2019 was an extremely unusual year – the first without a Budget for at least 120 years. However, it has now been confirmed that we will eventually have a Budget on 11 March.
What might be announced at this Budget that would of interest to employers? In this article we take a look at some possibilities based on the Conservative party manifesto and most recent Queen’s Speech.
It should of course be remembered that the below are just predictions, and some surprises always remain possible. Chancellors have in the past been known to pull a few rabbits out of their hat, especially when they have a comfortable majority in Parliament.
The Conservative manifesto includes a pledge to not raise the rates of income tax, National Insurance or VAT. However, that doesn’t mean we won’t see any changes to thresholds or allowances.
In particular, it looks likely that the National Insurance threshold will be raised to £9,500 from April 2020, with the Government’s stated ambition being to ultimately raise this to £12,500.
The Employment Allowance (EA) also looks set to rise from £3,000 to £4,000 from April 2020. It was previously announced at Budget 2018 that, from April 2020, the EA would be restricted to smaller employers (those with a total secondary Class 1 liability in the previous tax year under £100,000). There has been no indication that this plan has been dropped, other than to relax some of the proposed information requirements, though we should expect this to be confirmed at the Budget.
Other possible tax announcements based on the manifesto documents include:
- A new one-year employer NICs holiday from April 2020 for employers that hire people within one year of leaving the armed forces
- An increase in the large company R&D tax credit rate from 12% to 13% from April 2020.
- A review of Entrepreneur’s Relief, with a view to its reform.
- An increase in the Structures and Buildings Allowance (SBA) rate from 2% to 3% from April 2020.
- A new anti-tax avoidance and evasion law which will (amongst other things) bring in longer sentences for tax fraud and consolidate existing anti-evasion and avoidance measures and powers.
- A review of business rates, together with further reductions for retail businesses.
Finally, it was announced on 7 January that the Government will be undertaking a review of the off-payroll working rules, which are due to be extended to the private sector from April 2020.
If these rules are implemented as proposed then, from 6 April 2020, responsibility for determining whether an engagement falls within the off-payroll rules will move from a worker’s personal service company (PSC) to the client (the business which requires the worker’s services). The party which pays the PSC (which may be the client, or an agency depending on the commercial arrangements) will then be required to operate PAYE and NICs as appropriate.
Due to a lack of final legislation and detailed guidance, the ATT continues to call[ER1] for the introduction of these rules to be delayed by a year. We wait to see if the Chancellor will decide on a delay – the Government’s review is due to conclude by mid-February, so we should see an announcement at the Budget itself, if not before.
Employment law changes
The Government has already announced that National Minimum Wage and National Living Wage rates will increase across the board from April[ER2] .
Beyond that, the manifesto provides clues as to other employment law announcements we might see at the Budget, including:
- Scrapping exclusivity clauses in zero hours' contracts.
- Creation of a single employment law enforcement body.
- Further crackdowns on employers who abuse employment law (the manifesto refers specifically to those who take workers’ tips or refuse them sick pay).
- New rights to request a more predictable contract.
- Measures to encourage flexible working, including a consultation on whether this should be the default position.
- Extended leave for neonatal care.
- Extending the entitlement to leave for unpaid carers to a week.
Outside of the core areas of tax and employment law, we may also see some announcements around the following:
- Extra funding for childcare – including before and after school and during the school holidays.
- A review around the problem of workers who earn below the personal allowance missing out on tax relief on contributions to net pay pension schemes.
- Improving the working of the Apprenticeship Levy, and increasing the use of UK apprentices in large infrastructure projects.
- More funding for skills training – the manifesto suggests a new National Skills Fund worth £3 billion will be launched over the next Parliament to provide matching funding for individuals and SMEs for high-quality education and training.
Finally, even though the Budget will take place after 31 January 2019, we can expect Brexit to have more than the odd mention. In particular, more details on immigration and skills training in the run up to and following the end of the transitional period are expected.