UK Autumn Budget 2017 – personal tax changes

Nov 27, 2017

Last week’s Budget included an announcement towards achieving the government’s election manifesto promise of increasing the higher rate tax threshold to £50,000 by the end of the current parliament.  The government also proposes to increase the personal allowance to £12,500 in that timescale.  A prediction we made, back in March this year, after the Chancellor’s first Budget. And there was no backtracking in this Budget on the decision not to proceed with the increases to class 4 NIC for the self-employed which proved so controversial in the aftermath of the Spring Budget.

The higher rate threshold

The personal allowance for 2018/19 will be £11,850, an increase of £350 from the £11,500 2017/18 level. The higher rate threshold for 2018/19 will be £46,350. With a personal allowance of £11,850 this means that the higher rate band will be increased to £34,500 in 2018/19 (from £33,500). However, Scottish taxpayers will already know that the Scottish budget is the one to watch for them as income tax is devolved to the Scottish parliament.

Currently, Scots pay 40 percent tax on earnings in excess of £43,000 (up to £150,000) compared to the 2017/18 higher rate threshold of £45,000 enjoyed in the rest of the UK. After the UK Autumn Budget, that differential may grow – unless the Scottish government chooses to close the gap as part of its own budget announcement planned for 14 December

The marriage allowance

The marriage allowance allows taxpayers to transfer up to 10 percent of their unused personal allowance to their partner, if claimed. The government will now allow claims in cases where a partner has died before the claim was made. These claims will be able to be backdated by up to four years.

Off-payroll working in the private sector

The government recently reformed the off-payroll working rules (known as IR35) for engagements in the public sector in April 2017.

A possible next step being considered is to extend the reforms to the private sector, targeted at individuals who effectively work as employees being taxed as employees even if they choose to structure their work through a company.

As a result, the government will consult on how to tackle non-compliance in the private sector, drawing on the experience of the public sector reforms.

Employment status discussion paper

A discussion paper will be published as part of the response to the Taylor review of employment practices in the modern economy exploring the case and options for longer-term reform to make the employment status tests for both employment rights and tax clearer.

Taxation of trusts

The government will publish a consultation in 2018 on how to make the taxation of trusts “simpler, fairer, and more transparent”. As yet, it’s not clear if this review will solely focus on income tax or if a wide ranging review will be conducted to include all taxes to which a trust structure is exposed to.

Rent-a-room relief

The government will publish a call for evidence to establish how rent-a-room relief is used to ensure it is “better targeted at longer-term lettings”.

Mileage rates for landlords

The option to use mileage rates is to be extended to individuals operating property businesses, on a voluntary basis, aimed at reducing the administrative burden for these businesses.

Benefits in kind: electric vehicles

From April 2018, there will be no benefit in kind charge on electricity that employers provide to charge employees’ electric vehicles.

Taxation of employee business expenses

Following the call for evidence published in March 2017, the government will make several changes to the taxation of employee expenses:

  • Self-funded training – the government will consult in 2018 on extending the scope of tax relief currently available to employees and the self-employed for work-related training costs.
  • Subsistence benchmark scale rates – from April 2019, employers will no longer be required to check receipts when reimbursing employees for subsistence using benchmark scale rates. The existing concessionary accommodation and subsistence overseas scale rates will be placed on a statutory basis.
  • Guidance and claims process for employee expenses – HMRC will work with external stakeholders to “improve the guidance on employee expenses”, particularly on travel and subsistence and the process for claiming tax relief on non-reimbursed employment expenses.

Qualifying Care Relief (QCR) and self-funded Shared Lives payments

QCR is a tax simplification covering expenses incurred when providing care that means carers only need to keep simple records. The government will extend the scope of QCR.