The Budget – HR impact
- Date: Tuesday 5th April 2016
In his recent budget speech, Chancellor George Osborne revealed some big plans which could have quite an impact on HR financials over the coming months:
Planned cuts were announced, reducing corporation tax to 20% from 28%, with further reductions in to come in 2017 and 2020. Small business rate relief will also be extended, meaning that more than 600,000 small businesses will pay no business rates at all.
Pensions and savings
ISA limits are set to increase to £20,000 per year and the government announced the launch of a new flexible Lifetime ISA for those under 40 years old.
The new ISA allows people to save up to £4,000 each year and receive an additional 25 per cent bonus from the government. Savings, including the government bonus, can be accessed both to buy a first home and in retirement.
Public sector pensions
An increase in pension contributions from public sector employers is to be expected, which could cost the public sector an extra £2bn by the end of 2020.
Encouraging the self-employed
Class 2 national insurance contributions – which require the self-employed to pay £2.80 a week on profits of £5,965 or more a year – are set to be abolished from April 2018.
Until a full reform in 2018, the requirement for self-employed workers to pay class 4 national insurance remains unchanged.
Income tax thresholds
The March 2016 budget confirmed that the government will be taking another significant step by increasing the personal allowance from £11,000 in 2016-17 to £11,500 in 2017-18.
This continues to ensure that no one working 30 hours per week on the national minimum wage will pay income tax in 2017-18.
Additionally, the higher-rate tax threshold – where the rate rises from 20 per cent to 40 per cent – will increase from £42,385 to £45,000 in April 2017.
Personal service company clampdown
The HMRC reports that 90 per cent of personal service companies are not paying the correct amount of tax and national insurance contributions and Osborne announced a £12bn tax evasion and avoidance clampdown.
From 2018, termination payments of more than £30,000 will be subject to employer national insurance contributions.
Salary sacrifice schemes
The government is concerned about the growth of salary sacrifice schemes, and is considering limiting the range of benefits that attract income tax and national insurance advantages when they are provided as part of such schemes.
The budget confirms that childcare vouchers will be closed to new entrants from April 2018.
From April 2017, employers will receive a 10 per cent top-up on their monthly levy contributions in England, available to spend on apprenticeship training through their digital account.
Further details on the operating model are due in April and draft funding rates will be published in June.