The Chancellor of the Exchequer gave his Autumn Statement to Parliament on 23 November 2016. Here is a summary of what was announced that we feel may be relevant to our clients.
We've summarised new thresholds for 2017/18 below, although please note some of these remain unchanged from the current year:
Other points to note:
- UK income tax rates remain at 20%, 40% and 45%. (The Scottish Rate of Income Tax for 2017-18 will be announced by the Scottish Government separately).
- National Insurance rates remain unchanged.
- Class 2 NICs will be abolished from April 2018 and entitlement to contributory benefits for the self-employed will be accessed through Class 3 and Class 4 NICs.
- As recommended by the Office of Tax Simplification (OTS), the National Insurance secondary (employer) threshold and the National Insurance primary (employee) threshold will be aligned from April 2017, meaning that both employees and employers will start paying National Insurance on weekly earnings above £157.
The tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017, except for arrangements relating to pensions, childcare, Cycle to Work and ultra-low emission cars
This will mean that employees swapping salary for benefits will pay the same tax as the vast majority of individuals who buy them out of their post-tax income. Arrangements in place before April 2017 will be protected until April 2018, and arrangements for cars, accommodation and school fees will be protected until April 2021.
Benefits in Kind
The government will consider how benefits in kind are valued for tax purposes, publishing a consultation on employer-provided living accommodation and a call for evidence on the valuation of all other benefits in kind at Budget 2017.
Employee business expenses
The government will publish a call for evidence at Budget 2017 on the use of the income tax relief for employees' business expenses, including those that are not reimbursed by their employer.
From April 2018, termination payments over £30,000, which are subject to income tax, will also be subject to employer NICs. Tax will only be applied to the equivalent of an employee's basic pay if their notice is not worked, making it simpler to apply the new rules.
The first £30,000 of a termination payment will remain exempt from income tax and National Insurance.
Tax-Free Childcare will be introduced gradually from early 2017, with rollout beginning upon completion of the trial. Once the scheme is fully rolled out, the government will review its operation to ensure it is delivering as intended and to assess the benefit it is delivering for working parents.
Strengthening tax avoidance sanctions and deterrents
The government will introduce a new penalty for any person who has enabled another person or business to use a tax avoidance arrangement that is later defeated by HMRC. Details will be published in draft legislation shortly.
The government will also remove the defence of having relied on non-independent advice as taking 'reasonable care' when considering penalties for any person or business that uses such arrangements.
Disguised remuneration schemes
Budget 2016 announced changes to tackle use of disguised remuneration schemes by employers and employees. The government will now extend the scope of these changes to tackle the use of disguised remuneration avoidance schemes by the self-employed.
This will ensure that self-employed users of these schemes pay their fair share of tax and National Insurance. Further, the government will take steps to make it less attractive for employers to use disguised remuneration avoidance schemes, by denying tax relief for an employer's contributions to disguised remuneration schemes unless tax and National Insurance are paid within a specified period.
Off-payroll working in the Public Sector
Following consultation, the government will reform the off-payroll working rules in the public sector from April 2017 by moving responsibility for operating them, and paying the correct tax, to the body paying the worker's company (PSC).
This reform aims to tackle the high levels of non-compliance with the current IR35 rules and will mean that those working in a similar way to employees in the public sector will pay the same taxes as employees.
The 5% tax-free allowance will be removed for those working in the public sector, reflecting the fact that workers no longer bear the administrative burden of deciding whether the rules apply.
VAT Flat Rate Scheme
The government will introduce a new 16.5% rate from 1 April 2017 for businesses with limited costs, such as many labour-only businesses. This will help level the playing field, while maintaining the accounting simplification for the small businesses that use the scheme as intended. Guidance which has the force of law, published alongside the Autumn Statement, will introduce anti-forestalling provisions.
For further information on any of these changes, please feel free to contact PayStream for details.