By Patrick Stewart
Chancellor Philip Hammond delivered his first Autumn Statement yesterday which included a number of announcements bound to affect both employers and employees.
Salary sacrifice schemes restricted
As anticipated, tax free employee benefits offered by salary sacrifice schemes are to be restricted from April 2017. Employees will no longer be able to opt to sacrifice some of their salary for tax-free benefits in kind. However, all arrangements in place before April 2017 will be protected until April 2018, whilst arrangements in place before April 2017 for cars, accommodation and school fees will be protected until April 2021. Further, the most popular employee benefits, namely childcare, pensions, cycle to work schemes and ultra low emissions company cars, are specifically excluded from the restrictions.
Employee shareholder status abolished
The employee shareholder status introduced in September 2013 is to be abolished at the next opportunity. In the meantime, the tax advantages linked to shares awarded under the scheme will be abolished for those arrangements entered into on or after 1 December 2016. For arrangements entered into before this date, the tax advantages will continue to apply. Although the provisions were originally introduced to assist small businesses, the special tax rules have primarily been used by senior executives looking for a tax break. The impact of the changes are therefore likely to be negligible.
National Minimum Wage increased
The National Minimum Wage for over 25 year olds will rise to £7.50 from April 2017. Although lower than some had anticipated, it represents a pay rise of over £500 a year for a full time worker.
Tax on termination payments
As announced at the 2016 budget, from April 2018 the excess over £30,000 on any termination payment will now be subject not only to Income Tax, but also employer National Insurance Contributions. Further, as expected, from April 2018 non-contractual payments in lieu of notice will now be taxable. However perhaps more surprisingly, the statement included the very welcome news that only the employee’s basic salary will be considered when taxing a non-contractual payment in lieu of notice. This means that any payments which the employee might expect to receive had they worked their notice, for example bonus or commission, can still be paid free from tax.
Finally, it was confirmed that tax free childcare will be phased in from early 2017 and, in another measure designed to assist working families, families will be entitled to an increased 30 hours of free childcare a week for 3 and 4 year olds from September 2017.
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