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Autumn Statement 2016 - Employment

On 23rd November 2016, Chancellor Philip Hammond delivered his first Autumn Statement. We’ve taken a look at the key employment points that he announced that affect employers, employees, partners and workers.

Employee Taxation

Tax-free personal allowances are planned to rise in line with inflation, rather than the national minimum wage. They will have an increase from £11,000 to £11,500 as of April 2017, with the plan to stretch to £12,500 by 2020.

The higher rate of income tax will also increase from £43,000 to £45,000, while the government has committed to raise this allowance to £50,000 by 2020.

Minimum and Living Wage

The national living wage will increase as of April 2017 from £7.20 to £7.50 an hour, for those over the aged of 25. For those younger than 25 or apprentices, the national minimum wage rate will still see increases:

  • 16 – 17 year olds > from £4.00 to £4.05 per hour
  • 18 – 20 year olds > from £5.55 to £5.60 per hour
  • 21 – 24 year olds > from £6.95 to £7.05 per hour
  • Apprentices > from £3.40 to £3.50 per hour

Salary Sacrifice

From April 2017, salary sacrifice schemes will change so there will be fewer benefits that attract tax and employer national insurance advantages.

The only benefits that will continue to have favourable tax rates are certain pension contributions, certain childcare benefits, equipment provided under a cycle to work scheme, and ultra-low emission cars. Arrangements that are in place before April 2017 will be protected until April 2018, and arrangements for cars, accommodation and school fees will be protected until 2021.

Employee Shareholders

Income tax and capital gains reliefs will be removed from schemes made on or after 1st December 2016. This is an attempt to limit it being used as a tax planning vehicle for high-earners, rather than as a way of supporting a more flexible workforce.

The status will be closed to any new arrangement until the next legislative opportunity.

Termination Payments

From April 2018 the excess over £30,000 will no longer be free of national insurance. The exemption of termination payments will apply equally to income tax and NI. This means businesses will be

required to account for employer National Insurance Contributions for any balance over and above the £30,000 exemption.

Conclusion

There wasn’t a great deal to surprise or trouble employers in the autumn statement. The planned abolition of employee shareholder schemes was news to most, however various whispers have said there has been a very low take up of these schemes, and therefore it is unlikely to be seen as a great loss.

A couple of things for employers to note includes planning and budgeting for the minimum wage increases, and taking time to consider a review of their benefits schemes, to ensure the best value is obtained.  

If you would like any further information on the above topics, get in touch on 0117 906 9400 or enquiries@gregglatchams.com.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

Categories: Employment | For Business

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