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Employment tax measures announced in the Summer Budget 2015
13 July 15 | By: Jas Jhooty
Below is a summary of the main employment tax changes announced in last week’s Budget.
Personal allowance and basic rate limit
Personal allowances from 2016/17 onwards were increased by £200 from those previouslyannounced in the March 2015 budget. The new Personal allowances are as follows: – 2016/17 £11,000; 2017/18 £11,200
Similarly the Basic Rate Limit (BMT) with effect from 2016/17 was also uplifted by £100 to: – 2016/17 £32,000; 2017/18 £32,400. Subsequently the Higher Rate Threshold (HRT) has also increased to: – 2016/17 £43,000; 2017/18 £43,600
The Chancellor also stated that this Government’s aim is to achieve a Personal allowance of £12,500 & a Higher Rate Threshold of £50,000 by the end of this parliament.
The Chancellor also rebranded the National Minimum Wage for over 25s as the National Living Wage (not to be confused with the actual Living Wage of £7.85). The National Living Wage is set at £7.20 from April 2016 rising to £9.00 by 2020.
Employment Allowance
The Employment Allowance was increased from £2000 to £3,000 from April 2016. However as part of the Treasury’s general anti-avoidance agenda, one-person companies are no longer eligible to receive the Employment Allowance.
Tax-free childcare
Following on from a lengthy delay brought about by a judicial review, the new system of tax-free childcare will finally be introduced from 2017. The existing limited exemption for employer-provided childcare will remain open to new entrants until the new system is in place, from which time it will only be available to employees already within an employer’s scheme.
Consultations and draft legislation
Following on from recommendations made by the Office of Tax Simplification (OTS) draft legislation has been announced that will enact the following changes: -
- Removal of the £8,500 threshold thus abolishing P9Ds from April 2016
- Removal for requirement for expenses (in the absence of a dispensation) being reported on a P11D from April 2016
- Previously published scale rate subsistence rates now enshrined in legislation
- Details of how to payroll benefits – (A future article will fully analyse these proposals)
- Removal of the requirement to report payrolled benefits on the P11D
- Allow councillors to claim for their journeys for council purposes tax-free from April 2016
- Disallowing tax relief from ordinary commuting costs for workers engaged through employment intermediaries
- Proposals to limit the amount of tax free income a sportsman can enjoy from a testimonial game/match
It was also announced that the Office of Tax Simplification is to be made permanent and its remit extended.
Extra compliance funds
HMRC received a further £800 million boost towards their compliance activities over the course of this parliament. A significant portion of this money will go towards ensuring that employers are fully meeting their employment tax obligations.
How emTax can help
The above is a snapshot of the major changes announced in last week’s budget. More in-depth articles on some of the OTS recommendations will follow over the next few weeks.
Over August 2015, HMRC are conducting interviews with relevant stakeholders to seek their views on the drafting of certain regulations before they are finalised. The particular regulations under discussion cover:-
- The abolition of the £8,500 threshold
- The real time collection of income tax on benefits in kind through voluntary payrolling
- The exemption for paid or reimbursed expenses
As recognised industry experts, representatives from emTax have been invited to one of these meetings. If you have any particular queries or issues about any of the above please do not hesitate to contact us so that we may make representations on your behalf.
Finally we have been reliably informed that the long awaited Trivial Benefits exemption that was inexplicably pulled back in March 2015, will be making a comeback in the 2016 Finance Act following on from Chancellors Autumn Statement.