The budget has been announced and a lot of changes are happening.
This was always going to be a momentous budget.
The first ever by a female Chancellor and the first Labour budget in 14 years.
And, if figures are to be believed, a budget to try and fix a £22bn “black hole”.
Add all of this to the proposed Employment Rights Bill and the changes in that to come, businesses (especially small businesses) are understandably nervous.
The government has been stating repeatedly for us to brace ourselves for an uncomfortable budget and that certainly seems to have been a true and fair warning.
What’s been introduced will definitely have significant ramifications for all businesses and therefore on employees and staffing.
In line with the REC (of whom we are members), we are sharing our thoughts and insights into some of the key takeaways from the budget and how it would affect you.
Starting with the biggest headlines of the budget let’s look what it means to small businesses.
For many the most concerning element of the Budget will be the 1.2% rise in employer National Insurance Contributions.
This increase was slightly lower than anticipated, however, there was a much larger reduction in the threshold that determines which employers pay National Insurance, from £9,100 to £5,000.
Smaller businesses needn’t panic over this change though, as the Employer’s Allowance threshold was increased to £10,500 from £5,000.
While this may cause initial concern about compliance issues, the REC will be watching how this plays out very closely, and how HMRC ensures it doesn’t drive up potential issues.
There was also a significant increase in the National Minimum Wage. With a 6.7% rise for those over 21, taking hourly pay from £11.44 to at least £12.21, and an increase of 16.3% for those aged 18 to 20, taking that rate to £10 an hour.
The Chancellor also revealed that there would be an increase in Capital Gains Tax from 10% to 18% for the lower rate and 20% to 24% for the higher rate.
Amongst the package of increased business costs, it was a relief to see that Corporation Tax will remain at 25% for the duration of the Parliament.
These additional costs for business could be counterproductive in the face of the mission for growth, as they increase the cost of employing people – just at the time we are beginning to see some early signs that the market was finally recovering.
Asking businesses to pay a lot more for employing people, without a clearer path to higher growth levels, is a big gamble.
In terms of what comes next, the Government needs to administer a further shot of confidence to business to fuel growth, especially given the forecasts do not look as positive as hoped.
We are here to help support you with the decisions you will have to make regarding staffing in future, and with that we will continue to work with the REC to make sure that you receive the best possible help, support, advice, and guidance when it comes to navigating the changes ahead.
