Autumn Statement – Employment Implications

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On 23rd November 2016 Philip Hammond delivered his first Autumn Statement as chancellor.

Taxation/Pay

Mr Hammond explained the government’s decision to increase the National Living by 30 pence, from £7.20 to £7.50 commencing at the start of April 2017. This new figure is the minimum amount that employers can pay their workers over the age of 25 years old and we could see this increase place strain on a number of employers.

Positively, the income tax threshold is set to rise from £11,000 to £11,500 in April 2017. This allows individuals to earn up to £11,500 before they are subject to tax implications. In keeping with tax, the higher rate income tax threshold is also set to rise from £43,000 to £50,000 by the end of the Parliament.

Interestingly, the predicted decision has been made to limit the benefits that attract tax and NIC savings on salary sacrifices and benefits in kind. However, there are exceptions to this including: enhanced employer pension contributions, childcare, ultra-low emission cars and the cycle to work scheme. These changes will come into effect from April 2017.

From April 2018, the government have concluded that employment termination payments over £30,000 will still be exempt from income tax and NICs, however employer NI will now be payable on payments over £30,000.

Pensions

The government is proposing to reduce the money purchase annual allowance (“MPAA”) from the current level of £10,000 to £4,000 from April 2017. The MPAA is designed to restrict the scope for individuals who flexibly access a defined contribution (“DA”) pension arrangement to acquire further tax relief and is triggered when individuals access these pension agreements in certain ways.

Measures to address pensions “scams” are being tackled within a consultation paper which will be published shortly. This will include issues such as “cold-calling”.

Employee Shareholder Shares (ESS)

In 2013, ESS were introduced to provide a more flexible workforce. In the 2016 Budget, limits were put in place which resulted in a substantial reduction in the capital gains tax relief, which subsequently led to a fall in the use of this arrangement for tax planning purposes. Following the Autumn Statement, tax relief for ESS agreements entered into on or after 1st December 2016 has been withdrawn.

For any further information please contact a member of the Forbes Employment Team on 0800 689 0831. Alternatively send any question through to Forbes Solicitors via our online Contact Form

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