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Blog Budget 2018 – Is austerity finally coming to an end?

Budget 2018 – Is austerity finally coming to an end?

30 October 2018

Going into Budget 2018, between leaks and political instability, few expected Chancellor Philip Hammond would have surprises left to spring.

How wrong we were.

Under pressure to support No 10’s ’end of austerity’ message, bolstered by revised growth forecasts from the Office of Budget Responsibility, and safe in the knowledge that it could all go out of the window in the event of a no-deal Brexit, the Chancellor gave the most eventful Budget speech of recent years.

There were commitments to increased public spending on emotive issues such as schools, high streets, hospitals, village halls, potholes and public toilets.

There was a crowd-pleasing swing at global tech giants in the form of a new UK digital services tax, coupled with a two-year cut in business rates for some independent shops, cafes and pubs.

Minimum wages are to increase, stamp duty relief for first-time buyers is extended, fuel duty remains frozen, as do duties on beer, cider and spirits – all gestures intended to signal that sacrifices made by the British public have paid off.

There were also many specific technical changes in both business and personal tax, including the headline measure of an increase to the personal allowance and the higher-rate threshold from April 2019, in line with last year’s Conservative manifesto pledge, but delivered a year early.

But there are hidden thorns, too. For example, as long expected, controversial public sector IR35 reforms will be extended into the private sector, while entrepreneurs and lettings reliefs are being tightened up.

To understand how announcements made in the Budget on 29 October 2018 will affect your financial situation, read on.

At-a-glance

Business

  • Small retail businesses in England will see business rates reduced by a third.
  • The annual investment allowance is to rise five-fold from £200,000 to £1 million for two years.
  • Reforms to individuals working under IR35 are to be extended to the private sector from April 2020.

Personal

  • The personal allowance is to rise to £12,500, higher-rate threshold up to £50,000.
  • A 4.9% increase will set the national living wage at £8.21 an hour for over-25s.
  • Stamp duty abolished for all first-time buyers of shared-ownership homes worth up to £500,000.

Duties

  • Fuel duty unchanged at 57.95p per litre of petrol, diesel, biodiesel or bioethanol.
  • Duties on beer, most ciders, and spirts remain unchanged for 2019/20.
  • Cost of a bottle of wine duty to rise by 8p, in line with inflation, in February 2019.

VAT

  • The VAT-registration threshold is to stay at £85,000 until April 2022.
  • The Government will revisit options for reforming VAT once final terms of the UK’s exit from the EU have been agreed.

Other announcements

  • Qualifying conditions for entrepreneurs’ relief extended from 12 months to two years.
  • Some employers to pay half of what they currently pay towards the apprenticeship levy – 10% down to 5%.
  • Lettings relief limited to properties where the owner is in shared occupancy with the tenant.

To find out more down load our full Budget Briefing here.

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