On Monday 29th October the UK Chancellor (the Finance Minister) delivered the UK Budget for the next Financial Year, which starts on 6th April 2019.
There are many things in the Budget, which has increased Government spending and reduced taxes because the economy is doing better than previously expected.
The main areas which impact foreign owned businesses are :
This is the amount of investment in capital equipment (machinery, furniture, IT equipment) which can be taken direct from the company taxes in full in any year. This rises from GBP 200,000 to GBP 1 million for the two tax years 2019 /20 and 2020/ 21. As the company tax year ends on 31st March each year, expenditure between 1st April 2019 and 31st March 2021, will qualify for this Investment Allowance.
Company tax rates
This remains at 19% for 2019 / 20, and is still expected to fall to 17% in April 2020.
The tax free earnings allowance, the amount a person can earn before paying any Income Tax, increases from GBP 11,500 to GBP 12,500 each year. The effect of this is that a person working 30 hours each week for the minimum wage will now pay no Income tax. Between GBP 12,501 and the start of the Higher Rate a person pays 20%.
The starting point for the next (Higher) rate band for Income tax increases from GBP 45,000 to GBP 50,000, and so for earnings between GBP 50.001 and GBP 150,000 the person pays 40%, From GBP 150,001 and above, earnings are taxed at 45%.
The Chancellor has said that, in the event of a “Bad Brexit” there will have to be another Budget, which is widely taken to indicate further reductions in taxes to stimulate the economy.
However, what is perhaps more interesting is what was not said. In the Budget calculations there was no mention of the so called “Brexit dividend”, the much discussed GBP 350 million per week which the UK was supposed to be saving by not being part of the EU. Neither, within the EU, has there been any serious discussion as to what steps the EU would have to take to balance its budget if the UK stopped paying in.
These are simply observations and we and do not draw any conclusions, leaving it to you to decide what, if anything, might be meant by this. As always, every situation is different, so please consult your usual tax adviser or EBS before making any decisions on the basis of this article.