How Does the Budget Affect You?
In his annual Budget review Rishi Sunak has vowed to ‘protect jobs and livelihoods’. A bold statement and one that he, and the rest of the government, need to deliver on for our economic and public morale recovery.
Where are we now?
Rishi Sunak mentioned three key economic indicators whilst unveiling his budget:
- Since March more than 700,000 people have lost jobs
- Our economy has shrunk by 10%. The largest fall in over 300 years
- UK borrowing is at the highest it has ever been outside wartime
The UK unemployment rate, in the three months to December 2020, was 5.1%, that’s a rise 1.3% in a year. A trend that during such times is to be expected but saddening all the same. The key to getting our economy back on track is to first tackle the jobs market, which after it finds some stability, will subsequently enable to government to tackle the deficit.
So, what has been announced in the budget that is going to directly affect businesses looking to hire and people looking for jobs?
Furlough is top of the list, having been extended until the end of September, with the government continuing to pay 80% for the hours that individuals cannot work. Although they will be scaling this back from July, asking employers to contribute 10% in July and 20% in August and September.
This scheme has been credited with saving tens of thousands of jobs as businesses have remained closed. All being well, the extension to September should hopefully see the number of people on the scheme fall progressively as businesses reopen again.
Support for the self-employed is also set to be extended until September and eligibility criteria has been widened to include 600,000 more self-employed people who will be able to access grants.
There are more than 5 million self-employed people in the UK and throughout the pandemic the government has come under fire for its lack of support for this sector. With many people in the self-employed bracket falling through the cracks. Under the new criteria, those who were new to being self-employed and could not prove their income status on their tax returns are now eligible following the completion of tax returns for 2019-2020 financial year.
There may be further changes ahead for the self-employed, as the Chancellor has suggested that tax breaks for the self-employed may end in the future. Thus, putting employees and the self-employed on a level-pegging in terms of tax treatment. This is in line with changes for Contractors that fall under the changes to IR35 regulations – you can read more about IR35 changes here.
Increases in National Living and National Minimum wage, which were already announced in the Government’s spending review, have been confirmed as happening in the budget. The Low Pay Commission estimates that there were 2 million workers paid at or below the minimum wage in April 2019 so the increase of 19p per hour to £8.91 is going to be a welcome change for many workers.
You can read more about the rises in National Minimum and National Living Wage here.
The new budget proposes no changes to income tax, National Insurance or VAT for the coming months, however there will most definitely be changes in the future in order to combat the deficit left by the past 12 months. There have however been two changes to income tax thresholds with the personal income tax allowance being frozen at £12,570 from April 2021 to 2026 and higher rate income tax to be frozen at £50,270 from April 2021 to 2026.
The major change in taxation is to businesses. Corporation tax on company profits over £250,000 is set to rise from 19% to 25% in April 2023, although even Boris Johnson has conceded these plans are 50-50 at best to occur without concessions.
In good news for young people and those looking to retrain, incentive grants for apprenticeships are set to rise to £3,000 and £126m for traineeships. As one of the hardest hit by job losses, 16-24 year olds have had an uncertain future, but for some this will come as a welcome relief, as long as businesses across a wide spectrum of industries take advantage of the grants.
The number of apprenticeship starts in the first three quarters of the 2019-20 academic year (Aug-Apr) was 275,000, which reflected a 13% drop on the same period from the previous year. With these increased grants, the hope is that this trend will change. (More Apprenticeship Stats can be found here).
An additional new visa scheme has been announced that is specifically tailored to help start-ups and rapidly growing FinTech firms to source skilled talent from abroad. These changes do little to alleviate concerns for industries reliant on overseas temporary workers. We have discussed the new immigration scheme and such concerns in-depth in another blog here.
The Future Will Tell
This time last year, Rishi Sunak revealed his first budget plans with an impressive £12 billion COVID support package. Today, almost £300 billion later, his plans to tackle the deficit have to be radical and more importantly have to work. Dubbed by the Financial Times the ‘Spend Now, Tax Later Plan’, expect additional hikes in taxation to affect businesses and people in the future.
If you are looking to build up your team to help you on the road to recovery or to shore up your busy operations, we are happy to help. With specialist consultants in more than 8 sectors, we have the local and national expertise to make your hiring a success. Get in touch to learn more.
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