to £1,185 in 2018/19.

Blind person’s allowance will rise from £2,320 in 2017/18 to £2,390 in 2018/19.

Starting rate for savings

The 0% band for the starting rate for savings income will be retained at its current level of £5,000 for 2018/19 and will not be uprated in line with inflation.

Individual Savings Account (ISA) and Child Trust Funds annual subscription limits

The ISA subscription limit for 2018/19 will remain unchanged at £20,000. The annual subscription limit for Junior ISAs and Child Trust Funds for 2018/19 will be uprated in line with the Consumer Prices Index to £4,260.

Marriage Allowance claims on behalf of deceased partners

From 29 November 2017, it will be possible to make a Marriage Allowance (MA) claim on behalf of a deceased spouse or civil partner and backdate such a claim by up to four years, where applicable.

MA allows individuals to transfer 10% of their personal allowance to their spouse or civil partner where the recipient is not a higher rate or additional rate taxpayer. Individuals are able to backdate claims for up to four years. Currently, the legislation does not allow transfers of personal allowance on behalf of deceased spouses and civil partners, or from a surviving partner to a deceased partner.

Mileage rates for unincorporated property businesses

In line with other trading businesses, landlords are to be given the option to use fixed rates per business mile to calculate their allowable deductions for motoring expenses, instead of deducting actual running costs and claiming capital allowances. This option will not, however, be available to landlords who are companies or in mixed partnerships (a partnership with both individual and non-individual members).

This measure will apply retrospectively from 6 April 2017. It will include transitional arrangements to allow landlords who previously claimed mileage rates under an existing Extra Statutory Concession to start using mileage rates again, from 6 April 2017, without having to wait to acquire a new vehicle.

Rent-a-room relief to be reviewed

Although there is no change at present, the government is to publish a call for evidence around the usage of rent-a-room relief with a view to establishing whether it is consistent with the original policy rationale to support longer-term lettings.

Offshore trusts: anti-avoidance

With effect from 6 April 2018, a new measure will ensure that payments from an offshore trust intended for a UK resident individual do not escape tax when they are made via an overseas beneficiary or a remittance basis user.

Where capital payments or benefits are received by an individual who does not pay UK tax on the distribution (because they are either non-resident or are non-domiciled remittance basis users who do not remit the payment) and that individual then makes an onward gift to a UK resident, that UK resident will be treated as if they had received a capital payment or benefit from the trust equal to the amount of the gift.

Taxation of trusts

The government has confirmed that it will publish a consultation in 2018 on how to make the taxation of trusts simpler, fairer and more transparent.

Venture Capital Trusts – limiting the effect of anti-abuse provisions on commercial mergers

An existing anti-abuse rule for VCTs is to be amended so that it works as originally intended. Currently, income tax relief is restricted where a VCT buys back shares from an investor and the investor subscribes for new shares in the same VCT within a six-month period, a form of ‘bed and breakfasting’. Relief is also restricted for investors who sell shares in a VCT and subscribe for new shares in another VCT within a six-month period, where those VCTs merge. The change now being made will ensure that income tax relief may no longer be withdrawn where the relevant VCTs merge more than two years after the latest subscription for shares, or do so where it is not one of the main purposes of the merger to obtain a tax advantage. It will take effect for VCT subscriptions made on or after 6 April 2014.

Venture capital schemes – risk to capital condition

A new condition is to be introduced to the EIS, SEIS and VCT rules to exclude tax-motivated investments, where the tax relief provides most of the return for an investor with limited risk to the original investment (that is, preserving an investor’s capital). The condition depends on taking a ‘reasonable’ view as to whether an investment has been structured to provide a low risk return for investors.

The condition has two parts:

  • whether the company has objectives to grow and develop over the long-term (which broadly mirrors an existing test with the schemes); and
  • whether there is a significant risk that there could be a loss of capital to the investor of an amount greater than the net return. The condition requires all relevant factors about the investment to be considered in the round.

The new condition will apply to all investments made on or after 6 April 2018.

Encouraging more high-growth investment through Venture Capital Trusts

Certain changes are being made to the rules on investments made by VCTs, including:

  • inclusion of a final date of 6 April 2018 in relation to the applicability of certain ‘grandfathering’ provisions;
  • doubling the time VCTs have to reinvest gains from investments from six to twelve months;
  • requirement that 30% of funds raised in an accounting period must be invested in qualifying holdings within twelve months after the end of the accounting period;
  • requirement that qualifying loans are to be unsecured and ensure that returns on loan capital above 10% represent no more than a commercial return on the principal; and
  • an increase in the proportion of VCT funds that must be held in qualifying holdings from 70% to 80%.

