On 8 July the Chancellor revealed the government’s economic plans. We outline 4 items that will affect employers.
Squeezing one-man bands
Last year the government brought in the Employment Allowance, giving businesses up to £2000 off their employer’s National Insurance bill.
An employee’s Class 1 NI record is made up of two contributions:
a) paid by employers, and
b) deducted from employees’ pay.
The goal was to encourage job growth by making it cheaper to employ staff.
From April 2016, companies where the director is the sole employee will no longer be able to claim Employment Allowance.
No details yet whether companies with multiple directors (and no other staff) will also be affected.
National Living Wage
Currently the National Minimum Wage (NMW) has 3 age bands: under 18, 18 to 20, 21 and over.
From next April an extra age band of 25 and over will be added. This has been dubbed the “National Living Wage” (NLW).
NMW is £6.50 for 21 and over, rising to £6.70 on 1 October.
If your staff are 25 or over, their pay must rise again in April to NLW of £7.20.
Employment Allowance increase
To offset the cost of NLW for employers, the Employment Allowance will rise.
Employers will be able to cut up to £3000 off their employer’s National Insurance bill.
Corporation tax will fall from 20% to 19% in 2017, and then drop to 18% by 2020.