The principal employment measures announced in Monday’s budget include the reform to off-payroll working in the private sector; increased national minimum wage rates; and the delay in implementing the changes to national insurance contributions on termination payments.
IR35 in the private sector
The public sector off-payroll working rules are to be extended to large and medium sized businesses in the private sector from 6 April 2020. The existing IR35 rules will continue to apply to small businesses. We don’t yet have clarification as to what is meant by a small, medium or large business.
It had been anticipated that this change would be introduced next year (read our previous blog) but the Chancellor has confirmed that the reform has been delayed until 2020.
In summary, IR35 is designed to ensure that individuals providing services via an intermediary, who would have been taxed as employees if they had been engaged directly, pay employment tax in a similar way to employees. Currently it is the intermediary in the private sector which is responsible for determining whether IR35 applies and, if it does, paying tax and national insurance contributions. In the public sector, from 6 April 2017, the responsibility for determining whether IR35 applies, and paying tax and NICs if it does, rests with the public body and not the intermediary. This is explained in detail on Workbox at Tax: Employees, Consultants and others.
Changing responsibility for IR35 assessments in the private sector will have significant financial and practice consequences. We are running seminars in December on “IR35 in the private sector: how to navigate the changes”. If you would like to come along, please sign up here.
National minimum wage
The government has followed the recommendations made by the Low Pay Commission in confirming that the following national minimum wage rates will apply from 6 April 2019:
- National living wage (workers aged 25 and over) = £8.21 (from £7.83)
- Standard adult rate (age 21-14) = £7.70 (from £7.38)
- Development rate (age 18-20) = £6.15 (from £5.90)
- Workers aged 16-17 (who are not apprentices) = £4.35 (from £4.20)
- Apprentice rate = £3.90 (from £3.70)
Tax on termination payments
Currently, if the £30,000 tax exemption applies to a termination payment, no employer or employee national insurance contributions are due. However, from April 2020 employer Class 1A NICs will be due on any balance over £30,000. This change was due to take place in April 2019 but has been put back by a year.
Please get in touch with your usual Brodies contact if you would like more information about any of the budget announcements.
On November 1, 2018