Below is a summary of some of the points highlighted in the July Budget and some further unconnected udpates which are likely to affect employers. Full details can be found online at HMRC.
National Living Wage
Starting in April 2016, a new National Living Wage will apply to workers aged 25 and over. The initial rate will be £7.20 per hour but the Government projects that this will rise to £9.00 an hour by 2020, modelled on 60% of median earnings. In the meantime, the adult rate of the National Minimum Wage (i.e. aged 21 and over) will increase by 3% to £6.70 an hour from 1 October 2015. National Minimum Wage rates for younger workers from October are set out below and those rates for younger workers will remain in place even when the National Living Wage is introduced for those aged 25 and over.
16 and 17 year olds £3.87
18 – 20 year olds £5.30
Apprentices 18 or under in their first year £3.30
Income Tax Personal Allowance
From 6 April 2016, the personal allowance (below which no income tax is payable) will increase from £10,600 to £11,000. The Government aspires to increase it further to £12,500 by 2020.
Higher Rate Income Tax Threshold
The rate at which employees begin to pay income tax at 40% will rise next April from £42,385 to £43,000 once the personal allowance (above) is taken into account. [For example, in 2015/16 the 40% tax rate begins at £31,785 plus the current personal allowance of £10,600 = £42,385].
The allowance (which employers claim against their Class 1 NI contribution liability) will increase from £2,000 to £3,000 from April 2016.
The rate, currently set at 20% on all profits, will reduce to 19% in 2017 and to 18% in 2020.
Insurance Premium Tax
Insurance premium tax will increase from 1 November 2015 from the present rate of 6% to 9½%. This will have financial implications for employers providing healthcare insurance to their employees, as well as to insurance premiums more generally.
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