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Predicted changes to Employment taxation anticipated in the 2016 Budget

14 March 16 | By: Jas Jhooty

crystal ball

There are many changes to employment taxation being introduced from April 2016. These include the abolition of the P9D and the antiquated £8,500 test along with the end of P11D dispensations. However the Chancellor is not resting on his laurels and he is still expected to announce a range of far-reaching measures to increase employment taxation in this year’s budget.

Personal Service Companies

Back in July 2015 HM Treasury published a consultation document that proposed making end engagers responsible for operating a supplementary payroll to invoices received from Personal Service Companies (PSCs). It is expected that this proposal will be enacted in this year’s budget under the guise of the Chancellor levelling the playing field between PSCs and employees. With less than 500 IR35 enquiries conducted annually on the quarter of million PSCs the Chancellor can raise over £500,000,000 by introducing this measure.

Taxing termination/redundancy payments

The Government have been considering replacing the current £30,000 exemption with a new exemption which increases proportionately with the number of years of service the employee has completed. This will probably be to make just Statutory Redundancy Pay tax-free with all other payments becoming taxable.

Travel & Subsistence

Another proposal document issued by HM Treasury in Autumn 2015, offered to simplify the current Permanent Workplace/Temporary Workplace rules. These proposals allowed employees to elect for just one of their work locations to be classified as their Permanent Workplace with travel to all other locations allowed to be paid tax-free.

Unfortunately, the quid pro quo announced in this document is to make all day subsistence payments taxable. The Government’s argument is that the current allowance of day subsistence costs relates back to an archaic tax case from the 1930s when most employees enjoyed subsidised or free meals from their employers. The Government believe that there is an argument against the taxpayer continuing to subsidise employees for what they consider to be a private expense.

Salary sacrifice schemes

Last year the ex-Liberal Democrat MP Steve Webb leaked a story that the Treasury had performed considerable work on producing draft legislation to abolish the effectiveness of salary sacrifice schemes because the NIC being lost to the Government was in excess of £15 billion per year.

The Chancellor may have put this on the back burner last year but this measure could be resurrected and enacted in this year’s Budget.

How emTax can help

We will of course provide an update after Wednesday of how many of these predicted measures have been enacted as well as full details of all employment tax changes announced in this year’s budget.

As mentioned at the start of this article there are many changes to benefits and expenses legislation coming into force from 6th April 2016. These include voluntary payrolling of benefits & the end of the P11D dispensation regime

emTax are offering a comprehensive and cost-effective Benefits and Expenses training course for 2016 that explains succinctly what all of these changes will mean for your organisation. If you interested please click here for more details.


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