Budget 2013: Key announcements for HR
George Osborne has delivered his fourth Budget, "for people who aspire to work hard and get on". While acknowledging that the recovery programme was "taking longer than we had all hoped", he said that the Government was "slowly but surely fixing our country's economic problems".
The Chancellor trailed the latest forecasts for UK economic growth by noting that the Office for Budget Responsibility (OBR) had again revised down its forecasts for both global and Eurozone economic growth since its last forecasts. The OBR is now forecasting UK GDP growth of 0.6% in 2013, rising to 1.8% in 2014 and 2.3% in 2015.
In confronting "the nation's problems head on", the Chancellor made a number of announcements of note to HR professionals.
The cap on public-sector pay awards, at an average 1%, will be extended for a further year, to 2015/16 for most of the employees affected. This will apply to the civil service and those covered by the public-sector pay review bodies, with budgets for local authorities and the devolved administrations being "adjusted accordingly" in the June 2013 Spending Review.
The Government will also seek "substantial savings from progression pay", with details in the June Spending Review. "I know that that is tough, but it is fair," Osborne said.
However, the armed forces will be exempt from the changes to progression pay arrangements, due to "the unique nature of their careers".
The main rate of corporation tax - due to fall to 23% from April 2013 and to 21% from April 2014 - will reduce by another one percentage point to 20% from April 2015. This will make it the lowest business tax rate of any major economy in the world.
The Chancellor confirmed the introduction of a new tax-free childcare scheme, which will offer 20% off childcare costs up to £1,200 for each child where both parents in the household are working but neither earns more than £150,000 a year. This will replace the current childcare vouchers scheme, which is only available to employees whose employer chooses to take part in the scheme (although those in this scheme will be able to choose whether or not to remain in it once the new scheme is launched).
The new arrangements will be phased in from autumn 2015 - initially for children aged under five, but extending to those aged under 12. The Government will issue a consultation on the design and operation of the new scheme, including "how employers can continue to play a role in supporting their employees with childcare costs".
The Finance Bill 2014 will include legislation to increase the maximum amount that companies can lend to employees tax-free - for purposes such as to purchase a season ticket - from £5,000 to £10,000 a year.
The new single-state pension will now be introduced from 2016. The impact of this will be felt by public-sector employers and those private-sector employers and employees with defined-benefit pension schemes, who will no longer be able to pay lower National Insurance contributions in return for contracting out of the second state pension. While public-sector employers will "have to absorb the burden", private-sector employers will be expected to offset the extra cost through making changes to their contribution rates or pension benefits.
As previously announced, the 50% higher tax rate will reduce to 45% from April 2013. The personal income tax allowance will increase to £9,440 from April 2013, and it was announced that it will increase again, to £10,000, from April 2014.
A new employment allowance will be introduced from April 2014 to address the cost of employing people, particularly for small businesses. It will give all businesses, including charities, an entitlement to £2,000 per annum off their employer National Insurance contributions.
Employment law
The Government has confirmed the implementation date for the new owner-employee status is 1 September 2013. Employee-owners will receive shares of between £2,000 and £50,000, exempt from capital gains tax, in return for giving up specified employment rights. The Government has also announced that the first £2,000 of share value that any employee receives under the new status will be free from income tax and National Insurance contributions.
In addition, the Government will remove the presumption of self-employment for limited liability partnership (LLP) partners in order to tackle the disguising of employment relationships through LLPs and counter the artificial allocation of profits to partners - in both LLPs and other partnerships - to achieve a tax advantage.
Following recommendations by Dame Carol Black and David Frost, as announced in January 2013, the Government will abolish the Percentage Threshold Scheme and recycle funding into creating the health and work assessment and advisory service for those in danger of long-term sickness absence. The Government will also introduce a targeted tax relief so that amounts up to a cap of £500 paid by employers on health-related interventions recommended by the service are not treated as a taxable benefit in kind. The Government will consult on implementation later in 2013.
Note: On 20 March 2013, the House of Lords voted to remove s.27 of the Growth and Infrastructure Bill, which would amend the Employment Rights Act 1996 to create a new tier of employment status: employee owners, who would receive shares exempt from capital gains tax, in return for giving up specified employment rights, including the right to unfair dismissal. The proposal now returns to the House of Commons.
Also
Budget
2013 (PDF format, 3.2MB) Download the complete Budget 2013 document from the
HM Treasury website.
