How the Budget 2015 affects you

aat comment

There were few of the fabled rabbits from hats from the Chancellor. But cuts to the jobs tax are important – and welcome.

I’ve never been a great fan of the “jobs tax”. I’m talking about employers’ National Insurance (NI) – the tax companies have to pay simply to put a bum on an office seat. Apart from the perverse incentive it creates – “don’t take on staff or we’ll tax you”, it’s a hidden levy . Effectively it’s a personal tax that is unseen by the person it is levied upon.

In what was a generally modest Budget – no Nigel Lawson-style pre-election giveaways like the 2p cut in income tax in 1987 – Chancellor George Osborne pledged to abolish employers’ NI for two key groups. Under the plans, companies will no longer have to pay employer’s NI for under-21s or, from 2016, apprentices.

This will come as great news for a lot of AAT Comment readers. AAT students who enter the labour market before their 21st birthday, or through an apprenticeship, just became a more attractive hire. They will cost less to employ than other groups.

Great news. But is it fair? It’s certainly defendable. The simple truth is that being young is a disadvantage in the labour market. Many youngsters complain that they are asked to fight a battle they cannot win: employers don’t want to take a chance on people with no paid experience, but it’s impossible to get paid experience because no-one will hire them. The Catch-22 is crushing.

The move by Osborne today may go some way to levelling the playing field. Firms are more likely to give youngsters an opportunity if they are cheaper to employ. And this week’s package creates a strong incentive for firms to create apprenticeships: another lifeline for those that desperately need paid work to make their way in the world.

What has the Budget done for business?

Apart from a bit of bank-bashing, this was a generally business-friendly statement. The most eye-catching business policy was the cutting of Corporation Tax to 20% from April.

Business rates relief for small businesses has been doubled until next year – part of a wider proposal to review the business rates landscape completely. It’s about time for a rethink: the public values high-street shops, but they are currently unfairly penalised in comparison to their online-only rivals, because business rates are levied on the value of commercial property.

There was an interesting proposal, too, to allow the new mayoralty in Greater Manchester to keep 100% of the growth in business rates in the area. From 2017, when the new elected mayor of the city-region takes charge, any increases on rates revenue will be retained locally rather than half of it being redistributed around the country by the Treasury as is currently the case.

Consumer confidence may be boosted by higher house prices. The move by the Chancellor for the government to subsidise first time buyers’ deposits by £50 for every £200 they save is another demand-side measure from the Chancellor on housing, coming on the back of the original Help to Buy scheme. The new ISAs should push up house prices, although many would argue that boosting supply of housing – rather than demand for it – would be a wiser approach. Help to Buy ISAs will be popular with those looking to get on the housing ladder, nevertheless. Saving £12,000 gets you a deposit of £15,000.

However, there was no pledge on keeping VAT at the current 20% rate. This allowed Labour leader Ed Miliband to taunt the Chancellor that he had a secret plan to raise it in order to balance the books. Expect more of that attack line as we approach the General Election – now just seven weeks away.

How was the Budget for you? Let us know on Facebook.

Accounting Technician editor Ben Walker has been a policy and business journalist for 15 years. But don’t let that put you off, he can be surprisingly good company at times. 

Ben Walker is the former editor of Accounting Technician.

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