21 November 2016
With just a couple of days left before Phillip Hammond’s first Autumn Statement, businesses across Wales are waiting with bated breath to see what is in store for a post-Brexit and post-Trump Britain. In this blog, I highlight some announcements that Welsh businesses may be waiting to here.
Stamp Duty back to normal
The idea of raising stamp duty by 3% on additional properties as a means of solving the housing crisis was instantly widely regarded to be totally short sighted. Among others, the Residential Landlord’s Association and the Taxpayer’s Alliance have called for the Government to rethink the rise. The simple fact is that the UK housing market needs reputable landlords, and the inevitable result is that the Stamp Duty rise is passed directly to renters. That’s money that could be put towards a first-time buyer’s deposit. Stamp duty isn’t and never was the answer to the UK’s housing problems, facilitating the building of new homes is.
Mortgage interest tax relief rate returned for higher rate taxpayers
From 2017 higher rate tax relief is set to be restricted for buy-to-let landlords on the costs of finance, such as mortgages. When the changes come in, tax relief will be a flat rate of 20%, which stands as a fifty percent cut for higher rate taxpayers. The changes are set to be phased in over three years and, by 2020, all financing costs (not just mortgage interest) incurred by landlords will be given as a basic rate reduction. Basic rate taxpayers will see no real change, but rather than levelling the playing field, the changes disproportionally effect top rate taxpayers, who could potentially see the return on their investments drop to little more that of a standard savings account.
Get to grips with Brexit. Let’s start making some deals
While the two-year window to renegotiate a new legal framework for Britain’s trade relationship with the EU doesn’t begin until Article 50 is triggered, we need to start making new deals now. Donald Trump’s advisers have asserted that Britain would not be last in line for a trade deal with the United States, time will tell if this plays out. Other crucial international deals which must be looked at quickly include Canada, Australia, India, New Zealand and China. The recent 11th hour issues faced in the trade negotiations between the EU and Canada show just how difficult such deals can be, and why Britain can’t hesitate in securing new international agreements.
Reintroduce personal allowance for earners over £100k
Currently, personal allowance is reduced by £1 for every £2 above of the adjusted net income above £100,000. So, for those earning £122,000 or higher, the personal allowance is zero. The consequence of this is that those who find their income crossing over the £100,000 threshold are hit with massive penalties. The fact is that the removal of the personal allowance leads to massive amounts of tax planning to ensure higher earners stay within the limits, this is totally counterproductive.
Introduce research & development (R&D) for sole traders and partnership
The announcement made by the Prime Minister, Theresa May, to commit a to a £2 billion annual fund for scientific research and development, and a review of tax incentives for innovative corporations is welcome news. Currently, SME businesses have the potential to claim back 33.35p for every £1 spent on R&D projects. Loss making companies are also able to surrender their R&D losses for a cash repayment. These benefits can be crucial for young or start-up companies where the cash repayment can be used to support cashflow. However, sole traders and partnerships are not eligible for such benefits even if they are engaged in eligible research activities, this should be redressed.