Budget 2018 – one of the most expected events not just in the UK but the whole world ahead of Brexit. As this was the last budget drafted before UK leaving the EU, it garnered immense attention worldwide.
Chancellor Philip Hammond stated that this budget was aimed at the hard working families and the people who are the backbone of the British economy. He also said that the times of austerity are coming to an end and a new beginning in the chapters of British economy is to be born. People who didn’t get the full idea of the Budget 2018 can find an accountant nearby to understand intricate details of it.
Let us see the important highlights of the Budget 2018 in this article. It would be better for freelancers and self – employed individuals doing a self-assessment to know these details.
IR 35 tax reform –This is one of the most significant element of Budget 2018 as it directly concerns the freelancers, IT contractors and consultants in UK. This tax reform states that the self-employed people who are hired by employers through a third party companies would pay national insurance rates as the employees rather than at the self-employed rate.
IR 35 was extended to private sector companies to combat tax avoidance through means of ‘disguised employment’. IR 35 was extended to the private sector. This move has triggered backlashes from self-employment community and this tax returns services near you reform will not be implemented until April 2020.
Self-employed people with confusions regarding IR 35 tax reforms can find an accountant online and get a clarity before self-assessment of taxes. To find professional help online, you can do a Google search of ‘accounting firms near me’ to land with a list of accounting professionals
Personal tax allowance – Personal tax allowance rate at which people will start paying taxes has been hiked to £12,500 from a previous figure of £11,850 from this April. The basic rate limit has been increased to £37,500. Also the higher rate Income Tax threshold has been hiked to £50,000.
Small business tax rates – The budget by Philip Hammond has reduced the tax rates for the small businesses. Small businesses with value of up to £51,000 will have their business rates bill slashed by at least 33% percent than before saving these businesses at least £8,000
Apprenticeship fees –
National Living Wage – The National Living Wage has been hiked to £8.21 per hour from £7.83 per hour
Relief for entrepreneurs – The qualifying period of tax relief for entrepreneurs has been extended from 12 months to 2 years. Also the Capital Gains taxes on the sale of their businesses has been fixed at 10% rather than an earlier rate of 28%.
Annual Investment Allowance (AIA) – It was announced that the small businesses will be able to claim £1 million of expenditure per annum for the next two years starting from 1st of January 2019. This will help the small companies to invest in plant and machinery with 100% tax relief.
Incentives for greater capital investment were also announced.
VAT imposition on small businesses – This budget was expected to impose VAT on businesses earning more than £43,000 instead of the £85,000 turnover earlier. But, the VAT imposition for a figure of £43,000 was dropped and remains to stay at £85,000 until 2022. After which a new method of calculation of VAT imposition will be introduced.
Fuel duty freeze – Fuel duty to be frozen for the 9th year in a row.
Digital Services Tax – It was mentioned in the budget that the large social media platforms, search engines and online marketplaces doing business in the country will have to pay a Digital Services Taxes of 2% starting from April 2020. Companies with sales of more than £500 million globally fall under this category.
Corporation Tax – Corporation Tax will be fixed at 19% for the financial year 2019 starting from April 2019 and 17% for the financial year 2020 starting April 2020.
Research and Development tax – Small businesses that conduct R&D through partners can claim reliefs from the R&D tax credits system. The relief amount is to be capped at three times its PAYE and NICs liability for the financial year.
The extension of IR 35 to private sector firms did not draw a good response from the freelancers, contractors, and self-employed individuals. However, it is considered a good move by the lawmakers who believe that it can prevent tax leaks.
Contrary to this fact, a major amount of people have expressed that this budget was the best small business budget that has been delivered. The business rates cut for small businesses and entrepreneurs are welcomed by the taxpaying community.
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