121 summarises the budget key points
This was heralded as a Budget “that puts security first, that recognises the hard work and sacrifice of the British people over the last five years”. In short, according to George Osbourne, this was a Budget for working people. We summarise the main points below:
•The Chancellor said he will make savings of £34bn over this parliament – half of which will come from government department’s budgets. Of the other £17bn, a total of £12bn will come from welfare cuts while £5bn will come from stopping tax avoidance and loopholes.
•Public sector pay rises will be capped at 1% per year until 2019 and the NHS is being offered another £8bn of spending.
•A new National Living Wage has been introduced, starting at £7.20 per hour from April 2016 to reach £9 per hour by 2020. This will be compulsory for those aged over 25. This compares with the National Minimum Wage of £6.50 for over-21s currently.
•A tax lock will be legislated for in the coming weeks to prohibit increases in the main rates of income tax, national insurance and VAT for five years.
•The tax-free personal allowance will be raised from £10,600 to £11,000 next year, as a step towards a target of £12,500.
•The threshold for the 40p rate of tax has been raised from £42,385 in this tax year to £43,000 in 2016-17, on its way to the £50,000 target.
•Corporation tax will be cut to 19% in 2017, and then 18% from 2020. That is down from 28% when he took over as Chancellor in 2010. Mr Osborne says this is an advert to tell the world Britain is open for business.
•Small firms’ NI contributions will fall, with a £3,000 employment allowance. So this means that a small firm can hire four staff on the national Living Wage and pay no national insurance contributions.
•The annual investment allowance, which was initially set as a temporary tax break for businesses, will be set at £200,000 permanently from January 2016.
•£12bn of welfare savings will be found, with spending focused on the elderly and disabled and disability benefit will not be taxed or means tested, while more money is going to women’s refuge centres.
•For those aged 18-21, they must “earn or learn”, according to the Chancellor and will lose their automatic entitlement to housing benefits.
•The cap on benefits will be cut from £26,000 to £23,000 in London and £20,000 in the rest of the UK.
•Working-age benefits will be frozen for four years, including tax credits and housing benefit. Maternity payments will be excluded from the freeze.
•Working benefits will be stripped from those who are not disabled and have no children, and will be withdrawn at a faster pace as a claimant’s earnings rise.
•Tax credit and universal credit support to be limited to first two children from April 2017.
•From 2017 there will be an extra £175,000 inheritance tax allowance for those who leave their homes to their children or grandchildren, on top of the £325,000 standard inheritance tax allowance currently.
•The Government is consulting on a new ISA-style pension where savers pay tax on the income they put in, but not when they take it out.
•An apprenticeship levy is being given to large firms, by which those firms which train apprentices receive more money than they put in to the apprentices.
•New cars will not need an MOT until they are four years old, rather than three at the moment and fuel duty has been frozen for another year.
•Britain will meet the NATO commitment to spend 2% of GDP on defence each year
Latest update on the long running holiday pay debate
The Deduction from Wages (Limitation) Regulations 2014 now limits the time for employees wishing to backdate claims for underpaid holiday pay, to a period of two years. This applies only to new cases raised on or after 1 July and means that claims for underpaid holiday pay will not be allowed where the date of the payment in question was more than two years before the date the Tribunal claim was raised. These Regulations come out of the decision in Bear Scotland which decided that non-guaranteed overtime payments should be included in holiday pay calculations and that claims would be time barred where there was a break of more than three months between the successive underpayments. This severely limited employees’ entitlement to claim any backdated unpaid sums.
There is expected to be a slight peak in claims to the Employment Tribunal as employees rushed to submit in time for the deadline but interestingly, this issue has not resulted in the huge numbers of claims which was originally predicted by the Unions. According to recent figures issued by the Employment Tribunal in Scotland, there are just under 21,000 claims lodged for holiday pay in Scotland involving around 321 employers. The Employment Tribunal has recognised that the law has not ever been straightforward in this area and that it continues to be shrouded in confusion.
The approach being taken by the Employment Tribunal is to “sist” (freeze) cases to allow time for the law to develop as it awaits decisions from the Employment Appeal Tribunal which can then be applied to the cases that have been raised.
We will continue to keep readers in touch with the way in which the law develops in this important and potentially costly area.