Last week, the Chancellor the Exchequer, George Osborne, issued his Summer Budget. Read a fuller summary of the main announcements, but below are those issues most likely to be of relevance to employers:
A new Apprenticeships Levy will be applied to large employers to fund 3 million new apprenticeships in the current Parliament.
The Government has pledged to raise the personal allowance to £12,500 by the end of this Parliament. As a first step towards that pledge, the personal allowance will increase by £400 to £11,000 from April 2016 and then to £11,200 in April 2017. Legislation will be introduced to ensure that, once the personal allowance has reached £12,500, it will always be at least equivalent to working 30 hours a week on the national minimum wage. These changes will be included in the SFB 2015.
The higher rate threshold for income tax will increase from £42,385 to £43,000 from April 2016, as part of the Government's commitment to raise it to £50,000 by the end of this Parliament. The NICs upper earnings limit will increase to remain aligned with the higher rate threshold. These changes will also be included in the SFB 2015.
The Government will consult on simplifying the tax and NICs treatment of termination payments and has published a consultation on the tax treatment of travel and subsistence. A consultation will be published in Autumn 2015 on the abolition of class 2 NICs and the reform of class 4 NICs.
The Government announced that it will start a dialogue with business on how to improve the effectiveness of the IR35 legislation (which targets individuals working through limited companies) and will publish a discussion document after Summer Budget 2015.
National Insurance contributions
The existing national insurance contributions ("NICs") Employment Allowance will be increased from £2,000 to £3,000 from April 2016. However, from April 2016, companies where the director is the sole employee will no longer be able to claim the Employment Allowance.
National Living Wage
A new mandatory National Living Wage of £7.30 per hour, offsetting corporation tax deductions for businesses, will be introduced from April 2016 for workers aged 25 or over. The National Minimum Wage (currently £6.50 per hour rising to £6.70 in October, with lower rates for those under 21 and apprentices) will continue to apply to other workers. This is lower than the current living wage calculated by the Living Wage Foundation according to the basic cost of living in the UK, which is presently £7.85 per hour across the UK and £9.15 per hour in London, and which employers (including Taylor Wessing London) have chosen to pay on a voluntary basis.
Contributions to pension schemes by additional rate tax payers will be subject to a lower annual allowance, falling by £1 for each £2 earned above £150,000, from a standard annual allowance of £40,000 to a floor of £10,000. Contributions above this will be subject to the annual allowance charge in the normal way. The annual allowance taper will have effect on and after 6 April 2016.
The Government will "actively monitor" salary sacrifice arrangements – the strongest indication yet that these schemes may be attacked at the next Budget.
The Government is consulting on radically changing the pension taxation structure, possibly to one where contributions are taxed rather than receipts, to more closely mirror ISAs.
At present, small shops are allowed to open all day on a Sunday, but those over 280 square metres are limited to six hours. Local authorities will be given more power to set Sunday trading hours. Unions have already raised concerns about the effect on workers who may be required to work longer hours. Shop and betting workers currently have the right to opt out of Sunday working by giving three months’ notice to their employer, unless they were hired to work only on Sundays.
Childcare for pre-school children
All working parents of children aged between 3-4 years are to receive free childcare for up to 30 hours per week.