At the end of March, the Chancellor Rishi Sunak, delivered the UK Spring Statement. With the upcoming tax increases and the cost of living rising rapidly, the public were waiting for some relief from the Chancellor’s announcement. On the same day, the Office for National Statistics revealed that inflation in the UK hit 6.2% in February, seeing the biggest drop in spending power since 1956 when records began.
With the changes affecting everyone in the UK, HR teams should prepare for questions from employees. We also encourage HR to reach out to the wider team and make it known that your door is open. Many people, particularly those on lower incomes are going to feel the squeeze and HR should be on hand to chat through any concerns.
Here are 5 key takeaways for HR teams to consider:
National Insurance Contributions
Although the planned 1.25% increase will stay in place, the threshold at which workers start paying National Insurance will change from July. It’ll be raised by £3,000, to bring it in line with the personal income tax allowance. Essentially, earners over £12,570 or under will not have to pay National Insurance from July. Workers earning over £9,586 will still contribute towards the hike in National Insurance as planned from April and because of this balance, workers earning under £50,000 will pay less in NICs.
HR teams should make employees aware that their monthly take home salary is going to change once in April and again in July. Those earning over £50,000 will feel the effects of the NICs increase more, as they’ll be contributing more than they were before the NICs increase that’s coming into effect in April. For example, someone earning £50,000 currently pays £404.32 in NICs. From April, they’ll pay £442.99 and then from July, they’ll pay £413.29. Ensure that employees earning this salary and over are aware of this change.
The basic rate of income tax will also fall by a penny to 19p by 2024. HR teams just need to keep this on their radar as payroll will be affected at some point.
Rishi Sunak also announced that the Government would look into whether more could be done to encourage employers to deliver ‘high-quality employee training’. This includes taking a look at the Apprenticeship Levy and whether that could be improved.
The Employment Allowance will increase from £4,000 to £5,000 from April 2022. The allowance means employers can reduce the amount they pay on National Insurance by up to £5,000 for this tax year, helping smaller businesses with employment costs. This could be good news for recruitment as well as retention.
Research and Development (R&D) Tax Credits
R&D tax credits are an incentive for companies to invest more in research and development. Rishi Sunak announced that these tax credits would be improved to “deliver better value for money for the taxpayer while being more generous”. More details will be given later this year.
Fuel Duty Cut
All drivers have felt the petrol crisis. If you have employees that drive for work and submit their petrol receipts to HR, you’ll have noticed the sharp increase in costs. To help with the rise in petrol prices, fuel duty will be cut by 5p per litre. According to the Chancellor, the cut will save the average van driver £200 and the average car driver £100 over the next year. However, the move has been criticised as the cut only takes prices back to what they were a week prior.
While we see some savings and cuts to taxes, the average worker is still going to be left with less due to inflation. HR teams should communicate the upcoming changes, how it will affect employees, and provide support where possible. HR technology is a great tool for streamlining company-wide communications and streamlining processes, meaning HR teams have more time to focus on their employees.
How Phase 3 can help
If you need support navigating the new changes from the Chancellor’s Spring Statement, whether it’s finding the right HR technology or outsourcing payroll services, we can help. To find out more, get in touch with us today.
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