What's new in the new tax year?
By Philip McNeill, Head of Taxation (Tax, Practice and Owner Managed Business Taxes)
6 April 2018
Philip McNeill looks at what is on the horizon and how to keep aware of tax changes ushered in during the new tax year.
The Chancellor’s Spring Statement had no particular tax surprises, but that does not mean that the 2018-19 tax year is without change.
The slow fuse
With the new Budget cycle announced in the autumn, it could be late summer 2019 before the new measures included in the 2017 Autumn Statement finally receive Royal Assent and become law.
Similarly, 2018-19 is going to be affected by many measures announced long ago.
While this timescale facilitates greater consultation, it can be hard to keep tabs on what is actually law now.
Consultation galore
While the Spring Statement didn’t radically impact the immediate tax outlook, the number of consultations is staggering.
The new handy consultation tracker mentions 31 consultations progressing at different stages through the system.
Some of these are more of a minority interest – like the taxation of self-funded work-related training, which is reminiscent of exam questions.
While others, like VAT collected at point of sale, and an overhaul of the VAT registration threshold could change the UK business landscape, particularly post-Brexit.
Complex interaction
Scottish taxpayers face a new landscape for 2018-19.
It’s not just the five tax bands, it’s the complex interaction with UK limits for different reliefs, gains and income sources.
How do you work out tax relief on pensions when the tax deducted doesn’t match the taxpayer’s marginal tax rate? Will we see a surge in Gift Aid claims from Scottish taxpayers and what about Marriage Allowance?
Other changes
Looking more widely, unincorporated landlords face higher interest relief restrictions as the disallowance reaches 50%. With the option to opt out of cash accounting for those under £150,000 turnover, choices abound. Where lease premiums are significant, opt-out may be advantageous.
Cash basis also brings in loan to value interest restrictions, which when added to the mindboggling adjustments based on ‘relievable amount’ makes the simple concept ‘relief is restricted to basic rate’ laughable.
For the aficionados, step five involves taking the adjusted net income or ATI (sic), dividing this by ‘S’ and multiplying it by ‘L’ to decide if the basic rate relief should be further restricted.
Company matters
For companies there is a further restriction to the Dividends Allowance, falling to £2,000 from £5,000 and the consequential impact of remuneration strategy for owner managed businesses.
The loss of disincorporation relief from April 2018 may have little impact, given the £100,000 market value asset limit. Of more substance is the loss of indexation for company gains from I January 2018 which could particularly impact property companies, and makes the decision about incorporation more complex.
Keeping up to date
Fortunately, help is at hand with ICAS’ new round of Spring Tax Updates. These free sessions will aim to condense all the need to know changes in an hour’s session, with an opportunity to ask questions.
Book your place on the free events now