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Tax Changes Set to Hit Construction Worker Pay

Written by: Keith Tully

Published: 26th November 2015

Changes to taxation policies confirmed this week by chancellor George Osborne are set to impact the take home pay of construction workers around the UK.

Until now, it has been possible for construction workers employed by umbrella companies to claim tax relief on their expenses but that potential is now set to be taken away.

The result looks likely to be that thousands of construction sector employees around the country will be left with less money in their bank accounts at the end of each month.

“As confirmed at Summer Budget 2015, the government will legislate to restrict tax relief for travel and subsistence expenses for workers engaged through an employment intermediary, such as an umbrella company or a personal service company,” Osborne wrote in his newly-published Autumn Statement and Spending Review.

He went on to explain that the changes will be brought into effect from the beginning of the next tax year in early April 2016.

The changes mean expenses payments will become subject to income tax and national insurance contributions, which they are currently not.

For some people the ramifications could be very significant. Anyone who currently receives around £50 each week in expenses payments from their umbrella company employer could see their take home pay reduced by as much as £1,000 over the course of a 12-month period.  

“This is a kick in the teeth for workers who are already losing thousands of pounds a year by being forced to work via an umbrella company,” said Brian Rye, the acting general secretary of UCATT, the construction sector union.

In a statement, Mr Rye also made clear his disapproval of the government’s decision not to ban construction sector companies from creating umbrella organisations and accused George Osborne of only introducing tax changes that impact their employees.

“The Chancellor has protected his friends in the construction industry by allowing umbrella companies to remain legal while boosting his own coffers at the expense of ordinary construction workers,” he said. 

“This is effectively a pay cut and means that construction workers will be unable to make ends meet or afford life’s extras which are often the only recompense for working long hours in a hard unforgiving environment.”

Keith Tully

Keith Tully

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Keith has been involved in Business Rescue since 1992, during which time he’s worked for both independent and national firms. His specialties include company restructuring matters and negotiating with HMRC on his clients behalf.

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