On Monday 29th October 2018, Chancellor Phillip Hammond delivered the UK’s final budget prior to leaving the EU. Although lots of measures were announced in the over-1-hour speech, affecting both individuals and businesses, this summary is targeted at how the budget will affect you as an individual.
Income Tax
Currently, 31 million people in the UK pay income tax – that is, everyone earning more than the personal allowance of £11,850 per year. In April 2019, this personal allowance of tax-free income will be raised to £12,500, and the point at which you pay the higher rate of tax will be raised from £46,350 to £50,000.
Although National Insurance changes will increase the cost for people in the higher rate tax bracket, the income tax changes will still result in a net gain year-on-year.
Universal Credit
Other than explicitly stating that Universal Credit is here to stay, Hammond has not yet released details about the transition measures that will be introduced over the next 5 years.
However, he did state that once the rollout of Universal Credit was complete, that work allowances would be increased. This would mean that you are able to earn more from work without losing your benefit payments.
In the meantime, Jobseeker’s Allowance, Employment and Support Allowance, Child Benefit, and some types of Housing Benefit will remain the same until the end of their 4-year-freeze (April 2020).
National Living Wage
The National Living Wage for over-25s will rise from £7.83 an hour to £8.21 an hour in April 2019. This increase is at a faster rate than the increase in cost of living which should benefit anyone currently on the £7.83 an hour rate.
Changes for the Self-Employed
It has been a common occurrence that people claim self-employed status by setting up a “Personal Service Company (PSC)” but actually work side-by-side, and in the same manner as regular employees.
These “synthetic” self-employed workers do this in order to pay themselves a lower wage from the PSC, as well as a dividend to make up the difference, resulting in the same gross income, but lower payments of National Insurance and Income Tax.
HMRC already introduced tougher regulation of this in the public sector in 2017, but now plans to do the same in the private sector from April 2020 for those working for large and medium sized businesses.
To view a summary of the full budget, follow the link below:
https://www.bbc.co.uk/news/uk-politics-46017125
For help with any of your accounting or business advisory needs, please contact Stack & Jones Accountants on 01869 277973 for a free 1-hour consultation.
Sources: pwc, BBC News, which.co.uk, businessadvice.co.uk
Image source: Unsplash.com
