Looking for the Budget highlights 2018 and its effect on self-employed and small businesses?  To get the better understandings of chancellor’s announcement and its possible consequences on the UK’s freelancers, contractors, and small business owners, take a look at this summarized blog.

The Chancellor kept saying that this budget would will be dedicated to the most hardworking individuals, families and the government’s goal was to raise wages, employment and growth.

Budget 2018 Summary  


IR35 is a tax legislation planned to fight against tax avoidance by those employees who are selling their services to the clients through a third party more like a limited company. But, in reality, they are fulfilling all the services in the same ways as an employee. In case, if you are categorized as an employee then you pay a bit more employment taxes.

In order to bring some fixes into this activity, HMRC brought changes to IR35 in the public sector in April 2017. The changes moved responsibilities in making IR35 status taxations from the limited company (i.e. the worker) to the agency and the final client.

However, after some issues, the government finally come up with an idea to proceed with caution.

The Private Sector IR35 Planned Changes:      

  • Businesses will be accountable for evaluating an individual’s employment status.
  • The reform won’t be allowed to apply to the minimum 1.5 million businesses, also won’t apply to large and medium business which takes too long to adjust with the changes being announced in April 2020.
  • Medium and Large businesses will need to apply IR35 rules to the individuals working through their own company. This will be implemented from 6th April 2020.
  • Where it’s determined that the rules do apply, the business, agency or third party that pays the individual’s company will need to deduct income tax and employee NICs and pay employer NICs
  • HMRC won’t perform targeted campaigns into preceding years when people start giving employment taxes supporting IR35 for the first time following the reform, and businesses’ decisions regarding whether their workers fall within the IR35 rules
  • HMRC will continue working with stakeholders to recognize the enhancements for checking employment status for tax and other formalities to ensure that the reform is meeting the needs of the private sector. In Addition, improvements will be tested with stakeholder and other legal experts before execution.

Higher Tax Rate and Personal Allowance Threshold Increase

It is expected that the rate at which individuals will start paying income tax will increase from £11,850 to £12,500 in April 2019. Since, changes are anticipated therefore, announced a year earlier.

Likewise, the higher rate Income Tax threshold will face an upsurge from £46,350 to £50,000 in April 2019.

The Dividend Allowance

For the individuals looking for the news about tax-free dividend allowance, the update is that the tax-free dividend allowance will remain unchanged at £2,000.

National Insurance              

Up till now, there are no anticipated changes for National Insurance or the related rates. However, it’s been expected that this could be re-examined in the future budgets.

Pensions and savings 2019/20:

Lifetime allowance for pensions:
The lifetime allowance for pension savings increases in line with CPI for 2019/20, rising to £1,055,000 (2018/19: £1,030,000).

Savings Starting Rate

Remain unchanged, the band of savings income that is subject to the 0% starting rate will be kept at its current level of £5,000 for 2019/20

Individual Savings Account ISA

The subscription limit for the adult ISA will be unaffected at £20,000. The junior ISAs 2019/20 will sooner be update in line with CPI to £4,368 (2018/19: £4,260).

Child trust funds:

The government will issue a session in 2019 related to draft regulations for the purpose of maturing child trust fund accounts. Child trust funds for 2019/20, annual subscription will be updated with CPI to £4,368 (2018/19: £4,260).

The National Living Wage

A slight increase will be appear In the National Living Wage i.e by 4.9% t

Business Taxes and Relief

Corporation Tax

Financial year 2019 (start 1st April 2019) = 19% Financial year 2020 (start 1st April 2020) = 17%

Entrepreneurs’ Relief

Entrepreneurs Relief (ER) will be prolonged from 12 to 24 months from 6th April 2019. (Qualifying conditions)

He also claimed that in addition to current rules on share capital and voting rights, shareholders will be entitled to a minimum 5% of the distributable profits and claimed net assets of the company

R&D Relief

No changes were announced for R&D relief.

Annual Investment Allowance (AIA)

He announced Greater capital investment incentives.

Companies can claim £1 million as AIA for spending occurred from January 1st 2019 to 31st Dec 2020.

Business rates

Those companies which are comprising business rates of value

Business rates for companies with a value of £51,000 or less will be reduced by a third over two years.

Other duties and allowances

Fuel Duty

Fuel duty remain unchanged for the ninth sequential years.

Stamp Duty Land Tax: relief for first-time buyers

A relief has been announced to an estimated value of £500,000 from 22 Nov 2017. Those who are eligible but have not claimed previously, will be able to adjust their return to claim a refund.

Capital gains tax: letting relief

The government will reform lettings From April 2020, it only applies in conditions where the owner of the property is in shared tenancy with the tenant.

Making Tax Digital (MTD)

No changes were proclaimed to the VAT threshold of £85,000, the introduction of MTD for VAT registered businesses remains a reality.

VAT and Brexit

Brexit is the only thing that’s been mentioned just for once in the whole year.

Previous HMRC guidance shown that a ‘no-deal’ Brexit’, UK VAT-registered businesses importing goods into the UK will be eligible to add import VAT on their VAT return.

In you are a freelancer, small business or startup, don’t hesitate to contact Certax London. We can help you with tax and accounting services with free consultation.  Contact Certax London today for more information.

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