Legal

What the budget means for businesses

16 Mar 2021 By Andy Hamman

From the furlough scheme extension to the increasing national living wage, Andy Hamman outlines the key changes employers need to be aware of

Job retention scheme

Having extended the original furlough scheme three times, it comes as no surprise that the chancellor has extended it once again until 30 September 2021. This latest extension represents 19 full months of the scheme since March 2020.

Employers will continue to be able to claim up to 80 per cent of employee wages for hours not worked (capped at £2,500 pro rata). From July 2021, claims will drop to a maximum of 70 per cent (capped at £2,187.50) and in August and September, it will be reduced further to 60 per cent (capped at £1,875). In both cases, the employer will be required to top up wages to 80 per cent or more.

As before, for any periods that employees do work or if on annual leave, the employer must pay 100 per cent of the wages. For all periods, the business also remains responsible for funding employer national insurance and pension contributions.

As of 31 January 2021, 4.7 million employees were part of the furlough scheme. By mid-February 2021, £53.8bn had been claimed by employers since the introduction of the scheme. The government will be establishing a taskforce to tackle alleged fraud to ensure compliant funding – an important announcement given the volume of government support that has been extended to mitigate the impact of Covid. It is right that the government applies scrutiny to ensure such funds are used appropriately. This announcement should act as a fresh reminder to employers to check claims made for accuracy and to repay any amounts found to be over claimed to HMRC.

Apprenticeships

To support future employment opportunities, the current grant of £1,500 (for those aged 25+) will be doubled to £3,000 per apprentice with no age restriction. Whether this will have the desired effect is debatable as the existing apprenticeship scheme has so far failed to demonstrate the impact the government expected.

National living wage

From April 2021, the national living wage will increase by 2.2 per cent to £8.91 per hour and will apply to workers aged 23 years and over – down from aged 25 and over. This is in line with published plans to increase the wage to £10.50 per hour by 2024 for workers aged 21 and over. The rise continues to be welcomed and is on target.

Personal allowances, income tax and NI

The personal allowance will rise to £12,570 from April 2021 and the rate at which higher rates of tax are paid will increase to £50,270. Thereafter, there will be no proposed changes or increases until 2026, which the government estimates will save £8bn a year by 2025-26.

Taxpayers would naturally wish to see index-linked increases year-on-year, but against the alternative backdrop of higher taxation to help the economy recover, this appears to be a reasonable compromise, at least in the short term.

Off-payroll rules and Construction Industry Scheme 

It was not expected that the budget would make any mention of (or postpone) the change to legislation for off-payroll workers in the private sector from 6 April 2021. There had been some speculation of a further deferral; however, it is clear that the new rules will come into play on time and as intended. Although not particularly welcome, many businesses have taken the delay from April 2020 as an opportunity to meet the new compliance conditions. It comes as no surprise that the planned changes will proceed unheeded. 

The proposed changes to tighten the Construction Industry Scheme compliance will go ahead as planned.

Andy Hamman is employment tax director at national audit, tax, advisory and risk firm Crowe 

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