In terms of employment taxes, the Autumn Statement was a collection of measures to help low earners, measures that will impact mainly on middle earners and anti-avoidance measures.
The following is a list of key points arising from the Autumn Statement:
- As previously announced, the National Living Wage and the National Minimum Wage will increase from April 2017 as follows:
- Those aged 25 and over – from £7.20 per hour to £7.50 per hour
- 21 – 24 year olds – from £6.95 per hour to £7.05
- 18 – 20 year olds – from £5.55 per hour to £5.60
- 16 – 17 year olds – from £4.00 per hour to £4.05
- Apprentices – from £3.40 per hour to £3.50This is additional expense for businesses which will need to be considered in budgets if not already incorporated.
The personal allowance will increase from £11,000 to £11,500 from 6 April 2017. The point at which people will pay the higher rate of income tax will increase from £43,000 this year, to £45,000 from 6 April 2017.
Tax savings for employees:
- The employer and employee NIC thresholds will be aligned at £157 per week from 6 April 2017. Annual cost to employers of around £7.18 per employee earning at or above the threshold. No difference to employees.
- From April 2017, most salary sacrifice schemes will be subject to the same tax as cash income (i.e. as if the salary sacrifice was never in place).
Salary sacrifice for pensions, pensions advice, childcare, Cycle to Work and ultra-low emission cars will be exempt from these changes so will continue to benefit from existing tax advantages in future.
All arrangements in place before April 2017 will be protected for up to a year, and arrangements in place before April 2017 for cars, accommodation and school fees will be protected for up to 4 years.
In future salary sacrifice schemes under which the employer provides a benefit other than those falling under the exemption noted above will only be beneficial where the employer can negotiate a better price for assets than the employee could obtain themselves. The cost of implementing the salary sacrifice scheme is likely to outweigh the benefits achieved in many cases.
- From 6 April 2017, where an employee wants to “make good” a benefit in kind so that the taxable value is reduced they will have to make the payment to their employer by 6 July following the end of the relevant tax year.
- The Government is continuing to crack down on tax avoiders and those who help them by closing tax incentives that they believe are being mis-used to provide “disguised remuneration” by abolishing employee shareholder status, introducing a new penalty for those helping someone else to use a tax avoidance scheme and denying the VAT flat rate scheme in situstions where this is being used to create an unfair advantage. Tax avoiders will not be able to claim as a defence against penalties that relying on non-independent tax advice is taking reasonable care.
Anybody who had entered into an employee shareholder status agreement before 1 December 2016 will be unaffected by the change above.
For further advice, please contact Clair Williams.