by Dawn Ford
Politicians on both sides roared in favour and indeed in protest, at the Chancellor Rishi Sunak’s announcements this week with the UK Government budget review.
For the recruitment and outsourcing industries, it was a fairly low impact Budget
For the tax year starting April 2022, there will be an increase to Class 1 and Class 4 NICs, amounting to a 1.25% increase for each of employers, employees and the self employed. For Ltd company contractors taking part of their income as dividends, there will also be a 1.25% tax rate on those dividends. Together these changes are expected to bring the Treasury an extra £13bn a year to boost NHS funding, social care reforms, public health and prevention programs and investment in training the health staff of the future. From April 2023, this levy will become a tax listed separately on payslips and self-assessment payments and at this point will be payable by those who are working and above the state pension age (who would not otherwise be liable to pay NICs).
Given the rush of changes in recent years, there was no mention of IR35 in the Budget but of course the increased employer NICs costs that come with receiving the services of PAYE, Umbrella and Inside IR35 Ltd contractors may cause some clients to rethink the way they buy services and potentially look more towards outsourced, statement of work services and outside of IR35 models, where appropriate, to avoid increased employer costs which will be passed on to them.
Perhaps more surprisingly, there was no change to pensions, which had certainly been one of the changes commentators had expected. For contractors utilising salary sacrifice options, this is one option to ameliorate the NICs changes because of course salary sacrifice options are made prior to NICs deductions.
To support the uplift in public investment into UK R&D, a Scale Up visa was announced to help fast growing businesses better attract global talent. Good news for clients looking to hire permanent staff, but crucially we still lack a useful visa option for highly skilled independent workers, seeking temporary roles – a gap in the post Brexit visa scheme that the Government has previously acknowledged but is yet to plug.
For our lower paid workers, there will be an increase to the National Minimum Wage from April 2020 to £9.50 which combined with a Universal Credit taper relief cut of 8% will be welcome news against a back drop of rising energy and food costs.
The introduction of more funding for apprenticeships and life long learning will be broadly welcomed but many will be hoping an overhaul of the apprenticeship levy may follow to allow the many unused apprenticeship levy pots to be put to better use for training and development within numerous businesses.
Corporation tax rising to 25% from April 2023 had already been announced, although a reduction in business rates of up to 50% for retail, hospitality and leisure businesses, will perhaps help to balance the books in those industries. And the issue of unsafe cladding, brought into everyone’s minds by the tragedy of Grenfell, will now have funding for replacements, raised through a new residential property developer tax of 4% from April 2022.
The freezing of fuel duty for the 12th consecutive year and the reduction in Air Passenger duty for short haul domestic flights from April 2023 were perhaps surprise announcements in the wake of the upcoming COP 26 summit but from a commercial perspective will not increase travel costs more than the increase in the price of petrol and other fossil fuels already has.
But with annual growth set to hit 6.5% this year and the UK economy set to return to pre-Covid levels by 2022, there is definitely grounds for commercial optimism. Which you can now celebrate with a cheaper draft beer, following a tax relief for that type of alcohol.
Further Budget insight from SIA here