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Spring Budget 2017

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National Insuranceaa_190903244

From April 2018 the main rate of Class 4 NI for the self-employed will increase from 9% to 10% and will increase further to 11% in 2019. As previously announced, Class 2 NI contributions will be abolished from 2018. These changes are aimed at reducing the disparity in tax between the self-employed and the employed.

Tax

Income Tax
As previously announced, in 2017/18 the personal allowance for England, Wales and Northern Ireland will increase to £11,500 and the higher-rate threshold will increase to £45,000.

Scottish rates are set by the Scottish Parliament. For 2017/18 the personal allowance will also be £11,500, but the higher-rate threshold will be lower than the rest of the UK at £43,430.

Capital Gains Tax

There were no changes announced in the Budget.

Inheritance Tax

No new announcements were made in the Budget, but as a reminder, April will see the introduction of the Residence Nil Rate Band. This is an additional allowance of £100,000 (increasing progressively to £175,000 by April 2020) that can be used against the value of an individual’s residence if it is left to their children or grandchildren. The allowance will be reduced or eliminated for estates worth more than £2 million.

Dividend Allowance

The tax-free Dividend Allowance will be reduced from £5,000 to £2,000 in April 2018. This will bring more dividend receipts into taxable bands. Dividends above this level will be taxed at 7.5% (basic-rate), 32.5% (higher-rate), and 38.1% (additional-rate).

 

Tax-Free Childcare has arrived

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  • aa_195814892Tax-Free Childcare is an online account, like a bank account which you can pay money into. The account can only be opened by parents with children aged up to twelve, or 17 if they have disabilities
  • the parents must be in work, and each earn at least £115 a week, but not more than £100,000 each per year
  • anyone can pay into it, not just the parents, at any time they like
  • for each 80p paid in the government will add 20p
  • the money must be used to pay for childcare with a carer who is registered to receive a Tax-Free Childcare payment
  • to qualify you must not be receiving free or subsidised childcare, or childcare vouchers from your employer
  • if you close the account and draw the money out instead of using it for childcare, you’ll lose the government’s contribution.

When can you sign up? There’s good news and bad. While some parents will be able to start a Tax-Free Childcare account some time in spring 2017 (an exact date hasn’t been fixed), the scheme is being rolled out gradually. It’s being made available to those with the youngest children first. It might be much later in the year before it’s available to all working parents.

National Living Wage and National Minimum Wage

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The National Living Wageaa_241271680

The Government’s National Living Wage is due to be introduced on 1st April 2016 for all working people aged 25 and over, and will be set at £7.20 per hour. The current National Minimum Wage for those under the age of 25 will continue to apply.

Who will be entitled to the National Living Wage?

Generally all those who are covered by the National Minimum Wage, and are 25 years old and over, will be covered by the National Living Wage these include:

  • employees
  • most workers and agency workers
  • casual labourers
  • agricultural workers
  • apprentices who are aged 25 and over.

Penalties for failure to comply

With the introduction of the National Living Wage the penalty for non-payment will be 200% of the amount owed, unless the arrears are paid within 14 days.The maximum fine for non-payment will be £20,000 per worker. However, employers who fail to pay will be banned from being a company director for up to 15 years.

The difference between the National Living Wage and the Living Wage

The new National Living Wage is different from the Living Wage, which is an hourly rate of pay and updated annually. The Living Wage is set independently by the Living Wage Foundation and is calculated according to the basic cost of living in the UK. Employers choose to pay the Living Wage on a voluntary basis.

National Minimum Wage

The National Minimum Wage (NMW) is the minimum pay per hour most workers are entitled to by law. The rate will depend on a worker’s age and if they are an apprentice. Any changes to the rate are normally introduced in October each year. Information is also available on this page for the National Living Wage which comes into force in April 2016.

Key points

  • Most workers over school leave age will be entitled to receive the NMW.
  • The NMW rate is reviewed annually by the Low Pay Commission.
  • The minimum rate depends on the age of the worker.
  • HM Revenue &Customs (HRMC) can take employers to court for not paying the NMW.
  • There are a number of exemptions to those who receive the NMW. These do not relate to the size of the business, sector, job or region.
  • The compulsory National Living Wage is the national rate set for people aged 25 and over.
  • The NMW rates for those aged under 25 change on 1 October every year whilst the NLW rate for those aged 25 and over will change every year on 1 April.

The rates from 1st October 2015 are:

  • £6.70 for workers 21 and over
  • £5.30 18-20 yrs
  • £3.87 for 16-17 yrs, who are above school leaving age but under 18
  • £3.30 for apprentices under 19 or 19 or over who are in the first year of apprenticeship.

It is important to note that these rates, which come into force 1 October 2015, apply to pay reference periods beginning on or after that date.

Exemptions

There are a number of people who are not entitled to the NMW.

  • Self-employed people.
  • Volunteers or voluntary workers.
  • Company directors.
  • Family members, or people who live in the family home of the employer who undertake household tasks.

All other workers including pieceworkers, home workers, agency workers, commission workers, part-time workers and casual workers must receive at least the NMW.

Government’s £12bn welfare cuts

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David Cameron has insisted that the Government’s £12bn welfare cuts will create a fairer Britain by boosting social mobility and economic opportunity.aa_118114915

The Prime Minister said the welfare system must help people to get good jobs instead of giving them handouts, signalling an attack on the tax credit payouts that top up low wages for the working poor and housing benefit.

But he said the Government would balance benefit cuts with boosts to the minimum wage and personal tax allowance, as well as providing further childcare support for working families and improvements to education.

The changes will be announced in full in next month’s Budget and will include capping benefits at £23,000 a year for each family.

 

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