With the General Election looming, the budget was a last ditch attempt for the Tories to retain their position at Number 10. It has been reported that employment has reached its higher ever rate, with unemployment rates falling across every region of the UK. There are more people than ever working for themselves and the budget for 2015 has recognised this, and offers benefits to self-employed workers, as well as those employed by companies. It remains to be seen whether this will be enough to save the Tories in this election but there are some definitive benefits for workers. The new budget will have a number of effects on aspects of payroll. The following are some of the changes which have been announced and employers should be aware of these and take steps to ensure processes are implemented.
The new budget allows for greater freedom when it comes to pensions. Instead of buying an annuity, those aged over 55 have the opportunity to cash in their pension and can spend it in whatever way they choose. In effect, pension holders can sell their annuity. There is the option of UFPLS, which allows you to use your pension money in a similar manner to withdrawing money from your bank account. You can withdraw it as and when you need it. There is also the option of flex-access drawdown, which allows those with pensions to take out 25% of their pension, which will be tax free and keep the rest for investment. The lifetime allowance for pension savings (tax free) will drop from £1.25m to £1m. This change will be in effect from April 2016.
In other pension changes, the State Pension is set to increase to £115.95 per week and the Pension Credit will also increase to £151.20 per week for single people, with an increase to £230.85 for couples.
Personal Income Tax Allowance
There will also be changes to the personal tax allowance. This will increase from £10,600 in 2015/16 to £11,000 in 2017/18. The transferable tax allowance for married couples will also rise to £1,100.
The higher rate tax payers will also benefit, as the point at which they will start paying the 40% cent tax will be increased by £315 next year and £600 in 2017.
It was also announced that the class two national insurance contributions will be eliminated for those who are working on a self-employed basis. The employer national insurance contribution for workers aged under 21 will also be abolished from April, as will that for young apprentices in 2016. This may affect the private health insurance sector.
If these changes to the budget affect your business, it is important to put these into action, so you are prepared when they come into place. If in doubt about any aspects of the budget, you should visit the government website or speak to an advisor.