Budget 2016 Round-UpThe Chancellor’s Budget today revealed a few surprises.  However the key aspects for employers were the introduction of compulsory national insurance contributions (NICs) on termination payments over £30,000, and an increase in the threshold for personal tax contributions.

The Chancellor claimed this was “a budget for working people” and announced that from April 2017, the tax threshold will rise to £11,500, on target to reach the £12,500 threshold as promised in the Conservative party before they came to power.

The threshold for employees paying the 40% tax rate will also be increased, to £45,000, from April 2017 and self-employed people will no longer have to pay Class 2 National Insurance contributions from 2018.

In addition, the announcement that employer’s national insurance will apply to any termination payment made to ex-employees of more than £30,000 from April 2018 will add 13.8% to the cost to businesses of such payments.

The Government continues to clamp down on tax evasion and avoidance schemes, Osborne added, by toughening the rules on the use of umbrella or personal service companies.

This means that public-sector organisations will have a new duty to tighten their rules on the use of contractors.  From April 2017, when they engage an off-payroll worker through their own limited company, that body (or a recruitment agency if used) will become responsible for determining whether or not the rules should apply, and for paying the right tax.

The Government also outlined plans for changes to salary sacrifice, an area that observers suggested might be up for review.  The Government said “It is considering limiting the range of benefits that attract income tax and NICs advantages when they are provided as part of salary-sacrifice schemes’.  However, the government’s intention is that pension saving, childcare and health-related benefits such as Cycle to Work should continue to benefit from income tax and NICs relief.

Some employees are set to receive pay rises of more than 2%, especially those paid the national minimum wage, who will receive a 3.7% boost after the Government announced an increase to £6.95 an hour for 21- to 24-year-olds.

The Treasury also announced a lifetime limit of £100,000 on gains that are exempt from Capital Gains Tax that a person can make on the disposal of shares acquired under an employee shareholder agreements entered into after 16 March 2016.

If you want to know more about how any of these changes affect your business, call us today on 01252 790145 to find out more.