Here are some key points from the Autumn Budget 2018 for employers to consider:
1) Change to tax rules for the self-employed.
From 6 April 2020, large and medium-sized businesses will have to apply the same rules as are now in force in the public sector. Under the existing IR35 rules in the private sector, if an individual provides his services to an end client through a personal services company (PSC), it is the PSC that must determine whether the individual would, but for the PSC, be regarded as an employee of the end client, and account for PAYE and NICs on payments from the end client if so. Under the new rules, it is the end client who must apply those tests and potentially (depending on whether there are other links in the chain such as an agency) make the PAYE / NIC deductions as necessary. We are promised an improved and refined online “Check Employment Status for Tax” tool from HMRC and significantly expanded guidance for the private sector before the new rules come into force, but companies will need to start thinking about the individuals they engage off-payroll, how the company will run its employment checks, and the potential impact on the relationships if tax has to be deducted at source.
2) No change yet to NICs on termination payments.
Employers still getting to grips with the new ‘Post-employment notice pay rules’ will be pleased to see that the proposed introduction of employer Class 1A NICs on termination payments over £30,000 has also been delayed until April 2020. These changes were originally intended to take effect from April 2019.
3) The contribution to the apprenticeship levy for smaller firms will be halved from 10% to 5%.
SMEs will therefore only contribute 5% to the training, as part of a “£695 million package to support apprenticeships”. No fixed date announced.
4) Changes to living wage and minimum wage
The Chancellor announced his budget with the statement that it was for ‘hard working families‘ who ‘get up early in the morning… to open up factories, shops and building sites… to drop their kids off at school… to check on elderly relatives and neighbours‘. A budget for ‘the strivers, the grafters and the carers‘.
Indeed, the Chancellor has taken steps to ‘see higher wages for those in work‘ and ‘minimising the amount of tax we need to take from their hard-earned wages‘ including:
• increasing the national living wage from £7.83 to £8.21 from April 2019;
• increasing the personal allowance and higher rate threshold to £12,500 and £50,000 respectively for 2019/20 and 2020/21; and
• announcing a remit for the Low Pay Commission (LPC) for the years beyond 2020 – presumably reflecting ‘the government’s aspiration.. to end low pay’.
The budget confirms that the government has accepted all of the LPC’s recommendations for the other national minimum wage rates to apply from April 2019, including:
• increasing the rate for 21 to 24 year olds by 4.3% from £7.38 to £7.70 per hour
• increasing the rate for 18 to 20 year olds by 4.2% from £5.90 to £6.15 per hour
• increasing the rate for 16 to 17 year olds by 3.6% from £4.20 to £4.35 per hour
• increasing the rate for apprentices by 5.4% from £3.70 to £3.90 per hour.
The government has also announced that it will be consulting on whether or not all jobs should be advertised on a flexible basis and on a new statutory obligation for large employers to publish their parental leave policies.
What should employers be doing now?
Whilst many employers may be relieved that they now have until April 2020 to prepare for IR35 reforms, employers should not take the delay as an opportunity to sit back. Preparations should start now, with employers ensuring they understand who is engaged in their business, what role they perform and on what terms they are engaged. In that way a picture can be built up of where any risk lies and steps identified to minimise or, so far as possible, eradicate it. We must also await clarification on what will be a ‘medium’ or ‘large’ sized organisation for these purposes.
Employers must also factor in the increases to the NLW and NMW from April 2019. The Budget also references the new statutory entitlement to parental bereavement leave and pay which will come into force in April 2020 and the new tax-free childcare scheme (with childcare voucher schemes finally closing to new entrants this October), both of which will impact on existing policies and procedures.
With a clear eye on Brexit and future technologies infiltrating the workplace, employers should ensure they maximise the opportunities open to them in light of the government’s commitment to further funding the apprenticeship levy and skills training.