In his budget announcement, Osborne revised down the UK’s growth forecast and stated that the Office of Budgetary Responsibilities (OBR)’s forecasts are based on the UK remaining in the EU, as any exit could spark economic uncertainty.
He also claimed that the UK was “well placed” to handle the potential external crises that could be caused by the global economic situation.
Today’s labour market statistics show that a record number of people are in work, with an employment rate of 74.1% and an unemployment rate of 5.1%.
“Since my autumn statement, 150,000 new jobs have been created,” Osborne said. “We were warned that they would be low skilled, but 90% are skilled. We were warned that most would be part time, but three quarters are full time.” He also stressed that not all of the growth has been focused in London, with the fastest growth occurring in the North East.
The biggest surprise in the budget was the announcement of a sugar tax on soft drinks manufacturers, designed to tackle childhood obesity.
Here are the other key points HR professionals need to be aware of:
- Lifetime ISA: Osborne acknowledged an “agonising choice” for young people who are forced to either save for their first home or for their retirement. He announced the introduction of a Lifetime ISA for those under the age of 40 with an annual limit of £4,000. For every £4 an individual places in the fund, the government will add a further £1. The government is currently assessing whether people could remove the money for a small fee and return it, creating what Osborne described as “flexible and fair” system. The question now is how this ISA will fit with personal pensions savings.
- Tax cuts for businesses: By 2020 corporation tax will fall to 17%. "Britain is blazing a trail, let the rest of the world catch up," the chancellor said. Business rates will fall for smaller businesses, with the business rate threshold doubling to £15,000. This means that from April 2017, 600,000 SMEs will be paying no business rates at all. “This is a budget that gets rid of [tax] loopholes for multinationals and gets rid of taxes for small businesses,” said Osborne.
- Tax cuts for individuals: The tax-free personal allowance will increase to £11,500 next year. The higher 40% rate threshold will increase to £45,000. Self-employed people will be exempt from paying class 2 National Insurance contributions from 2018.
- Redundancy tax: It will become more expensive to shed staff, as the Conservatives outlined plans to introduce National Insurance taxes onto redundancy payments.
- Personal contractors: The chancellor announced a crack down on contractors using personal service companies. Public sector organisations will be responsible for making sure any workers or contractors are paying the correct tax.
- Education reform: All schools will become, or will be in the process of becoming, academies by 2020. Maths will become a compulsory subject to the age of 18. There will be the option for schools for adopt a longer day, with the potential for offering more sports to students.
- Infrastructure: Osborne discussed further infrastructure improvements as part of the scheme to build a Northern Powerhouse. An improved road link between Manchester and Sheffield and a four-lane M62 were outlined. A plan for the future of London’s transport was also unveiled, with Crossrail 2 confirmed. No start date has been suggested for the project.