PAYROLL INSIGHT
Budget 2018
CIPP’s policy team outline the key announcements
P resenting his last Budget delivered a speech which took an hour and a quarter: the quarter to tell us the ‘need to know’ items, and the hour filled with the usual school playground haranguing of the opposition. However, the chancellor’s task this year was not enviable because the ‘deal or no deal’ debate continues with many questions still unanswered. There was the admission to being at a pivotal moment in Brexit negotiations, but the government is confident, though not complacent, and is “preparing for every eventuality”. We were assured: it is a budget for Britain’s future, a budget paving the way for a brighter future, a budget for hard working families, for the strivers, the grafters and the carers; that government would minimise the amount of tax it has to take from their wages. The economic forecast from the Office for Budget Responsibility (OBR) was positive. With wages growing at the fastest pace in almost a decade we were assured of sustained real wage growth in each of the next five years. The OBR also confirmed significant improvement in public finances with national debt having peaked in 2016–17. This apparently means a new path for public spending: “Fiscal Phil says fiscal rules, OK” – no, I’m not making that up, the chancellor really did say that. The speech ended with the chancellor declaring “We have reached a defining moment…the era of austerity is finally coming to an end…but discipline will before the UK exits the EU, the chancellor, Philip Hammond,
remain”. So, what were the key changes announced that employers and payroll and pensions professionals need to know about? ...personal allowance and the HRT will then remain in force for the 2020–21 tax year Tax rates and thresholds Fiscal Phil’s Budget included the announcement that from April 2019 the income tax: ● personal allowance for tax-free income will be set at £12,500 ● higher rate threshold (HRT), being the point when higher earners start to pay 40% tax, will be set at £50,000. The personal allowance and the HRT will then remain in force for the 2020–21 tax year. But from April 2021, both will return to annual increases that are in line with consumer price index (CPI) inflation, as currently legislated for. Company cars, vans and fuel The Budget confirmed that figures for the company car fuel benefit charge and the van fuel benefit charge will increase in line with the real price index (RPI), and the van benefit charge will increase in line with CPI. Documents published with the Budget confirm that:
● the multiplier for the car fuel benefit charge will increase to £24,100 (from £23,400) ● the flat-rate van fuel benefit charge will increase to £655 (from £633), and ● the flat-rate van benefit charge will increase to £3,430 (from £3,350). The van benefit charge for zero- emission goods vehicles increases from 40% to 60% of the standard charge from April 2019, as previously announced. The diesel supplement for the company car tax appropriate percentage remains at 4%, subject to a maximum appropriate percentage of 37%. Cars that meet the Euro 6d standard (also known as real driving emissions step 2, RDE2) are exempt. Apprentices ● Transferring levy funds – Confirmation was given that from April 2019 levy-paying employers will be able to transfer up to 25% of their funds to pay for apprenticeship training in their supply chains. ● Contribution to funding costs halved for non-levy paying employers – The co-investment rate for smaller businesses taking on apprentices will halve from 10% to 5%. It is expected that the change to 5% contribution will only apply to new starters from April 2019, but it is not yet known if this reduced contribution will also apply to levy-paying employers when their levy pot is empty. ● Employer-designed apprenticeship standards – The government will also provide up to £5 million to the Institute for Apprenticeships and National
| Professional in Payroll, Pensions and Reward | December 2018 / January 2019 | Issue 46 18
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