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In addition to announcing increases in the National Living Wage and National Minimum Wage rates in his autumn statement, the Chancellor also announced a number of other employee-related measures.
The National Insurance thresholds at which point employers and employees start paying National Insurance contributions, which are currently set at £156 for employers and £155 for employees, will be equalised at £157 from April 2017.
Termination payments over £30,000, which are currently subject to PAYE deductions, will also be subject to employers’ National Insurance contributions from April 2018. The first £30,000 of a termination payment will be exempt from PAYE deductions and National Insurance contributions.
The personal allowance will increase to £11,500 for the 2017/18 tax year and the government has reiterated its commitment to raising it to £12,500 by 2020.
Tax-free childcare is to be introduced ‘from early 2017’ and employer-supported tax-free childcare schemes will only remain open to new entrants until April 2018.
The employment status of employee shareholder, whereby employees give up some of their employment rights (including the right not to be unfairly dismissed) in return for a minimum of £2,000 shares in the employer’s business, to be abolished as soon as the relevant legislation can be amended. The shares qualify for certain tax advantages, but these are not available to new employee shareholders where the arrangement was entered into on or after 1 December 2016. This effectively removes any incentive to enter into this type of arrangement in the future.
Salary sacrifice – NI and PAYE savings
Following what is seen as widespread abuse of salary sacrifice arrangements, including a report of an employee sacrificing salary in exchange for the benefit of a new fridge-freezer, the government has stated its intention to phase out a range of benefits that currently attract income tax and/or National Insurance advantages where they are provided as part of a salary sacrifice arrangement.
However, the government’s intention is that pension saving, childcare, health-related benefits such as Cycle to Work schemes, and ultra-low emission vehicles should continue to benefit from income tax and National Insurance relief when provided through salary sacrifice arrangements.
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