Budget 2018 overview: Austerity is coming to an end, but discipline will remain
With the Government already having pledged to end austerity, the Chancellor had to loosen the purse strings in his Autumn Budget. Fortunately, better than expected growth and borrowing forecasts gave scope for a few extra voter-pleasing announcements.
Philip Hammond appeared to enjoy delivering his third Budget speech (could it be his last?). A no-deal Brexit might spoil his plans, but assuming the best outcome, the Chancellor was upbeat about the UK’s economic prospects, while stressing the need for continued discipline.
The Chancellor described this as a Budget for “the strivers, the grafters and the carers”. Given pre-speech announcements, there was no revelation in the additional funding for the NHS. However despite this, there were still some surprises.
The big news for personal taxpayers is that the Government will keep its promise of raising the personal allowance to £12,500 and the higher rate threshold to £50,000 – but a year early, from April 2019. More good news came in the freezing of beer, spirits and fuel duties. First-time buyers of shared properties also received stamp duty land tax relief.
From a business perspective, the Chancellor announced the introduction of a new Digital Services Tax aimed at online platforms generating at least £500 million a year in global revenues. The tax – expected to raise over £400 million a year – will come into effect from April 2020 unless an appropriate international solution can be agreed.
Other new measures continue the sustained attack on tax avoidance and evasion, including an end to the practice of purchasing services through overseas branches to avoid UK VAT. Changes to the enforcement of the ‘IR35’ rules for personal service companies – already made in the public sector – will be applied to large and medium-sized private sector organisations – but not until April 2020.
Mr Hammond also announced a package of measures designed to stimulate business investment, including an increase in the Annual Investment Allowance from £200,000 to £1 million for two years, targeted relief for the cost of acquiring IP-rich businesses, and the introduction of permanent tax relief for new, non-residential structures and buildings. He left CGT Entrepreneurs’ Relief intact, but doubled the minimum qualifying ownership period from one to two years.
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