For recent Budgets, some of the key proposals have been accurately predicted in advance. For this Budget there was speculation relating to personal and employment taxes. Firstly, it was suggested that personal allowances and the basic rate band will be frozen for 2019/2020. Secondly, there were to be measures introduced from April 2019 tackling individuals who HM Revenue and Customs believed are not genuinely self employed. The advance speculation on both of these was inaccurate with the result that a significant numbers of individuals will be pleased with the Chancellor’s proposals.
The personal allowance is currently £11,850. This will increase to £12,500 for 2019/2020. Individuals currently start paying 40% tax when their income reaches £46,350. From April 2019 the income threshold increases to £50,000. These increases are a year earlier than planned. It has been estimated that 25 million taxpayers will benefit from these increases. A basic rate taxpayer is likely to be £130 a year better off, whereas a 40% taxpayer will benefit from a tax saving of £860.
The measures targeting individuals who HM Revenue and Customs regard as not being genuinely self employed are being introduced from April 2020. These are aimed at circumstances where individuals set up their own Limited Companies to take on work. HM Revenue and Customs believe a third of people using these arrangements are actually working in the same way as employees. From April 2020 the changes will only apply for those working for medium-sized and large organisations.
Another positive announcement was the increase in the Annual Investment Allowance to £1 million for 2 years starting from 1 January 2019. Qualifying expenditure will achieve a 100% tax allowance. This will hopefully provide a significant boost to businesses looking to invest in equipment and machinery.
Overall, there were some nice surprises arising out of the Budget.