Costing you More: How Will the Changes in the Autumn Statement Affect your Business?
New Chancellor, Philip Hammond recently gave his first (and last!) Autumn Statement deciding to move future announcements to the spring. He has made a few changes that may affect the way businesses pay their staff. As well as changes to the taxing of termination payments and salary sacrifice arrangements, he has announced an increase in the National Living Wage and the other age related minimum wage rates.
The National Living Wage and the Minimum Wage rates from 1 April 2017 will be:
• £7.50 per hour - 25 years old and over
• £7.05 per hour - 21-24 years old
• £5.60 per hour - 18-20 years old
• £4.05 per hour - 16-17 years old
• £3.50 for apprentices aged under 19, or those who are 19 or over but who are in the first year of apprenticeship.
The government announced before the Autumn Statement that all payments in lieu of notice (PILONs) would be taxed, regardless of what the employment contract said, from April 2018 (currently some PILONs may be paid tax-free if there is no contractual right to make one). However, it has now confirmed that "tax will only be applied to the equivalent of basic pay if…notice is not worked". More details are expected on this soon.
The tax and employer National Insurance Contribution advantages of salary sacrifice schemes will be removed from April 2017, except for arrangements relating to pensions (including pensions advice), childcare, cycle to work schemes and ultra-low-emission cars. Arrangements in place before that date will be protected until April 2018, and arrangements for other cars, accommodation and school fees will be protected until April 2021.
Employers will find these benefits more expensive to offer, especially when the cost is added to the announced increase in insurance premium tax to 12%. This will affect benefits such as private dental and medical insurance.
There is a window between now and next April to review how these arrangements have been offered to employees, and whether both the benefit and the saving have become a contractual entitlement or, at the very least, an expectation. Making changes will therefore need to be done with care. If you need assistance with this, please get in touch.
Posted on 05 Dec 2016