Budget 2018 – Corporate and Business Tax

Corporation tax rates

As announced previously, corporation tax will fall to 19% from 1 April 2017 and then to 17% from 1 April 2020.

National Insurance (NI) for the self employed

The Chancellor confirmed in the Spring Budget 2017 that Class 2 National Insurance (paid at a weekly flat rate by the self employed) would be abolished from 6 April 2018, but it was then announced in November 2017 that the abolition would take place in 6 April 2019.  In the 2018 Budget, the Chancellor has said that the government will not now abolish Class 2 NICs during this parliament.

Class 2 NI will be £3.00 per week for 2019-20.

Dividend tax

The nil rate dividend allowance reduced from £5,000 to £2,000 from April 2018.  It will remain at £2,000 for 2019-20.

Making Tax Digital

Making Tax Digital (MTD) has been going through consultations over the past few years.   There were no new announcements in the Budget.

A reminder that the plan is that, under the scheme, limited companies, unincorporated business and landlords will have to use online software to report their income and expenses to HMRC at least quarterly.

From April 2019, all VAT registered businesses with a turnover in excess of the VAT threshold (£85,000) will be required to file their VAT returns through compliant software under making tax digital.  They will no longer be able to manually type figures into the HMRC website.  There will be bridging software available to allow businesses keeping their records in Excel to file under MTD.

Capital Allowances

Businesses can claim an annual investment allowance” (AIA) when they buy plant and machinery for use in the business.  The current limit is £200,000, which means that businesses can claim an immediate tax write down of the first £200,000 of expenditure every year.  The AIA will be increased to £1,000,000 for two years from 1 January 2019.

For asset purchases in excess of the AIA, expenditure goes into one of two pools – the main rate or the special rate pool, with current writing down allowances of 18% and 8% respectively, on a reducing balance basis.  The rate for the special rate pool will be reduced to 6% from April 2019.

From Budget Day, 29 October 2018, a new capital allowance (the Structures and Buildings Allowance) will be available, at a rate of 2%, for new qualifying non-residential structures and buildings on a straight-line basis.

Off Payroll Working

The government will legislate in Finance Bill 2019-20 to reform the off-payroll rules in the private sector. Responsibility for operating the existing off-payroll working rules, and deducting any tax and NICs due, will move from individuals to the organisation, agency or other third party paying an individual’s personal service company. Small organisations will be exempt and this change will bring private sector organisations in line with public sector bodies and agencies. The change will come into effect from 6 April 2020.

More details can be found here

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