UK Budget 2018: Key Changes & Major Highlights

• The first £2,000 (£2,000) of dividends will be taxed at 0% (0%), and this amount will be considered into account for computing the income tax slab.
• Any dividends above £2,000 (£2,000) will be taxed at 7.5% (7.5%), 32.5% (32.5%) or 38.1% (38.1%) as the top band of total income.
• The personal savings allowance of an individual exempts interest income of £1,000 (£1,000) for all basic rate taxpayers (20%) and £500 (£500) for a higher rate taxpayers (40%) only, it will not be available to additional rate taxpayers (45%).
• Non-dividend savings income will be taxed at 0% (0%) up to £5,000 (£5,000). However, the 0% rate will not be available if income from other sources, including dividends, exceeds £5,000 (£5,000).

Personal Allowances

• Personal allowance to be reduced by £1 for each £2 by which income exceeds £100,000.
• Relief is limited to 10%, and extends to civil partnerships.
• Non taxpayers can transfer up to £1,250 (£1,190) of the personal allowance to a spouse or civil partner who is a basic rate taxpayer.
• Certain income tax reliefs are to be capped at the greater of £50,000 or 25% of the total income, which however excludes charitable donations.

Annual Benefits on Company Cars

The annual benefits are dependent on the level of CO2 emissions.

• Benefit of 16% for emissions of 0-50g/km
• Benefit of 19% for emissions of 51-75g/km
• Benefit of 22% for emissions of 76-94g/km
• The benefit further increases by 1% at 95g/km
• Diesel supplement of 4%, subject to the maximum charge of 37%.
• Taxable benefit for significant private use of vans is £3,350 (£3,350).
• When the fuel is provided for private use in a company car, the taxable benefit percentage is applied to £23,400 (£23,400).
• Benefit for fuel provided for a van with significant private use is £633 (£633).

Pensions

• Special rules now apply for individuals whose benefits exceed the lifetime allowance, or any previous protected amount.
• Excess over this amount to be charged at 25% plus income tax on the balances drawn, or 55% for the benefits.
• Reduction in the annual allowance by £1 for every £2 if the income exceeds £150,000, up to a limit of £210,000.

Capital Gains Tax

Inheritance Tax

• Additional nil rate band of £150,000 (£125,000) will be applied when a main residence is passed on death to the direct descendant.
• Additional nil rate band to be reduced by £1 for each £2 if the net value of the estate exceeds £2m.
• Reduced rate of 36% to be applied when 10% or more of a net estate is left to charity.

Tax Efficient Investments

• For all the first time buyers – maximum deposits of £200 per month, plus an initial deposit of up to £1,000.
• Venture Capital Trusts (VCTs): income tax relief at up to 30% on investment up to £200,000, with capital gains tax reliefs.
• Enterprise Investment Scheme (EIS): income tax relief at up to 30% Seed Enterprise
• Investment Scheme (SEIS): income tax relief of 50% on investment up to £100,000
• Social Investment Tax Relief (SITR): income tax relief of 30% on investment up to £1m
• Lifetime ISAs: Available to all the adults under the age of 40, who can contribute up to £4,000 per year.
• All the contributions which are made before the age of 50 will get 25% bonus from the Government.

Air Passenger Duty

• All the flights from airports in the Scottish Highlands and Islands, and long haul flights from airports in Northern Ireland are exempted.
• Air passenger duty will not be charged for the lowest class of travel for children below the age of 16.
• Higher rate applicable for all aircraft over 20 tones and seating capacity of less than 19 passengers.

Corporation Tax

Capital Allowances

• Starting 1^st January 2019 to 31 December 2020, the 100% annual investment allowance will be applied to the first £1m (£200,000) per annum of capital expenditure.
• The allowances will be given on a reducing balance basis.
• The tax relief for expenditure on certain intangibles is to be given by accounting write downs and not on capital allowances.
• Any acquisition of mineral deposits and rights qualify for 10% p.a. only.

National Insurance Contributions

Class 1 Employees

Class 1 Employers

• Businesses and charities can claim a reduction of up to £3,000 (£3,000) of their employers’ contributions (“NIC employment allowance”).
• No employers’ contributions are payable in respect of weekly earnings up to £962 (£892) paid to employees under 21 and apprentices under 25.
• Class 1A (employers only): 13.8% (13.8%) on the amounts of taxable benefits.
• Class 1B (employers only): 13.8% (13.8%) in respect of amounts in a PAYE settlement agreement and the income tax thereon.
• Class 2 (flat rate for self-employed): £3.00 (£2.95) per week on profits above £6,365 (£6,205).
• Class 3 (voluntary): £15.00 (£14.65) per week.
• Class 4 (self-employed): 9% (9%) of profits between £8,632 (£8,424) and £50,000 (£46,350) per annum and 2% (2%) on profits above £50,000 (£46,350).
• A 0.5% (0.5%) annual levy will be payable by employers, charged on pay bills in excess of £3m (£3m).

Patent Box and R&D Tax Credits

Value Added Taxes

Insurance Premium Tax

Annual tax on Enveloped Dwellings

• An annual tax on enveloped dwellings is to be paid by a company, which owns a residential property with a value more than £500,000 (£500,000) on 1 April 2017 and after.
• Tax to be charged in bands, from a minimum of £3,650 (£3,600) to a maximum of £232,350 (£226,950)

Stamp duties and Property transaction taxes

• The tax figures are to be calculated inclusive of any VAT.
• For leases, the rate will be based on the discounted rental values.
• Residential property over worth £500,000 purchased by a company will fetch a rate of 15%.
• A 3% surcharge will be applied to all second and additional residential properties on transactions of £40,000 or more.
• All first time buyers (from 22 November 2017), including qualifying shared ownership paying £300,000 or less for a residential property have to pay no stamp duty land tax.
• A 5% stamp duty land tax will be applied for purchases between £300,000 and £500,000.

Scotland: Land and buildings transaction tax

• All lands and buildings transaction tax will be applied in Scotland instead of stamp duty land tax, which will be applied at different rates and bands.

Wales: Land transaction tax

• Land transaction tax will be applied in Wales instead of stamp duty land tax, which will be applied at different rates and bands for purchases from and after 1^st April 2018.

Other Stamp Duties

• Stamp duties and other stamp duty reserve taxes will not be charged on any recognized growth markets, which includes AIM and ISDX.