The change concerning unsecured loans will apply from the date of Royal Assent to Finance Bill 2017-18. The ‘grandfathering’ provisions and 30% investment in qualifying holdings provisions will apply from 6 April 2018. The increased period for reinvestment and qualifying holdings threshold provisions will take effect from 6 April 2019.

The Enterprise Investment Scheme and Venture Capital Trusts – encouraging investments in knowledge-intensive companies

The annual limit for individuals investing in knowledge-intensive companies under the EIS is to be increased to £2 million, in relation to shares issued on or after 6 April 2018, provided that anything above £1 million is invested in knowledge-intensive companies.

The annual EIS and VCT limit on the amount of tax-advantaged investments a knowledge-intensive company may receive will be increased to £10 million in relation to new qualifying investments made on or after 6 April 2018.

Greater flexibility is to be provided with respect to the rules for determining whether a knowledge-intensive company meets the permitted maximum age requirement.

Venture Capital Schemes: relevant investments

The definition of a ‘relevant investment’ is to be amended to ensure all investments, including all risk finance investments made before 2012, are counted towards the lifetime funding limit for companies receiving investment under tax-advantaged venture capital schemes. The limit is £12 million for most companies and £20 million for knowledge-intensive companies.

The definition of a relevant investment will apply for all purposes in the EIS and VCT rules and will also extend to the new lifetime limit for the Social Investment Tax Relief scheme.

The changes will apply to qualifying investments made on or after 1 December 2017.

Armed forces accommodation allowance exemption

Payments made to members of the armed forces to help meet the cost of accommodation are to be exempt. The exemption will take effect after the date of Royal Assent to Finance Bill 2017-18. The conditions on the types of allowance that will qualify for exemption will be set out in secondary legislation.

Extending Seafarers’ Earnings Deduction to the Royal Fleet Auxiliary

With effect on and after the date of Royal Assent to Finance Bill 2017-18, employees of the Royal Fleet Auxiliary will be able to claim the Seafarers’ Earnings Deduction.

Termination payments: removal of Foreign Service Relief (FSR)

Employees who are UK-resident in the tax year in which their employment is terminated will no longer be eligible for Foreign Service Relief (FSR) on their termination payment. FSR currently allows qualifying individuals to be either completely exempted from income tax on their termination payment or have the taxable amount reduced. The Statutory Residence Test will determine residence status for these purposes. Seafarers are protected from this change and will remain eligible for FSR even if UK-resident in the year of termination. For non-seafarers, the measure will apply where the employment contract is terminated on or after 6 April 2018, subject to anti-forestalling.

Tackling disguised remuneration

Following recent consultation on draft legislation, Finance Bill 2017-18 will include measures to:

  • introduce the close companies’ gateway, to tackle disguised remuneration avoidance schemes used by close companies to remunerate their employees, and directors, who have a material interest. This change will have effect on and after 6 April 2017.
  • require all employees, and self-employed individuals, who have received a disguised remuneration loan to provide information to HMRC by 1 October 2019.

This information will help HMRC ensure the loan charge is complied with. This change will have effect on and after Royal Assent of Finance Bill 2017-18.

The government will also legislate in Finance Bill 2017-18 to:

  • put beyond doubt, with effect from 22 November 2017, that provisions for taxing employment income provided through third parties (ITEPA 2003, Part 7A) apply regardless of whether contributions to disguised remuneration avoidance schemes should previously have been taxed as employment income. This change will have effect on and after 22 November 2017.
  • ensure the liabilities arising from the loan charge are collected from the appropriate person where the employer is located offshore. This change will have effect on and after Royal Assent of Finance Bill 2017-18

Cars appropriate percentage – increasing the diesel supplement

The appropriate percentage used for calculating the cash equivalent of a taxable benefit when a diesel car is made available for private use to an employee will rise with effect from 6 April 2018. From that date, the diesel supplement will rise from 3% to 4% for all diesel cars that are not certified to the Real Driving Emissions 2 (RDE2) standard. The supplement will apply to those cars propelled solely by diesel (not diesel hybrids) and registered on or after 1 January 1998, which do not have a registered Nitrogen Oxide (NOx) emissions value. It will also apply to models registered on or after 1 January 1998, which have a registered NOx emissions value which exceeds the RDE2 standard.

