The Autumn Statement November 2016 – General Overview


Today the Chancellor gave his first, and indeed what we now know will be his last, Autumn Statement. As expected there were some significant announcements for Payroll  – employers and employees alike. 

March 2017 will be the final Spring Budget

The UK is out of kilter with every other major country who hold their budgets in the Autumn (but then they have a January tax year) so our last Spring Budget will be March 2017 and from then on the Budget will take place in the Autumn, the first being Autumn 2017.

In addition to that Legislation Day is changing – this year the responses to all the consultation documents we’ve been waiting on will be published 5th December so expect your in-boxes to be busy then. From 2018 Legislation Day will move to the Summer.

Because Parliament is mandated to respond to the Office of Budget Reform twice a year there will be a Spring Statement from Spring 2018 however, unless there are exceptional circumstance there is no intention to announce major changes in the Statement.

The announcement about these changes can be found here https://www.gov.uk/government/news/7-things-you-need-to-know-about-the-new-budget-timetable

Simplifying the Pay as You Earn Settlement Agreement (PSA) process

Following consultation, the government will legislate in the Finance Bill 2017 to simplify the process for applying for and agreeing PSAs. This will have effect in relation to agreements for the 2018 to 2019 tax year and subsequent tax years.

Dates for ‘making good’ on benefits in kind

Following consultation, the government will legislate in the Finance Bill 2017 to ensure that an employee who wants to ‘make good’, on a non-payrolled benefit in kind will have to make the payment to their employer by 6 July in the following tax year. ‘Making good’ is where the employee makes a payment in return for the benefit in kind they receive. This reduces its taxable value and will be effective from April 2017.

Personal allowance and higher rate allowance 

The Personal Allowance will increase to £11, 500 pa from April 2017 and the Higher Rate allowance to £45, 000 pa. By 2020 the Personal Allowance will increase to £12, 500 pa and the Higher Rate Allowance to £50, 000 pa. During the 2020s the Personal Allowance will be increased inline with inflation but the Chancellor of the day will have the option to increase the allowance if monies are available.

National Insurance thresholds 

As recommended by the Office of Tax Simplification (OTS), the National Insurance secondary (employer) threshold and the National Insurance primary (employee) threshold will be aligned from April 2017, meaning that both employees and employers will start paying
National Insurance on weekly earnings above £157. This will simplify the payment of National Insurance for employers although there will be an additional cost per employee as employers will start to pay NICs on a lower earnings amount. There will be no cost to the employee.

Salary sacrifice arrangements

Following consultation, the tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017, except for arrangements relating to pensions (including advice), childcare, Cycle to Work and ultra-low emission cars. This will mean that employees swapping salary for benefits will pay the same tax as the vast majority of individuals who buy them out of their post-tax income. 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

So what does this mean – if you have any salary sacrifice schemes in place other than pensions, cycle to work, childcare and ultra low emission cars there will be some significant changes to implement that will add to the costs to both the employee and the employer.

Yes, if you have a car and school fee arrangement you have extra lead time to sort these out which effectively will mean for the life of a company car, car lease scheme or for at school fees and accommodation a number of years lea way.

For all other schemes already in place you effectively have 15 months to sort them out and after that employees are going to be subject to tax. This will cause a major headache for many employers.

Valuation of benefits in kind 

The government will consider how benefits in kind are valued for tax purposes, publishing a consultation on employer-provided living accommodation and a call for evidence on the valuation of all other benefits in kind at Budget 2017.

When we know what this means we will publish further information.

Employee business expenses

The government will publish a call for evidence at Budget 2017 on the use of the income tax relief for employees’ business expenses, including those that are not reimbursed by their employer.

Again when we know what this means we will publish further information.

More detail of these and other changes can be found here https://www.gov.uk/government/publications/autumn-statement-2016-documents/autumn-statement-2016#tax-1
National Living Wage

This will increase to £7.50 per hour from April 2017.