1st March 2021
How is this year’s Budget likely to affect payroll?
I think it’s fair to say that in a normal year most of the country doesn’t really pay much attention to the Chancellor’s Budget, but this year, with so much economic uncertainty and spiralling national debt, there will be few in our nation who aren’t keen to hear what the Chancellor has to say on 3 March.
Payroll practitioners, on the other hand, are always keen to know what the Chancellor has to say, knowing as they do that what he says could have an impact on their work. This was never more true than in 2021.
The government’s roadmap out of lockdown takes a cautious approach to re-opening the country. But with the furlough scheme due to end on April 30 and the final lockdown restrictions not set to be lifted until late June, there is intense pressure on the Chancellor to extend the support given to businesses through support schemes such as the business rates holiday, the furlough scheme and the VAT reduction for hospitality.
During his round of interviews for Sunday’s political programmes, the Chancellor dropped several large hints that he does indeed intend to extend the support to businesses, and payroll will naturally play a central role in continuing to calculate and process furlough payments. But the Chancellor also said that he “wants to level with the public” about the economic challenges we face.
There is now speculation that the Chancellor may announce tax rises, perhaps not in the rate at which we pay tax, but through a lowering of the thresholds at which we pay it. If the tax thresholds were to change for the coming tax year, beginning on 6 April, this would have a huge impact on payroll departments throughout the country.
Preparations for the new tax year are already underway, and it would be too late for any changes to be implemented by 6 April, so we could be back to the situation of making changes part way into the new tax year. This is certainly not a new occurrence, in fact we had the very same situation with the Scottish thresholds last year, but with everything else they have to contend with, this really isn’t the news that payroll departments were hoping to hear.
We wait to hear, with bated breath, the Chancellor’s Budget statement beginning at 12.30pm on 3 March.