Budget 2017: what HR needs to know

Many self-employed people will pay increased national insurance contributions (NICs), it was announced in today’s budget, as chancellor Philip Hammond aims to reduce the “tax advantages” of opting out of full employment.

The change will affect all self-employed individuals earning more than £8,060. At the same time, class 2 NICs paid by those who earn more than £5,965 are being abolished; the net effect is that all those earning more than £16,250 from self-employment will pay more tax.

The widely anticipated move also reflected the Treasury’s growing concern over the revenue being lost by the growth in self-employment, much of which has been attributed to gig economy workers, or companies encouraging staff to become self-employed.

Ian Brinkley, acting chief economist at the CIPD, said it highlighted the challenges associated with a population that was working in “increasingly diverse ways”. He said: “With more people likely to become self-employed or involved in other forms of atypical employment in the future, the tax issues highlighted by the chancellor will only become more problematic.”

The plans came in for immediate criticism in some quarters. Jon Greer, Old Mutual Wealth’s pensions expert, said they would “undoubtedly prove controversial and attract criticism” from those who believed they breach governmental pledges not to boost personal taxes.

He said: “Despite this double-whammy tax change, it should not be forgotten that while the self-employed currently enjoy a reduced rate of national insurance, they also miss out on sick pay, holiday entitlement and other perks enjoyed by those in employment.”

Further reform is likely in this area, with the government suggesting it will consult on changes to parental benefits for the self-employed this summer, as well as reviewing pension reforms. The self-employed are currently excluded from auto-enrolment unless they opt to make their own arrangements.

The chancellor also pledged £5m to increase the number of ‘returnships’ in the public and private sectors to help people return to employment following a career break. And he confirmed the introduction of a new regime of so-called T-levels, the flagship measure in an overhaul of post-16 education he said would put technical skills on a par with academic qualifications, and make sure students were “genuinely work-ready”.

Under the reforms, vocational courses will last up to 50 per cent longer, the equivalent of an extra 900 hours of teaching a year. The 13,000 current qualifications will be replaced by 15 standalone vocational courses, or T-levels, all of which will be backed by work placements.

Lizzie Crowley, skills adviser at the CIPD, said: “It’s great to see recognition that tackling the UK’s skills challenges is a top priority. With a significant slowdown in workers coming from the EU, upskilling the existing workforce and the next generation is more vital than ever.

“Technical education has been a longstanding weakness in the UK skills system. Additional investment to help equip the next generation of workers with technical skills is therefore very welcome as we head towards post-Brexit Britain.”

Hammond also pledged £3m towards funding support for Britain’s “brightest and best research talent” through 1,000 PHDs and fellowships in science, technology, engineering and mathematics, and confirmed a £40m commitment to promoting lifelong learning.

The budget confirmed that the national living wage would rise from £7.20 to £7.50 from April 2017, and that the income tax personal allowance would increase to £11,500, with the higher-rate threshold rising to £45,000. Hammond reiterated the government’s commitment to raising the personal allowance to £12,500 and the higher rate to £50,000 by the end of this parliament.

For advice and assistance in the ways that your HR department functions, please contact High Performance Consultancy, on this website or via social media.

Link to full article on this issue by People management: http://www2.cipd.co.uk/pm/peoplemanagement/b/weblog/archive/2017/03/08/budget-2017-what-hr-needs-to-know.aspx

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