The Annual Investment Allowance (AIA) is to be increased from £200,000 to £1million from 1 January 2019. The announcement should provide a welcome boost to business investment during the Brexit transition period and will return to the £200,000 limit in January 2021. Businesses can claim 100% capital expenditure incurred on most items of plant and machinery of up to £1million a year.
In addition, a new allowance was announced – the ‘structures and buildings allowance’ (SBA) which will give tax relief on eligible construction costs on non-residential buildings and structures from 29 October 2018. The relief will be given at 2% a year on a straight-line basis over a 50 year period.
Under the current system, buildings and structures do not qualify for capital allowances, but allowances are available for plant and machinery inside a building. Structures and buildings qualifying for the new allowance will include offices, retail and wholesale premises, walls, bridges, tunnels, factories and warehouses. Capital expenditure on renovations or conversions of existing commercial structures or buildings will also qualify. The new allowance will not apply to dwellings or to expenditure on the land itself.
Other announcements in the budget affecting business include:
- The personal Income Tax allowance for 2019-20 will be increased to £12,500
- Basic rate band increased to £37,500
- Higher rate band £37,501 to £150,000
- There is no change to the rate of Corporation Tax, which stays at 19% for the financial year beginning 1 April 2019.
- Two significant changes to Entrepreneurs’ Relief were announced: Claimants must have a 5% interest in the distributable profits and the net assets of the company to qualify, and separately that the minimum period, during which certain conditions must be met to qualify for the relief, is being increased from one to two years.
- From 1 April 2020, the amount of payable tax credit that can be claimed under the R&D SME tax relief scheme will be limited to three times the company’s total PAYE and NIC payments for the period. Any loss that cannot be surrendered can be carried forward and used against future profits.
- The changes recently made to IR35 arrangements in the public sector are to be rolled out to the private sector. The widening of the off-payroll working rules will take effect from April 2020 for medium and large organisations. Small firms will be exempt. These changes could see thousands of contractors and consultants paying more in NI contributions and income tax.
- Smaller retailers in England, occupying shop premises with rateable values under £51,000, should benefit from a cut of 1/3 in their business rates bills for 2 years from April 2019.
- The present VAT registration limit (£85,000) and deregistration limit (£83,000) will continue to apply for a further two years; until 31 March 2022.
- The special rate of writing down allowance is being reduced from 8% to 6% from April 2019.
- From 6 April 2020, the government will change the insolvency rules so that taxes collected on behalf of employees and customers, primarily employees PAYE and NIC and customers VAT, will be treated as a preferential creditor on winding up rather than distributed to other creditors.
