Spring Budget 2017

Spring Budget 2017

Employment matters from the Spring Budget 2017

Philip Hammond MP unveiled his first Budget as Chancellor of the Exchequer on March 8 2017. The speech was widely reported as being a ‘cautious’ Budget, containing substantially fewer measures than in previous years.

Many of the headlines regarding the speech concern a tax rise for the self-employed. Class 4 National Insurance contributions are payable by any self-employed sole trader or partnership with annual profits above £8,060, and these contributions will rise by 1% to 10% from April 2018, and then to 11% from April 2019. Mr Hammond however stopped short of bringing self-employed NI contributions in line with the 12% paid by employees.

The Government is still proposing to scrap Class 2 NI contributions for the self-employed from April 2018. Together, the two measures are said to equate to an increase of £240 in the annual tax bill of the average self-employed worker. However, those with earnings of below £16,250 will pay less tax.

There was no action taken against companies that use self-employed workers to gain tax advantages, but when touring the news studios after the speech, the Chief Secretary to the Treasury, David Gauke MP, put companies on notice that the Government was looking into this issue.

Since the speech, the Government has announced it will not introduce the legislation for the NI tax hike until the autumn, when it has completed a review of the state benefits provided to the self-employed.

Mr Hammond confirmed the Government’s plans to reduce corporation tax to 19% from April 2017, and to 17% by 2020.

He also confirmed the rise in the National Living Wage – the mandatory legal minimum pay rate for those aged 25 or over – to £7.50 per hour from April this year. The Government plans to increase the living wage to £9 per hour by 2020.

The personal allowance – the amount of an individual’s earnings that is not subject to income tax – will rise to £11,500 from April this year and to £12,500 by 2020. The higher rate threshold – the level above which earnings are taxed at 40% – will rise to £45,000 from April this year and to £50,000 by 2020.

Wages in real terms will not rise this year, but are projected to rise in each of the next four years.

Both the number of people in work and the employment rate – the percentage of the population aged 16-64 who are employed – are currently at record levels, but the latest predictions from the Office for Budget Responsibility, unveiled at the same time as the Budget, suggest that there will be 650,000 more people in employment in the UK by 2021.

£5 million was promised by Mr Hammond to help people returning to work after a career break under the Government’s ‘returnship’ scheme, and a new T-level technical vocational qualification, designed to be an alternative to A-levels, was unveiled.

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