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Budget 2014 changes to employment tax
24 March 14 | By: Jas Jhooty
Increase in personal allowances
Last year it was announced that personal allowances for people born after 5th April 1948 were increased to £10,000 for 2014/2015. The basic rate limit was also reduced to £31,865 for 2014/15. This year’s budget has increased the personal allowance to £10,500 in 2015/16 and the basic rate limit has also been increased to £31,785.
Transfer of allowances
At Autumn Statement 2013 the Government announced with effect from the 2015-16 tax year, a spouse or civil partner will be allowed to apply to transfer £1,000 of their personal allowance to their spouse or civil partner. At Budget 2014 the transferable amount for 2015-16 was increased to £1,050. The spouse or civil partner will receive the transferable allowance as a reduction to their income tax liability at the basic rate of tax. To be eligible to make or receive the transfer, neither party must be liable to income tax at the higher or additional rate. From 2016-17, the transferable amount will be 10 per cent of the personal allowance for those born after 5 April 1948.
New employment allowance
A new Employment Allowance will be introduced from 6 April 2014 that will cut the first £2,000 off the amount of employer’s Class 1 National Insurance Contributions.
The official rate of interest goes down with effect from 6 April 2014 from 4% to 3.25% (the first change in rate since 2010). Also from 6th April 2014 the £5,000 interest free loan benefit-in-kind threshold has been doubled to £10,000. If a loan does not exceed this threshold at any time in the tax year it will be exempt from tax.
The rates for 2016/17 will be included in Finance Bill 2014. The appropriate percentage to be applied to the price of a car to arrive at the taxable benefit continues to be determined by reference to the CO2 emissions level of the vehicle, with the lowest appropriate percentages applying to the vehicles with the lowest levels of CO2 emissions.
For 2016/17 the lowest appropriate percentage will be 7% which will apply for cars emitting 0 to 50g CO2 per km. Cars with emissions between 51 and 75g CO2 per km will have an appropriate percentage of 11% and those whose emissions rate is 76–94g CO2 per km will have an appropriate percentage of 15%.
The appropriate percentages for all other bands above 94g CO2 per km will increase by 2% compared with 2015/16 up to a maximum of 37%.
For 2017/18, the appropriate percentage for each band will increase by a further 2%, again to a maximum of 37%.
Company vans and car or van fuel benefitsThe Autumn Statement 2013 announced the 2014/15 new scale charges to be as follows
- Van benefit increased from £3,000 to £3,090
- Van fuel benefit increased from £564 to £581
- Car fuel multiplier increased from £21,100 to £21,700
The rate of the benefit charge for company vans and for fuel provided for company cars or vans will be increased in line with inflation in autumn 2014, based on the Retail Price Index figure for September.Currently there is no benefit charge applicable on a company van that has a zero rate of emissions, but this will change from 2015/16 onwards. Legislation will be included in Finance Bill 2015 to increase the van benefit charge on zero emission vans on a tapered basis so that the full van benefit charge will apply from 2020/21: -
- 2015/16 – 20% of the full van benefit charge
- 2016/17 – 40% of the full van benefit charge
- 2017/18 – 60% of the full van benefit charge
- 2018/19 – 80% of the full van benefit charge
- 2019/20 – 90% of the full van benefit charge
- 2020/21 – 100% of the full van benefit charge
VAT scale charge on road fuel
The VAT road fuel scale charges are amended with effect from 1 May 2014. Businesses must use the new scales from the start of the next prescribed accounting period beginning on or after 1 May 2014. The new rates can be found here.
Employee expenses and benefits
Following on from the Office of Tax Simplification’s second report on the review of the tax treatment of employees’ benefits and expenses , the Government will consult on four recommendations made in that review:
- removing the £8,500 earnings threshold below which employees are not taxable on certain benefits in kind
- a new statutory exemption for trivial benefits to replace the current informal arrangement
- a new system of voluntary payrolling for benefits in kind, building on the limited facility currently available
- a new statutory exemption for reimbursed expenses to replace the current dispensations system for expenses
Although not necessarily part of the same consultation, the Government is also going to review the tax treatment of travel and subsistence expenses and is also likely to issue a wider ‘call for evidence’ on remuneration practices and patterns to give it a better picture of what happens on the ground, on which it can base future policy reforms.
Anti avoidance measuresAs expected the measures announced in the 2013 Autumn Statement relating to intermediaries has been enacted. These measures will affect:-
How emTax can help
If you want any further advice on how these new measures may affect your organisation please do not hesitate to contact us.