The latest Budget from Chancellor Philip Hammond was delivered on Monday, an unusual day for a Budget announcement, and it delivered some potential significant consequences for people in Scotland. Here, we look at the main tax changes for individuals and trusts.
Personal Allowance - This allowance dictates the level of income that can be earned before an income tax deduction is made. The amount will be increased by £650 to £12,500 with effect from 6th April 2019 and is set by the UK Government for the whole of the UK.
Higher Rate Band Threshold - This will be increased to £50,000 from 6th April 2019 in England, Wales and Northern Ireland only. While Scotland's finance secretary Derek Mackay has already said he does not intend to imitate Philip Hammond and cut taxes for middle earners but will instead “choose a fairer, a more progressive path,” taxpayers will have to wait until he sets Scotland's own basic and higher rate thresholds, which will be announced in The Scottish Budget on 12 December 2018.
Capital Gains Tax
Principal Private Residence (PPR) Relief: reduction of final period exemption - This relief applies to sales of residential property in which the owner has occupied the property as his main home at some point. Currently a final period exemption of 18 months is allowed to be treated as a period of occupation for the purposes of this relief regardless of whether it is actually occupied. This period will reduce to nine months for disposals made after 6th April 2020. (The 36-months available to disabled persons or those in a care home will remain).
Lettings Relief: restriction on availability - This is an extension of the above PPR relief providing relief for a period where the main home is let due to the absence of the owners for a period of time. This will now only apply where the owner of the property is in 'shared occupancy' with the tenant.
Entrepreneurs Relief: increase in qualifying period - This relief is available to individuals who dispose of all or part of their business, or individuals who dispose of shares in their personal company assuming all condition are met during the 12 months preceding the sale. From 6/4/2019 this 12-month period has been extended to a minimum of two years.
Stamp Duty Land Tax: 1st Time Buyers – Shared Ownership - SDLT will be abolished for all first time buyers of shared ownership properties (a purchase of between 25% and 75% of a property and then rents it out) worth up to £500,000. This does not apply to Scottish properties.
Gift Aid for Charities and CASC: increase in GASDS Limit - The Gift Aid Small Donations Scheme (GASDS) limit has been increased to allow donations made in cash or by contactless payments of up to £30, previously £20, with effect from 6th April 2019. This does not affect the tax relief, merely the qualification to claim under these provisions.
Charity Trading Limits - The upper limit for trading that charities can carry out without incurring a tax liability are increased from £5,000 to £8,000 where turnover is under £20,000, and from £50,000 to £80,000 where turnover exceeds £200,000 with effect from 6th April 2019.
As previously announced at the 2017 Autumn Budget, the government has reiterated that it will publish a consultation on the taxation of trusts, with the aim of making the taxation of trusts simpler, fairer and more transparent. No time scale given.