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What does the 2018 budget mean for working parents?

by ParentalChoice
in Tax and Pensions, Payroll, Parenting, Financial Planning
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Yesterday, October 29, Chancellor Philip Hammond presented the UK Government’s 2018 budget. We have reviewed it and pulled out the key points which will affect working parents and, importantly, the implications for those who employ staff to help run their busy lives.

Whilst Mr Hammond was keen to headline the end of austerity being near, will this filter down to our bank accounts or are there little stealth increases which we haven’t noticed?

Increase in income tax thresholds

The biggest headline for the 31 million people paying income tax in the UK, is from April 2019 they will be better off due to an increase in their personal tax allowances. How much better off you’ll be depends which tax bracket you fall into.

The 25.6 million people who are currently basic rate tax payers will see a rise in their personal allowance from £11,850 to £12,500, meaning they will be better off by around £130 per year.

The threshold for paying the higher 40% rate of tax of will be increased from £46,350 to £50,000. The effect of this will see a tax saving of around £600 per person, and thousands of people moving down a tax bracket.

National Living Wage to increase

The Chancellor announced an increase in the National Living Wage for those over 25 years from £7.83 to £8.21. While this is great news for workers, this enforced pay-rise will have implications on employers.

Parental Choice’s payroll team have looked at the impact on employees and employers of the changes.

A member of staff, aged 25 years or older, being paid National Living Wage for 40 hours a week will see their salary rise from £313 per week to £328 per week. Over the year this is a pay-rise of £800. Great news if this is you!

If, however, you are the employer you will need to re-budget. Your costs will increase by around £800 per annum, plus the associated tax and pension costs.

Pensions

There was very little mention of pensions during the budget announcement. However, there was a definite giving with one hand and taking away with the other in terms of pensions for those who drop down from the higher to basic rate of tax. They will see their tax relief on contributions dropping to 20% therefore what goes into their pot will be less.

The amount you are able to save for your pension each year has not changed. Your annual allowance stays at £40,000. The anticipated reduction to £20,000 did not materialise, despite this, commentators are still expecting this income generating quick win to be introduced at some stage.

Brexit deal or no deal?

Does this budget stack up if there is no Brexit deal next year? According to Philip Hammond it does. “The measures that I announced yesterday will go ahead whatever happens,” he said. “I’m confident that we will get a good deal with the EU. If we do get that deal there will be a dividend from that deal that will enable us to put a bit more into the pot for the spending review that happens next year.”

He added: “I also kept sufficient firepower in my locker in borrowing capacity terms to be able to intervene and support the economy if anything happens – not just a no-deal Brexit, it could be anything – which means the economy needs more support over the coming years.”

 

Parental Choice’s services include searching for the childcare options which are best suited to the needs of your family, including nannies, au-pairs, nurseries, childminders, schools and tutors.  

We can also help you run all your contractual, payroll and pension obligations for any staff you employ to help run your busy household. See www.parentalchoice.co.uk, call us on 0208 979 6453 or email us on info@parentalchoice.co.uk for more information and details of our services.

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