UK Budget 2020 – what it means for employers

Brian Rudkin

Brian Rudkin

Director and Head of Employer Services

I think anti-climax is how I would best describe today’s Budget from an employer’s point of view. 

Although we were not expecting any major headlines on IR35 following the recent conclusion of the Government’s “review”, the fact that it did not feature in the Chancellor’s speech at all, and the only mention of the imminent IR35 changes was a brief paragraph buried away on page 88 of the Budget publication confirming it is full steam ahead, was a surprise. IR35 will have its day soon though when the Finance Bill is published on 19 March which (hopefully) will include much improved and clearer legislation on how IR35 is going to operate from 6 April. 

Away from IR35, most employment tax related announcements were fairly low key with no real headline grabbers. Predictably, vehicle taxation featured, including: 

  • Previously announced short-term reductions to the benefit in kind CO2 charges for low emission company cars and all cars registered from 6 April 2020 with slight increases in the two following years to negate this reduction. 
  • Inflationary increases to the van and van fuel benefit in kind charges from 6 April 2020 to £3,490 and £666 respectively 
  • A new nil van benefit in kind charge from 6 April 2021 for zero emission company vans 

There was no mention of changes to the treatment of double-cab pickups or panel vans, so it is business as usual for those vehicles for now. 

Other minor measures announced included an increase to the tax-exempt homeworker allowance to £6 per week from 6 April 2020 and a slight extension of the exemption covering welfare counselling benefits provided to employees to include relevant medical treatment linked to the counselling received. 

On the general employment side, the key announcement was the intention for the Government to increase the National Living Wage to 2/3rds of median pay by 2024 which, based on current estimations, will be around £10.50 per hour. This will put further cost pressure on employers in low paid sectors such as manufacturing, retail and hospitality over the next few years. The age at which workers will move on to the National Living Wage will also be extended to over 23s from April 2021, and with a target for it to apply to workers over 21 by April 2024. 

Finally, just a word on compliance. Yet again, the Construction Industry Scheme (CIS) is faced with even more compliance measures, this time to prevent businesses fraudulently using CIS to make tax reclaims. This should not have much impact on those businesses that try their best to be CIS compliant. What is probably more relevant to a wider section of the economy is the announcement that the Government is investing millions over the next few years to help HMRC focus on compliance activities. Is this a coincidence that it is at the same time that the IR35 legislation is changing? We will need to wait and see on that one. 

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