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Budget implications for HR and employment law

BY Sophie Macphail
Employment Law & HR
BG Purple

Phillip Hammond presented the Spring Budget 2017 on 13 March 2017. Although relatively thin in comparison to previous years, stretching to just 64 pages, there are some key changes that are important from an employment perspective. 


Consultation on state pension and taxation


The government is planning a consultation on the difference in NI contributions between the employed and self-employed, which are now mainly found in parental benefits. The consultation, due to take place this summer, will also look at accommodation benefits provided to employees and the taxation of employee expenses.


Wage and Tax Rates


NI contributions for the self-employed will increase to 10% in April 2018 and to 11% in 2019. This will mean that the rates are almost in line with the 12% NICs paid by employees. This is undoubtedly a response to the boom in self-employed numbers in the UK in recent years, with the Trade Union Congress claiming that the success of the gig economy combined with the surge in zero-hour contracts costs the UK £4bn in taxes. 


In order to reduce tax disparities between the employed and self-employed and those who work through a company, the tax-free dividend allowance will be reduced by £3,000 to £2,000 as of April 2018.


The national living wage will increase to increase on £7.50 on 1 April 2017, the personal allowance will increase to £11,500 and the higher rate threshold will increase to £45,000.


Childcare Policy


Originally due to come into place this Spring, a tax-free childcare scheme will now be introduced in Autumn and will replace the current childcare voucher scheme for new applicants. The scheme will be available to all eligible parents and will provide £2,000 towards childcare for children under 12. Further, from September working parents with children aged 3-4 will have their free childcare entitlement increased to 30 hours per week.


Returning to Work


The government intends to spend £5 million on promoting “returnships” for individuals who return to work after a career break. Further details will be provided in due course.

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