27 November 2017
There were a number of key items in Chancellor Philip Hammond’s budget announced on 22 November that will affect payroll.
Income Tax will be reduced for low and middle earners as the Chancellor kept to his pledge to raise the thresholds before the basic and higher rate tax kick in.
The personal allowance will rise to £11,850 in April from £11,500. The threshold before 40 per cent higher rate tax applies will rise to £46,350 from £45,000 in April. Raising these thresholds will cost an estimated extra £1.1 billion per year.
It is estimated that these combined increases would mean that a basic rate taxpayer would take home £70 more in the 2018-19 tax year and a higher rate taxpayer would take home an additional £340.
This is in line with the Chancellor’s promise in March that the personal allowance would be raised to £12,500 by 2020/21.
Additionally, the national living wage is set to increase by 4.4% from £7.50 to £7.83 for all workers over the age of 25. This will give employees working a typical 37.5 hour week a monthly increase of approximately £50.
The national minimum wage is also set to increase;
- 21-24-year-olds: £7.38 from £7.05 per hour, a 4.7% increase
- 18-20-year-olds: £5.90 from £5.60 per hour, a 5.4% increase
- 16 and 17-year-olds: £4.20 from £4.05 per hour, a 3.7% increase
- Apprentices (aged under 19 or in the first year of their apprenticeship): £3.70 from £3.50 per hour, a 5.7% increase