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What the 2018 budget has in store for employers

On 29 October 2018, Chancellor Philip Hammond delivered his Autumn Budget speech to the House of Commons. Below is a summary of the announcements that directly impact on employers.

Increase in National Living Wage

The Government pledge to achieve a national minimum wage of £9.00 by 2020, would appear to be on track. Therefore, the increase to £8.21 per hour from April 2019 is no major surprise and companies would be wise to plan ahead for the further increase that’s in the pipeline.

Rates overall will increase as follows:

  • 25 and over – from £7.83 to £8.21
  • 21 to 24 – from £7.38 to £7.70
  • 18 to 20 – £5.90 to £6.15
  • Under 18 – £4.20 to £4.35
  • Apprentice – £3.70 to £3.90

Apprenticeship contributions reduced  for small and medium-sized business

Introduction of the Apprenticeship Levy and changes to contributions in 2017 has led to many smaller businesses moving away from Apprenticeship Schemes, with figures reported by the Department of Education confirming a significant fall in apprenticeship registrations.

It makes sense then that the Government takes steps to rectify this and the announcement that contributions will be reduced to 5% for small and medium-sized employers will hopefully go some way to encourage businesses to rethink possible training opportunities in the future.

Increased tax thresholds

The rate at which people start paying income tax at 20%, will rise from £11,850 to £12,500, with the higher rate income tax threshold (the point at which people start paying tax at 40%) rising from £46,350 to £50,000 in April 2019

Introduction of Private Sector IR35 rules

The IR35 rule has been in place for public sector bodies for some time now and sees self-employed individuals being subject to the same level of tax deductions and employer tax and NI contributions as direct employees.

The Chancellor has set out in his budget the intention to extend the IR35 rule to the private sector from April 2020, with an exemption for ‘small businesses’ (those that turnover no more than £10.2m and have a balance sheet total not more than £5.1m, or less than 50 employees).

Businesses will need to review the way in which contractors are engaged to ensure that they are truly self-employed and not 'disguised employees'.

This article was written and contributed by Karen Moffett of Employee Management Ltd

DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances, and is merely a general comment on the relevant topic. If specific advice is required in connection with any of the matters covered in this article, Employee Management Ltd please speak to directly.

Published on 5th November 2018

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