The Chancelllor, Phillip Hammond has delivered his first and last Spring Budget which has seemingly hit millions of self-employed the hardest by hiking the NICs on them. We have listed the key highlights of the budget affecting the recruiters and recruitment agencies in particular.
Intermediaries Legislation- There wasn’t any direct mention by Phillip Hammond during his budget speech about off-payroll working rules (often known as IR35, or the intermediaries legislation). However the IR35 reforms have been confirmed with HMRC releasing the policy paper about “Off-payroll working in the public sector: changes to the intermediaries legislation” post budget which states, “To ensure that individuals cannot side-step employment taxes the reform will transfer the responsibility to consider whether the intermediaries legislation applies from PSCs to public sector engagers and agencies who pay workers engaged in the public sector.”
The new off payroll IR35 legislation will commence from 6 April. However, the final Finance Bill which is anticipated on 20 March will hopefully bring more clarity but leaving very little time for a reaction of any major change.
National Insurance Contributions (NICs)- The Chancellor announced a 2 percent increase for self-employed National Insurance Contributions (NIC’s) and reduced the allowance for Dividend Tax from £5,000 to £2,000. The Treasury aims to raise an extra £145m by 2021-22 through extra tax on the self-employed. This increase has ignited a fire as people refer to the Tory Manifesto which clearly stated no NIC increase during their term in Parliament.
Chris Bryce, Chief Executive of IPSE, organisation representing the UK’s self-employed and professional freelancers and contractors commented, “Adding in the reduction in Dividend Tax allowance, whether you work as a sole trader or through a limited company you will be facing higher bills. It’s entirely right for the Chancellor to look at taxation of the self-employed, but changes should only come after a thorough consultation with the business community, which has not taken place.”
From April 2018, when the Class 2 NIC is abolished, class 4 NICs will increase from 2% to 10% in 2018, with a further 1% increase in 2019. The combination of the abolition of Class 2 and the Class 4 increases announced today is expected to raise a net £145m a year by 2021-22. The increase will cost every self-employed person on average 60p more a week in tax. Higher paid self-employed will be paying more national insurance.
National Living Wage- Phillip Hammond announced that the national living wage will rise to £7.50 in April. Also, the personal allowance will rise for the seventh year in a row to £11,500
Apprenticeship Levy- Mr. Hammond emphasized offering world-class technical education to students and called for linking skills to job. Mentioning the Apprenticeship Levy, he stated “And, I am pleased to report, in National Apprenticeship Week, that our apprenticeship route is now, finally, delivering that ambition here, with 2.4 million apprenticeship starts in the last Parliament, and the launch of the Apprenticeship Levy in April supporting a further 3 million apprenticeships by 2020.”
To encourage and support the best of them to go on to advanced technical study, T-levels are introduced for technical students with a work placement included & maintenance loans for advanced technical students.
The impact of the Apprenticeship Levy on the recruitment industry and the point that agency workers were unable to benefit from any training/apprenticeship offered by the agency was notable by its absence.
Healthcare and social care- To tackle the crisis in the NHS through immediate funding increases and to ensure that elderly people are receiving the care they need, the Chancellor announced additional funding of £2 billion to social care in England over the next 3 years, with £1 billion available in 17-18. A green paper on the long-term sustainability of the NHS is due soon. Mr. Hammond also announced making a further £100m of capital available immediately for up to 100 new triage projects at English hospitals in time for next winter.
You can find the budget documents on below link
As a provider of services to some of the largest recruitment firms in the UK, we understand the anxiety around IR35 and the impact of the Apprenticeship Levy. Our experts are available to discuss the implications of the IR35 reforms affecting your agency and can help you with queries regarding it. Please get in touch with our experts:
Pom Chakravarti Call 07870 678 557 or email email@example.com.
Kunal Shah Call 0758 4651087 or email firstname.lastname@example.org.