Budget 2020 impact on employees and founders
Further to my (Coronavirus)Budget Round-Up that I sent out yesterday, I didn’t go into too much detail on the implications for directors and employees as it was mainly focused on businesses.
So in an effort to put that right, here’s a little more detail on the emergency SSP changes for employees and how the confirmations regarding personal allowances, NIC etc allows us to start planning tax-efficient remuneration strategies for Founders.
But before that, did you see this magical moment:
Want to see how it was done? More later…
Statutory Sick Pay (SSP) changes
Employees will be able to claim SSP from day one (rather than day four) and for up to 14 days if they become ill or have to self-isolate due to COVID-19.
Businesses with less than 250 employees (as at 28 February 2020) will be able to claim a refund of SSP made available to eligible employees as long as they maintain a record of staff absences. A GP fit note is not necessary. The Government is working on an alternative to a GP fit note that can be issued remotely following a call to the NHS (by dialling 111).
That’s the good news - the not-so-good news is that
the Government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible. Existing systems are not designed to facilitate employer refunds for SSP (my emphasis)
So whilst this situation could escalate pretty quickly and employees have been ‘assured’ that the Government has their back, it appears that the systems are not yet in place to support the employers who have to shoulder this cost…
And there’s also the fact that £94 per week won’t go far for the majority of employees…
Watch this space…
Directors’ Optimum Remuneration Strategy
Now that we have more figures confirmed from the Budget and with 6 April just around the corner, it is time to start thinking about optimum remuneration strategies for the tax year ahead.
For startups, I’m afraid there’s less flexibility for planning, as most are unlikely to have profit reserves from which you can pay out dividends. So you will largely be restricted to salary - although the increase in the NIC threshold from £8,632 to £9,500 from 6 April 2020 as announced yesterday will save £104.16 in NIC (don’t spend it all at once kids!).
Most founders with profitable businesses that have employees will be structuring their remuneration as
£9,500 in salary (£792 pm) and the remainder in dividends. This will virtually eliminate the need to pay NIC (employee and just £100 for the company) whilst banking future State pension credits plus preserving £3,000 of the annual tax-free allowance (£12,500) to cover a proportion of the dividend payments
This is waaaay over-simplified but it’s hopefully a useful starter in planning your rem strategy for the year ahead. I can, of course, sit down with you to work out your personalised optimum remuneration strategy from 6 April 2020. Just ask.
If you have any thoughts, comments or questions on the above points then please let me know by replying.
Have a great evening!
Best regards
Steve
PS. How was the magical folder colour change orchestrated? Eager to know…?
Well, it wasn’t apparently.
Disappointing, I know…