A number of changes take place from April this year, and we have looked at some of them in previous blog articles. One change that does apply and that we have not looked at before is the introduction of the National Living Wage (NLW). This will affect a large number of readers, whether they are employers or employees.
The National Minimum Wage (NMW) has been with us now some time. This provides the minimum hourly amount that must be paid or earned. In October 2015 this was increased to £6.70 per hour for people aged 21 or above, £5.30 per hour for people aged 18 to 20, and £3.87 per hour for people aged under 18.
The NMW and the NLW are both regulated by HM Revenue and Customs (HMRC).
From April 2016 the NLW requires everyone aged 25 and above to be paid at a rate of £7.20 per hour.
If you are paid above £7.20 per hour then this will clearly not affect you. However, if your wages prior to April are below this rate then you may be affected. Assuming that you are being paid at least the NMW (if not then please contact HMRC) then whether the introduction of the NLW affect you will depend on whether you are aged 25 or above. If you are aged below 25 then you will not be affected by the NLW. However, if you are aged 25 or above then your wage will increase to at least the level of the NLW.
This articles is being written before the March 2016 budget. However, a quick reminder of some of the changes that we already know about:
- Despite initial fears, there will be no change to the tax relief available on pension contributions.
- There will be a tax-free dividend allowance of £5,000 per annum. Tax on dividends above that level will increase by 7.5%.
- All interest will be paid before any tax is deducted. There will be a tax-free allowance of £1,000 per annum relating to interest (£500 for higher rate taxpayers). Interest above this level will be taxable as at present unless protected within an ISA, but that tax will now be collected by assessment or through an adjustment in your tax code.
- The personal allowance available to most people increases from £10,600 to £11,000. The additional age allowance finally disappears.
- There are major changes to the calculation of taxable income from property rental.
- Stamp duty on purchase of a second residential property increases by 3.5%.
WatkinsonBlack are pleased to advise on these and other matters. They have considerable experience in all areas of taxation and business services, including providing a very cost-effective payroll bureau service. If you want to arrange a no-obligation initial meeting on any taxation or accounting matter then please contact us. Please note that these ideas are intended to inform rather than advise and you should always obtain professional advice before taking any action.