The budget last week includes topical points for employers, including the introduction of a new living wage, increased Sunday trading powers and changes to various tax treatments.
National Living Wage
A premium is being introduced for workers aged 25 and over, that is in addition to the National Minimum Wage. The first premium, set at 50p, will be introduced in April 2016, resulting in the minimum wage for a worker aged 25 or over being £7.20.
The Low Pay Commission will be reviewing the National Minimum Wage and the National Living Wage levels each year, and will report on the annual increases it believes should apply from October and April respectively. The plan is to have the National Living Wage reach £9.00 by 2020.
The Employment Allowance (which reduces the National Insurance contributions paid by eligible businesses, charities and community amateur sports clubs) will assist employers with these pay increases and will increase from £2,000 to £3,000. From 2016, a business could employ up to four full time employees at the National Living Wage, without having to pay any National Insurance at all.
A consultation will take place, looking at delegating authority regarding Sunday trading to city mayors and local councils. Local areas would have more say in increasing Sunday trading hours to suit the needs of the area.
From September 2017, free childcare for working families with 3 and 4 year olds will double from the current 15 hours to 30 hours.
Another consultation which will take place relates to the tax treatment of termination payments, with a view to simplifying the process.
Salary sacrifice schemes
The government has committed to actively monitoring salary sacrifice schemes these, as their popularity means the cost to the taxpayer is increasing.
The budget commits the government to starting 3 million apprenticeships by 2020, coupled with a levy being placed on larger employers to find these.
The tax free personal allowance is to be increased by £400 to £11,000, the intention is to increase it to £12,500 by 2020. Once the personal allowance reaches this planned 2020 level, a law will be brought in meaning people working 39 hours a week at minimum wage, won’t pay income tax at all.
Higher tax threshold
Employees taxed at 40% currently earn £42,385, however this earnings limit is increasing to £43,000 next year.
Tax-free pension funds
Presently, up to £40,000 can be paid into a tax-free pension, however from April 2016, that amount will be reduced for those earning over £150,000.
Personal service companies
The government is clamping down on tax avoidance, planning and evasion, and providing HMRC with increased powers to ensure people pay the tax due.
HMRC will be consulting on reforms to IR35 legislation, as personal service companies are still being used for tax avoidance purposes.
The Employment Team at Healys will keep you informed on when the changes take effect, or as consultation processes evolve. If you have any questions in the meantime please get in touch on 020 7822 4000 or email firstname.lastname@example.org.