The Chancellor delivered the budget on Monday 29th October. Chancellor Hammond was very firm about one particular point- that the period of austerity in the UK is “finally coming to an end”. He was also particular about the fact that the UK needs to reduce debt and borrowing.
IR35 Reform and the Private Sector
The Chancellor announced that the IR35 rules reform will be extended to the private sector. This change in policy will become effective from April 2020. What this means is that the responsibility for determining workers IR35 status will transfer from the workers themselves to the end client. If the worker is deemed inside IR35 then they shall be treated similar to that of an employee where tax and national insurance are deducted at source.
This new policy only affects large and medium-sized organisations with HMRC providing support in implementing the change. Small organisations shall be exempt from this policy.
Chancellor of the Exchequer Philip Hammond said: “Last year we changed the way these rules are enforced in the public sector, but widespread non-compliance also exists in the private sector. Following our consultation, we will now apply the same changes to private sector organisations as well”
Critics of IR35 reform believe that the full impact of the public sector changes shall not be known until 2019. While a delay to the extension of the IR35 reform is widely welcomed the implementation of the new rules shall need to be carefully monitored to ensure a blanket policy is not used in determining individual workers IR35 status.
Changes in Personal Allowance and Higher Rate Threshold
As from April 2019, the personal allowance will rise from £11,850 to £12,500 and the threshold at which you start paying at the higher rate tax will rise from £46,350 to £50,000. These changes were expected to be implemented in 2020, but have been brought forward one year.
Entrepreneur’s relief applies to the sale of a qualifying business asset. The relief is available providing the qualifying conditions over a qualifying period have been met.
The qualifying period has been increased from one year to two years for disposals on or after 06th April 2019. There has been no change to the rate of relief of 10%.
Shareholders have to be entitled to at least 5 per cent of the distributable profits and net assets of a company to be able to claim the relief as well as five per cent of the ordinary share capital.
Other key announcements
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