In July this year, George Osborne declared there would be several changes to the National Minimum Wage and Tax. Who will be affected by these changes? What are the important changes that we need to know about?
CHANGES TO TAX & BENEFITS
Making the benefit system fairer for taxpayers
Benefits including tax credit will be frozen for 4 years from 2016.
Child Tax Credit will be limited to 2 children for children born from April 2017.
Adults aged 18-21 who claim Universal Credit will have to apply for an apprenticeship or to go on a work placement to gain work experience.
Rents for social housing will be reduced by 1% a year for 4 years.
Personal Allowance will be increased from £10,600 to £11,000
The tax-free Personal Allowance which is the amount people earn before they have to start paying Income Tax will increase to £11,000 in 2016.
Corporation Tax will be cut to 19% in 2017 and 18% in 2020
The main rate of Corporation Tax has already been cut from 28% in 2010 to 20%. It will now fall further, from 20% to 19% in 2017, and then to 18% in 2020, benefiting over a million businesses.
The standard rate of Insurance Premium Tax will increase to 9.5%
From November 2015 the standard rate of Insurance Premium Tax will be increased from 6% to 9.5%.
Road tax will be reformed
The road tax system will be changing to make it fairer for road users and taxpayers. From 2017, there will be a flat rate of £140 for most cars, except in the first year when tax will remain linked to the CO2 emissions that cars produce.
The amount people with an income of more than £150,000 can pay tax-free into a pension will be reduced
Most people can contribute up to £40,000 a year to their pension tax-free. From April 2016, this amount will be reduced for individuals with incomes of over £150,000.
CHANGES TO THE MINIMUM WAGE
£9 an hour by 2020
By 2020 employees will have to pay employees a minimum of £9 an hour.
You will have to be aged 25 and over
The new National Living Wage will only apply to those aged 25 and over whereas at the moment it is for those aged 21 and over.
The government want to encourage younger people to do work placements or to enroll on apprentice schemes to gain the experience to secure permanent employment.
The National Wage will be introduced gradually
It sounds great that most of us will be getting a pay rise but it will be introduced gradually. The first increase will be in April 2016 which employees will get a minimum £7.20 an hour.
Whereas most of us will receive a pay rise over the next few years, it is estimated about 60,000 will lose their jobs.
It will create 3 million new apprenticeships
3 million new apprenticeships will be created by 2020, funded by many employers. These employers are committed to training people in order to help them secure employment.
If you enjoyed this blog post then perhaps you’d like to read “July 2015 Budget Summary“?