New ‘National Living Wage’ tax credit changes
The most radical announcement by the Chancellor on 8th July was a significant reduction in the amount the government plans to spend on tax credits and other State benefits. At the same time he announced that there would a new national living wage to be paid by employers, rising to £9 an hour by 2020. This strategy combined with the increase in the personal allowance to £11,000 for 2016/17, and eventually £12,500, means that employees will keep more of what they earn but the tax credits received to top up their income will be significantly reduced.
Employers will need to assess the impact of this change on the profitability of their business and we can help you consider this in more detail as there are other factors such the increase in the employment allowance to £3,000 next year and the planned reductions in the corporation tax rate that may also be relevant to your business.