The diesel supplement will be removed altogether for diesel cars which are certified to the RDE2 standard.

Van benefit charge and the car and van fuel benefit charges

The following changes to company car and van benefits will take effect from 6 April 2018:

  • the car fuel benefit charge multiplier will rise to £23,400;
  • the van benefit charge will be £3,350; and
  • the van fuel benefit charge rises to £633.

Lifetime allowance: ongoing Consumer Prices Index increase

The lifetime allowance for pension savings will increase in line with the Consumer Prices Index (CPI), rising to £1,030,000 for 2018-19.

Scope of qualifying care relief for self-funded Shared Lives payments

The scope of qualifying care relief is to be expanded for 2017-18 onwards, to cover payments made from individuals that self-fund care they receive through a Shared Lives scheme.

Qualifying care relief is an optional tax simplification scheme available to those providing care under Shared Lives schemes which provides a standard relief instead of deductions for their actual expenses, allowing them to keep simpler records. Shared Lives care can be paid for in many ways and one method is self-funded payments. This is where the person receiving Shared Lives care uses their own finances to meet their support costs.

This change is designed to ensure that carers who are currently excluded from qualifying care relief because the person they look after happens to self-fund their care, are able to use the simplification scheme, in the same way as carers who look after people whose care is funded by, for example a local authority.

Save-As-You-Earn Pause

The government will allow employees on maternity and parental leave to take a pause of up to twelve months from saving into their Save-As-You-Earn (SAYE) employee share scheme. Employees can currently pause saving for six months. This increase is to allow employees on maternity and parental leave to continue saving into the scheme. The change will have effect on and after 6 April 2018.

Employer-provided electricity for an electric car

The government will legislate in Finance Bill 2018-19 to exempt employer-provided electricity from being taxed as a benefit in kind from April 2018. This will apply to electricity provided in workplace charging points for electric or hybrid cars owned by employees.

Overseas scale rates for accommodation and subsistence

To provide clarity and certainty, the existing concessionary travel and subsistence overseas scale rates are to be placed on a statutory basis from 6 April 2019. Employers will only be asked to ensure that employees are undertaking qualifying travel.

Abolition of receipt checking for subsistence benchmark scale rates

The government will legislate in Finance Bill 2018-19 so employers will no longer be required to check receipts when making payments to employees for subsistence using benchmark scale rates. This administrative easement applies to standard meal allowances paid in respect of qualifying travel and the newly legislated overseas scale rates. Employers will only be asked to ensure that employees are undertaking qualifying travel.

The change will have effect from April 2019. Abolition of receipt checking does not apply to amounts agreed under bespoke scale rates or industry wide rates.

Capital gains tax: annual exempt amount

For 2018/19, the capital gains tax annual exempt amount will rise from £11,300 for individuals and personal representatives and £5,650 for most trustees of a settlement, to £11,700 and £5,850 respectively.

Capital gains tax: carried interest

Finance Bill 2017-18 will include provisions aimed at individuals involved in investment management for private equity or other investment funds who receive amounts of carried interest after 22 November 2017. The legislation will confirm that the carried interest provisions (in TCGA 1992, ss 103KA-103KH) will apply to all carried interest arising after 22 November 2017. It will remove the transitional provision which excluded sums of carried interest arising after 8 July 2015 and in connection with the disposal of a partnership asset before that date. The definitions of ‘arise’ in ITA 2007 and the provisions in TCGA 1992, s 103KG(2)-(15) will apply uniformly to amounts of carried interest arising after 22 November 2017.

Double taxation relief: Changes to targeted anti-avoidance rule

Two changes are being made to the double tax relief (DTR) targeted anti-avoidance rule (TAAR). The first change removes the requirement for HMRC to issue a counteraction notice before the TAAR applies (taxpayers will instead be required to consider whether the DTR TAAR applies as part of their self-assessment). This will have effect for returns with a filing date on or after 1 April 2018. The second change widens the scope of schemes or arrangements to which the DTR TAAR can apply (to include the tax payable by any connected persons for one of the categories of prescribed schemes or arrangements). This will have effect for payments of foreign tax made on or after 22 November 2017.

NICs Bill

The government has confirmed that it will introduce the NICs Bill in 2018. The measures it will implement are expected to take effect one year later, from April 2019. This includes the abolition of Class 2 NICs, reforms to the NICs treatment of termination payments, and changes to the NICs treatment of sporting testimonials.

 

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