New benefits, changes in National Minimum Wage and more

Chancellor Rishi Sunak delivered the new government’s first budget on 11th of March, 2020.

There are several references to the Corona Virus situation, in a solution-oriented manner, especially regarding healthcare and related benefits.

The same day Bank of England announced an immediate reduction in the base rate of interest from 0.75% to 0.25% – the lowest level since 2008. This is clearly meant as a help to the people living in England, because the value that central bank sets is a guide for the financial sector to define the price of credit in the country. Other banks borrow money from the central bank at the base rate and then set their own rates for their customers. With this change we can expect cheaper financial products.

You may read about sensible preparations on the HMRC website, as well. They do their best in a caring fashion, even having attention on improving the immune system of those who are predisposed by some illness already. You can find links below.

The government strengthened its support for the NHS, businesses, and individuals by introducing special solutions and funding to ‘get the country through’ the coronavirus emergency. Longer-term plans were also announced for increased spending on major infrastructure projects across the UK.

To summarise Mr. Suntan’s statements we will attempt to highlight the main topics he elaborated on:

Tax Rates and Allowances

The government concluded no increase on Income Tax, National Insurance, or VAT.

Previously employees were obliged to pay National Insurance contributions from the minimal income of £8.424/year. The new limit is £9.500 from the 6th of April, 2020. If you earn £25,000 as an employee, you’ll pay around £100 less NI in the 2020/21 tax year. The tax free personal income remains at £12,500 and no changes have been made to Income Tax zones compared to last year.
Employment Allowance previously entitled certain businesses who employ staff to reduce their National Insurance bill by up to £3000. The Employment allowance was increased from £3,000 to £4,000 which means employer’s NI bills are reduced.

However important changes to the eligibility criteria are due to be introduced from April 2020. The Employment Allowance can only be claimed if the overall annual Employer National Insurance bill is below £100,000.

National Minimum Wage (NMW)

The chancellor confirmed an increase in the minimum wage along each and every age group:

• For workers over 25, an increase to £8.72 (6.2% rise)
• For workers aged 21 to 24, an increase to £8.20 (6.5% rise)
• For workers aged 18 to 20, an increase to to £6.45 (4.9% rise)
• For workers under 18, an increase to £4.55 (4.6% rise)
• Under 18, an increase to £4.15 (6.4% rise).

Sick Pay support (or Sick Pay Relief, the official abbreviation is SSP)

In the light of the coronavirus emergency, the government will support small- and medium-sized businesses and employers to cope with the extra costs of paying Coronavirus related Sick Pay by refunding those additional expenditures falling into this category.

The government previously said that Sick Pay will be paid from day one of illness. The Chancellor announced that this would also be available to those advised to self-isolate even if they had not yet presented with symptoms. There will also be no need to go to the doctors for a sick note, which will be made available by the NHS 111 service.

Other contributions

Of course, many self-employed people cannot claim SSP, for those who can’t, the government will make it quicker and easier to request and receive ‘new style’ Employment and Support Allowance* and Universal Credit.**

The government will also be temporarily relaxing the requirements of the minimum income limit in Universal Credit for those directly affected or self-isolating according to government advice for the duration of the outbreak.

IR35

These rules are aimed at so-called ‘disguised employees’ – people whose working practices are more similar to those of traditional employees. The new rules will be effective for the private sector from the 6th of April, as been published in February.

The government has promised a ‘soft landing’ as the new rules take effect and that the new approach won’t affect genuine freelancers.

If you need more data on the subject, read the articles ‘What is IR35’ and ‘IR35 – Frequently asked questions’ written without using hard to understand words, here:
Hyperlinks are needed here to IR35English and IR35FAQEnglish

Glossary

*Employment and Support Allowance: is a United Kingdom welfare payment for adults younger than the State Pension age who are having difficulty finding work because of their long-term medical condition or a disability. It is a basic income-replacement benefit.

**Universal Credit: is a benefit for working-age people, replacing six benefits and combining them into one payment: income support. (Includes e.g. housing benefit, job seeker’s, etc.)

Source References:
https://www.gov.uk/government/publications/coronavirus-action-plan/coronavirus-action-plan-a-guide-to-what-you-can-expect-across-the-uk
https://www.crunch.co.uk/knowledge/tax/crunchs-simple-guide-to-the-march-2020-budget/?utm_source=facebook&utm_medium=social&utm_campaign=group-march-2020-budget
https://www.accountingweb.co.uk/tax/hmrc-policy/no-movement-on-off-payroll-reforms