The TV programmes of many of our youths conjured images of the year 2020 seeing us living a life of plentiful leisure time, a fashion of shiny silver suits and an army of robots taking care of all our needs.
It is clear (to most of us at least!) that this isn’t how 2020 will look, however we do know how some key aspects of our businesses will look.
By 2020, all workers over 25 will earn £9 per hour – up from the current £7.20 per hour, equating to a 5% per annum increase.
While it is easy to calculate the effects of this on any employees who will continue to receive the minimum level, you need to consider how this will impact on your other employees:
– What will the expectations be of your other employees currently on say £9.00 per hour? Will they accept or be satisfied to keep the £1.80 per hour differential, or look towards a 5% per annum increase too?
By 2017 all employers will have reached the “We’re in!” stage, and from 1 October 2018 as an employer your contribution will be a minimum of 3%. This means that the £9.00 minimum could be said to be £9.27 before Employer’s NIC.
Assuming Employer’s NIC will remain at current levels, the minimum cost per hour of employment of over 25’s will be over £10.50 per hour.
Vehicle benefit in kind (BIK)
If you’re planning on changing a van in your business, or your company car in the next few years, there is a good chance it will remain in your business until 2020. The Chancellor has already announced how a company van and car will be taxed.
– A petrol or diesel fuelled van provided for private use to an employee currently gives rise to a taxable BIK of £3,150 which will, it is forecast, remain unchanged in 2020.
– Currently, having private use of a zero emission van gives your employee a taxable BIK of £630. By 2020, this will increase to £3,150 in line with petrol and diesel vans.
– Therefore, over the next 5 years one of the incentives to go green is removed, and given the higher cost of zero emission vans, the commercial choice may be to have a fleet of more polluting vehicles.
– The provision of a company car has become rarer over the last decade, with a trend towards either high private/low business mileage senior employees/business owners, or drivers of low emission cars being those who receive such a benefit.
– The £0 BIK for zero emissions has already been removed and by 2020 the driver will be taxed on a BIK of 16% of the list price of the vehicle. Given the relatively high cost of such vehicles, this could be a significant value benefit.
– The petrol/diesel company car driver will experience rapid increases in their BIK, and by 2020 all cars with CO2 emissions of greater than 160 will be taxed each year on 37% of the list price. This means that over 3 years, the company car driver will be paying tax on more than the original cost of the car when new.
Over the next 5 years, careful business planning is required to ensure that costs are budgeted for in making key decisions. Please contact our team to discuss how we can help you plan your business to 2020 and beyond.