The Chancellor presented his Pre-Budget Statement to Parliament on 2 December 2004. Most of the matters relevant to Payroll and HR were set out in supporting documents and press releases issued at the time. As UK legislation requires the PAYE, NICs and related thresholds to rise each year in line with the Retail Price Index, most are set to increase from 6 April 2005 by 3.1% (i.e. the year-on-year increase at September 2004). In a few cases, the increases are higher and legislation will be required to give them effect.

There were also announcements on a number of other measures, in particular a large number of documents describing steps that are to be taken to close down tax avoidance schemes. These are covered in separate items in this newsletter.

The Pre-Budget Statement and the associated documents are available on the Treasury and Inland Revenue websites.

National Insurance Thresholds
There are no increases to NICs rate for 2005/06. The NICs thresholds for 2005/06, effective 6 April 2005, are as follows:

Tax Allowances
Changes to bandwidths and any changes to income tax rates will be announced in the Budget Statement in March/April 2005. The new tax allowances from 6 April 2005 are shown in the following table. The increases are in line with inflation other than the age-related personal allowances, where the increases are around 3.8%.

* The Income Tax (Indexation) (No.2) Order 2004 gives these increases as £;7,040 and £;7,170 respectively, in line with inflation. The higher increases announced by the Chancellor will require separate legislation.

The personal allowance for employees under age 65 is set at the same level as the NICs earnings threshold. The new emergency tax code from April 2005 will be 489L and the weekly tax threshold will be £;94. The change to L suffix tax codes will be made in bulk from the start of the 2005/06 tax year. Instructions will be provided on form P9X, to be included in the Employer's Annual Pack due in February 2005. The update will involve an increase in 15 points to all L tax codes.

Any changes to the rates and thresholds will be announced by the Chancellor in the Budget Statement in March/April 2005. Instructions on how to implement any changes will be provided in the Employer's Budget Pack, sent out subsequent to the Budget, and will be applied on the first payday on or after a date in May or June 2005. Based on practice in recent years, the date may be 18 May, i.e. week 7, or 15 June, i.e. week 11.

The existing taxable pay tables SR + B to D (dated May 2004) will continue to be used until the week in 2005/06 when the Budget changes are applied. New tables are supplied with the Budget Pack.

Tax Credits
The elements of Working Tax Credit and Child Tax Credit will increase in line with inflation from April 2005, except for the maximum eligible childcare costs. The increases to the elements of WTC, effective April 2005, are as follows:

*In the case of a joint claim, these elements could be paid to both adults

Statutory Sick Pay
The weekly rate of SSP will increase from £;66.15 to £;68.20 from 6 April 2005. Daily rates are calculated by dividing the rate by the number of qualifying days in the week. The Lower Earnings Limit, the level at which an employee's average earnings must reach to qualify for SSP, increases to £;82 per week from 6 April 2005.

Statutory Maternity, Paternity and Adoption Pay
The changes to the rates, percentages and thresholds for SMP, SPP and SAP, effective for payment weeks starting on or after 3 April 2005, are as follows:

The Lower Earnings Limit, the level at which an employee's average earnings must reach to qualify for SMP, SPP or SAP, increases to £;82 per week from 6 April 2005.

The Government has set a goal of twelve months paid maternity leave, transferable from the mother to the father, by the end of the next Parliament. The first stage in achieving this objective will be the extension of the current SMP entitlement of 26 weeks to 39 weeks from April 2007.

Workforce development
The National Employer Training Programme will be rolled out from 2006-07 and will cover the whole country in 2007-08. This will build on the results of Employer Training Pilots, currently operating in over one third of the country, with over 15,000 employers and 100,000 employees participating. The key features of the National Employer Training Programme are:

• brokers who will act for employers and their employees to assess training needs and source high quality training provision that can be delivered flexibly in the workplace
  
  
• fully subsidised costs of training to level 2 (equivalent to 5 GCSEs at grade A*-C) where employers are prepared to offer their low-skilled employees paid time to train
  
  
• financial support - equivalent to that for a level 2 qualification - towards the cost of a level 3 qualification (equivalent to A levels) for those who can jump straight to level 3
  
  
• support from brokers to design and source training packages at level 3 and higher, and
  
  
• creation of links with Jobcentre Plus in order to support adults making the transition into work to get training in a way that meets the requirements of their employer.
  
  

From April 2006, the Government will pilot the approach of allowing longer-term benefit claimants currently on Jobseeker's Allowance, along with those on Income Support and Incapacity Benefit, to take up free, full-time, work-focused training, where this is judged by their Personal Advisor as the best way of helping them into work. The pilots will also test an additional benefit supplement of £;10 a week to cover the extra costs of learning. Receipt of this support will be dependent on participants meeting the conditions of a 'learning agreement', covering course attendance and participation, agreed with their Personal Advisor.

Skills Coaches will be piloted from April 2005 in eight Jobcentre Plus Districts, initially for the unemployed, to provide one-to-one personalised support to identify skill needs and provide guidance on the best training to promote employability.

Common Commencement Dates
Following the DTI pilot for employment law, the Government will now extend Common Commencement Dates for new and amended domestic legislation, starting with health and safety, company and consumer legislation in 2005. This will limit the dates when regulatory changes can be made, enabling businesses to plan for new measures and implement them effectively. New regulation in these areas will in future be introduced on two dates each year, 6 April and 1 October, unless there are exceptional reasons for not doing so.



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Sources:
www.inlandrevenue.gov.uk/pbr2004/pn01.htm
www.inlandrevenue.gov.uk/pbr2004/pn02.htm