As most of you are probably already aware, the March 2017 budget has been fully confirmed and announced.
In this article, we’re going to outline and explain the elements of the budget that relate to payroll in a broad or specific way.
One of the most radical changes introduced in the budget is the increase of personal allowance from the current £11,000 to £11,500, which makes the standard tax code 1150L. A £500 increase is more than was expected by most. These changes come into effect from 6th April.
Further, the 20 percent basic tax rate band is set to increase from £32,000 to £33,500 per year. As with the above, this change is set to come into effect from 6th April 2017.
Another important but less drastic change is the lower earnings limit for National Insurance increasing from £112 per week to £113 per week. Put differently, it is increasing from £672 per month to £680 per month.
Additionally, statutory sick pay is increasing from £88.45 to £89.35 per week and statutory paternity/maternity/adoption pay is set to increase from £139.58 to £140.98 per week.
With regards to employee wages the budget outlines a raft of changes, big and small, which we have outlined below.
Firstly, the National Living Wage for workers that are 25 and over is set to increase from £7.20 per hour to £7.50 from the first pay reference period which starts on or after 1st April 2017. Quite a jump.
Secondly, the National Minimum Wage rates will also be increasing across the board. For employees aged 21-24 the minimum wage will be increasing from £6.95 per hour to £7.05 per hour, for those aged between 18-20 it will be increasing from £5.55 per hour to £5.60 per hour. For 16-17 year old’s there will be an increase from £4.00 per hour to £4.05 per hour. Also, the apprentice rate will be increasing from £3.40 to £3.50 per hour.
Another widely discussed change is the introduction of the Apprentice Levy. This comes into full effect from April for companies who have a monthly pay bill that is £250,000 or more.
The Budget will also be introducing tax free childcare for children under the age of 12. The 20 percent relief of cost of childcare up to a total of £10,000 per child means it will be worth a maximum of £2,000 per child.
In terms of tax, the budget will see the increase of the VAT registration threshold from £83,000 to £85,000, so quite a marked increase. Finally, from the 1st of April the corporation tax rate will be being reduced from 20 percent to 19 percent.
So as can be seen from the above. The budget will be introducing a range of changes that relate to payroll.
These include changes to employee wages, personal allowance, tax bands, lower earnings limit for National Insurance, statutory sick pay, national living wages, minimum wages and finally VAT and corporation tax.
As well as making changes to existing things the budget will be introducing completely new things such as the much discussed apprenticeship levy