The headlines in the press all pointed to the chancellor’s implementation of a compulsory ‘living wage’, but there were plenty more policy announcements in the 123 page document that will affect construction companies. On the whole, construction industry commentators were less than impressed with the contents of the first Conservative budget in nearly 20 years. Read on as we recount the main points of Osborne’s latest budget.
Employers will have to pay staff aged 25 or over at least £9 per hour by 2020, and £7.20 from April 2016. Of course, with cuts to tax credits and other benefits these figures won’t reflect a true living wage – instead, they can be viewed as an increase in the national minimum wage for over 25s. Six million workers will see a pay rise but an estimated 60,000 jobs could be lost.
With this budget, the government has reiterated their commitment to apprenticeships, stating that they hope to fund 3 million more apprenticeships over the course of the parliament. The money will be raised through a new apprenticeship levy on larger companies. Larger firms that choose to hire apprentices will therefore get more out of the scheme than they pay via the levy. Smaller construction companies will not face the levy but will benefit from increased numbers of apprenticeships. The details of the levy and how it interacts with similar schemes in the construction industry is yet to be explained.
After the recent debacle over the pause in key rail infrastructure improvements, this budget focused on roads. The chancellor announced an overhaul in vehicle excise duty. All VED revenue will now be diverted into the Roads Fund which will be invested directly in the road network. The first year rate will be dependent on emissions (with tougher standards), then VED will be charged at a flat rate of £140 – zero emission vehicles will be charged nothing. Cars with a list price of over £40,000 will be charged an extra £310 a year. Fuel duty remains frozen.
Housebuilders will have been disappointed by the budget announcements, which mostly seemed to focus on increasing the demand for housing and helping people to get on the housing ladder. The matter of the housing shortage was barely mentioned. Additionally, housebuilders and estate agents saw their shares tumble as the government announced it would gradually reduce the tax relief offered to buy-to-let landlords.
Corporation tax will be cut to 19% in 2017 and 18% in 2020. The annual investment allowance will be set permanently to £200,000 a year, reducing the cost of investment for all businesses. Additionally, the employment allowance is set to be raised from £1000 to £3000, eliminating employer NICs up to this level.
This Conservative budget certainly provides some bonuses for businesses, but the implementation of a higher minimum wage for over 25s will certainly concern smaller employers. The increased number of apprenticeships should help to offset growing labour costs, but many builders will be disappointed by the lack of action on housing.
Integrity’s Evolution M software can help you update your finances ready for the implementation of the living wage and other budget announcements. Find out more about our construction accounting software’s many features and get in touch if you’d like to learn more.