The Autumn Statement may have some headline grabbing numbers and initiatives, including the fact that in 2017 the Budget will move to the Autumn, so any tax changes announced can be implemented in good time in advance of the new fiscal year, but there is little in it that has not already been trailed in preceding months as far as employees and employment taxes are concerned.
Below are the principal points for you to take on board arising from Philip Hammond's first and last Autumn Statement.
The key proposals to be aware of include:
Personal Allowance: This will remain at £11,500 for 2017/18. However, the Government has reconfirmed that it will meet its commitment to raising the income tax personal allowance to £12,500 by the end of this Parliament.
NLW and NMW Rates: The National Living Wage will be increased from £7.20 per hour to £7.50 per hour from 1 April 2017. This represents a 4.2% increase and is estimated to mean a pay rise of £1,400 a year for a full-time worker previously on the NMW. The Government has also committed to investing £4.3 million to strengthen enforcement to ensure that people are paid the minimum.
There will be the following increases to the NMW in April 2017:
- The rate for workers aged 21 to 24: up from £6.95 to £7.05
- The development rate (workers aged 18 to 20): up from £5.55 to £5.60
- The young workers rate (16 to 17 year olds): up from £4.00 to £4.05
- The apprenticeship rate: up from £3.40 to £3.50
Termination Payments: From April 2018, termination payments over £30,000, which are subject to income tax, will also be subject to employer NICs. The first £30,000 of a termination payment will remain tax free.
Salary Sacrifice Arrangements: From April 2017, the Government will phase out the tax and employer National Insurance savings offered under salary sacrifice arrangements, with the exception of arrangements relating to pension contributions, child care vouchers, cycle to work scheme and ultra low emission cars. Arrangements in place before April 2017 will be protected until April 2018 and arrangements for cars, accommodation and school fees will be protected until April 2021.
Employee shareholder scheme: Seen as a tax planning vehicle for the wealthy, employee shareholder status will be abolished for shares issued after 1 December 2016. There will therefore no longer be Income Tax relief on the receipt or buy-back of shares issued to an employee under an employee shareholder agreement made on or after 1 December 2016. In addition, the Capital Gains Tax exemption relating to shares received as consideration for entering into an employee shareholder agreement on or after that date will also be removed. Shares received under agreements made before 1 December 2016 will not be affected.
National Insurance Threshold: From April 2017, the National Insurance thresholds will be equalised for employer and employee contributions at £157 per week. There will be a maximum cost to business of £7.18 per employee a year and this change should provide an employee with additional annual income of £718.