How does the budget affect employers?
A few key points to note from the budget:
1. From April 2017 – the personal tax allowance rises to £11,500
2. From 2018 – NI contributions will be due on any termination payments (eg redundancy pay or payments due through settlement agreements) over £30,000
3. From 2018 – the threshold for the 40% tax rate increases to £45,000
4. There will be a “clamp down” (how or what we don’t know any details on yet) on the rules regarding the use of umbrella companies for contractors.
5. Some mention is made regarding possible changes to salary sacrifice schemes but it seems this is still up for review – good news for employers and employees alike for the time being as they can continue to benefit from the various schemes currently in place.
6. A lifetime limit of £100,000 is put into place on the amount that is exempt from Capital Gains Tax from disposal of shares acquired in an Employee Shareholder Agreement if it is entered into after 16 March 2016. Not such good news for any new agreements entered into but welcome news for those already in such agreements that no cap has been put in place for existing shares.
Additionally the government has announced increases to the National Minimum Wage rates for October 2016 that take the rate for a 21-24 year old to £6.95 per hour.
These rates, which usually last for a full year, will be reviewed again in April 2017 as there will be moves to harmonise the minimum wage rates with the new National Living Wage that comes into effect for employees over 25 on 1 April 2016.
There is a significant push from the TUC and from other bodies to apply the National Living Wage to anyone aged 21 and over, and at the same time to consider increasing the Apprentice rate of the NMW if we wish to encourage more young people to take up apprenticeships. These are additional potential costs for an employer to bear though and so may not be popular amongst business owners.