How to Stay Safe from HMRC
20 March 15 | By: Jas Jhooty
Below is a summary of the main employment tax changes announced in this week’s Budget.
Personal allowance and basic rate limit
Personal allowance and basic rate limit 2016-17 and 2017-18. As announced at Budget, legislation will be introduced in Finance Bill 2015 to increase the income tax personal allowance to £10,800 for 2016-17 and £11,000 for 2017-18.
The higher personal allowance for those born before 6 April 1938 will be removed with effect from 2016-17, so that everyone regardless of their age, is entitled to the same personal allowance.
The basic rate limit for 2016-17 and 2017-18 will increase by indexation so that most higher rate taxpayers will get the full benefit of the increases. Legislation will be introduced in Finance Bill 2015 to increase the basic rate limit to £31,900 for 2016-17 and £32,300 for 2017-18.
Taken together, these changes will increase the higher rate threshold above which individuals pay income tax at 40% to £42,700 for 2016-17 and £43,300 for 2017-18.
Van benefit charge for zero emission vans
As announced at Budget 2014, legislation will be introduced in Finance Bill 2015 to increase the current van benefit charge of £nil for vans which do not emit CO2 (zero emission vans), beginning in 2015-16. The van benefit charge for zero emission vans will be 20% of the value of the van benefit charge for vans which emit CO2 in 2015-16, 40% in 2016-17, 60% in 2017-18, 80% in 2018-19 and 90% in 2019-20. From 2020-21, there will be a single van benefit charge applying to all vans.
Statutory exemption for trivial benefits in kind
As announced at Autumn Statement 2014, legislation will be introduced in Finance Bill 2015 to provide a statutory exemption from tax for qualifying trivial benefits in kind (BiKs) costing £50 or less. Following technical consultation on the draft legislation, an annual cap of £300 will be introduced for office holders of close companies, and employees who are family members of those office holders. Those affected by this cap will be able to receive a maximum of £300 worth of trivial benefits in kind each year exempt from tax. Corresponding legislation will also be introduced for National Insurance contributions purposes. These changes will have effect from 6 April 2015.
Qualifying expenses payments – exemptions
As announced at Autumn Statement 2014, legislation will be introduced in Finance Bill 2015 to exempt from tax certain expenses payments and benefits in kind provided to employees. The legislation will apply where employees would have been eligible for tax relief if they had incurred and met the cost of the expenses or benefits themselves. This exemption replaces the rules that require employers to either apply to HMRC for an agreement known as a ‘dispensation’ so that they can provide expenses and benefits free of tax and National Insurance contributions, or to report such expenses and benefits to HMRC. However the exemption will not apply where expenses are paid as part of a salary sacrifice arrangement. Following consultation, the legislation has been revised ensure that the exemption cannot be used in conjunction with other arrangements that seek to replace salary with expenses. These changes will have effect from 6 April 2016.
Company car taxation (CCT)
Legislation will be introduced in a future Finance Bill to increase the appropriate percentage of the list price of company cars subject to tax by 3 percentage points for cars emitting more than 75 grams of carbon dioxide per kilometre (gCO2/km), to a maximum of 37%.
The 3 percentage point differential between the 0-50 and 51-75 gCO2/km bands and between the 51-75 and 76-94 gCO2/km bands will remain. The appropriate percentage for the 0-50 and 51-75 gCO2/km bands will, therefore, also increase by 3 percentage points.
These changes will have effect from 2019-20.
Ultra low emission vehicles
The government remains committed to reviewing incentives for Ultra Low Emission Vehicles in light of market developments at Budget 2016, to inform decisions on CCT from 2020-21 onwards.
Van benefit charge (VBC)
Regulations will be introduced to increase the VBC in line with inflation with effect from 6 April 2016. The increase will be based on the September 2015 RPI figure. The change will be introduced by secondary legislation later in 2015, in time for the usual tax code exercise in January 2016.
Fuel benefit charge (FBC)
Regulations will be introduced to increase the FBC multipliers for both company cars and vans in line with RPI with effect from 6 April 2016. The changes will be introduced by secondary legislation later in 2015, in time for the usual tax code exercise in January 2016.
The government intends to preserve the current treatment of payments made from sporting testimonials while it considers representations made to the recent call for evidence on extra statutory concessions.
The government will consult on detailed proposals to restrict tax relief for travel and subsistence, for workers engaged through an employment intermediary, such as an umbrella company or a personal service company, and under the supervision, direction and control of the end-user. This follows a discussion paper published shortly after Autumn Statement 2014 on Employment Intermediaries and travel and subsistence relief that furthered the government’s understanding of the issues. Any legislative changes would take effect from 6 April 2016 and would be legislated for in a future Finance Bill.
Measures unchanged following consultation
This section lists those measures where draft legislation has been published for consultation and no changes were made as a result, or minor technical amendments have been made to the final legislation to be introduced in Finance Bill 2015.