If you run your own payroll department, here are the parts of Philip Hammond’s latest Budget that will have your payroll people beavering away in preparation for April 2019.
It was the ‘end of austerity’. Or, depending on which side of the House you sit, it wasn’t anything of the sort. But there was lots to dissect in the chancellor’s latest Budget, and here are four things that caught our eye as being of greatest interest to payroll departments.
- Personal allowance up again
This year, for business across the UK except Scotland, the amount your employees need to earn before they start paying tax is £11,850. From the next financial year, that will rise to £12,500. In real terms that will mean £130 more in everyone’s pockets as a direct result of the threshold rise. It will also mean that a total of 1.74 million workers will not pay any tax at all.
- Higher tax rate raised
The threshold at which higher earning employees will pay 40% tax is set to increase from £46,350 to £50,000 from April 2019. That’s one year earlier than the commitments made in the Conservatives’ election manifesto. That threshold will remain at the same level in 2020/21.
- Living wage increases
From the start of the new financial year in April 2019, payroll processors will need to up the wages of anyone paid the National Living Wage. It will increase by 4.9%, taking the minimum wage from £7.83 to £8.21 an hour. That rate applies for anyone who is 25 or older. Younger people will also see rises in the minimums as follows:
Age Old rate New rate
21-24 £7.38 £7.70
18-20 £5.90 £6.15
16-17 £4.20 £4.32
The statutory rate for apprentices aged under 19 (or in the first year of their apprenticeship) will increase to £3.90.
- IR35 extended to private firms
You can’t fail to have noticed the ongoing furore regarding public sector workers and IR35, the rule change that effectively turned contract workers into employees (with an immediate effect on their National Insurance payments and taxable deductions).
Now, the chancellor has extended IR35 to include large and medium businesses. What does that main in real terms? Effectively, if you contract services from individuals who provide their services via a personal service company (or similar) and, but for this intermediary, they would be an employee, then you must treat them as an employee – not self-employed – for tax and NI purposes.
There are a number of caveats and extensions to IR35 affecting offshore intermediaries, the construction industry and more and, crucially, it is for the company to correctly assess the status of its contractors. If you’re unsure how IR35 applies to you and what changes you need to make to your payroll, get in touch.
Whilst not perhaps directly affecting payroll departments, there was plenty in the budget that could have an effect on the companies of which they are part. The amount non-levy-paying small business will have to contribute towards the cost of apprenticeship training will be halved from 10% to 5%.
And business rates for firms with a rateable value of £51,000 or less will be cut by a third over two years, effectively reducing rate bills for 90% of independent shops, pubs and restaurants by £8,000.
If you need a hand working out what the Budget means for your payroll, or you need help in implementing the changes talk to our experts now.