The Chancellor surprised everyone by announcing that this was his last Autumn Statement, but before we had time to wonder what had prompted him to hand in his resignation so soon after his appointment, he went on to assure us that the reason was that he was abolishing the Autumn Statement. As everyone drew breath again, he then announced that the Spring 2017 budget would be the last Spring budget, but that 2017 would also see the first Autumn Budget, and that there would then be a Spring statement in 2018.
Depending on your personality, you might by now be giving a Gallic Shrug and muttering ‘plus ça change…’, or ranting to anyone that will listen about change for the sake of change and the waste of taxpayers’ money. However, there is a logic. Since the introduction of the Autumn statement, changes to the tax system have been passing under our bemused gaze along an endless conveyor, rather like dishes in a sushi restaurant. Some legislation has taken effect from the date of the Autumn statement, some from the start of the tax year and still more from the date of Royal Assent to the Finance Act. On top of this, some legislation hastily passed has had to be amended within a couple of years to rectify unintended consequences.
If the new system works as it is meant to, we will have a budget in the Autumn time which will set out proposals for legislation that can be properly discussed, reviewed and even drafted in time to apply to the new tax year starting the following April. The function of the Spring statement, Mr Hammond has assured us, will be to respond to the forecast from the Office for Budget Responsibility. He did emphasize that if urgent changes were required, this was not being ruled out….but you can’t have everything.
All Chancellors whilst trying to balance the books must surely have one eye on measures that are likely to be universally popular. On this occasion, Mr Hammond was keen to remind us of some of his predecessor’s promises that are likely to bring a warm glow to all of us.
The personal allowance will rise to £11,500 in April 2017, and the Chancellor reiterated the government’s promise to raise it to £12,500 before the end of this Parliament (2020/21). After that he announced that it would rise in line with inflation. He also reiterated the promise to raise the higher rate threshold to £50,000 within the lifetime of the Parliament.
The annual rise in fuel duty has been cancelled again, which the Chancellor says will save the average car driver £130 a year, and the average van driver £350 per year.
After a long delay, the promised tax-free childcare is now promised to commence in early 2017. This scheme involves an individual paying money into a childcare account, which will be topped up by HMRC at a rate of £2 for every £8 paid in. The maximum saving will be £2,000 per child per annum.
Mr Hammond was keen to remind the opposite benches that it was the Conservatives who had introduced the National Living Wage. From April 2017, this will increase from the current rate of £7.20 per hour to £7.50 per hour. This applies to employees aged 25 and over.
There are also increases to the National minimum wage for 21-24 year olds which rises to £7.05 per hour, 18-20 years olds which rises to £5.60 per hour and 16-17 year olds which rises to £4.05 per hour. Apprentice wages will also rise to £3.50 per hour.
Money has been pledged to help small businesses understand the rules and to tackle employers who break the law by failing to pay the minimum required.
From April 2017 employee and employer national insurance thresholds will be aligned at £157 per week. This will cost businesses a maximum of £7.18 per employee annually, but will have no direct impact on the employee’s pay packet.
A new employment status was introduced in 1 September 2013, that of Employee shareholder. The idea was that in return for giving up certain employment rights, employee shareholders would receive free shares worth at least £2,000 in their employer’s parent company. The first £2,000 of these would be free of the normal tax on employment related securities, and the gain on a subsequent disposal of up to £50,000 worth of these shares would be free of capital gains tax.
HMRC guidance issued on the introduction of employee shareholder status indicated an employee shareholder would have a stake in their employing company and that this might lead to greater responsibility, improving their productivity and going the extra mile to ensure that it does well. Today the Chancellor announced that the tax advantages linked to Employee Shareholder status were being abolished in response to evidence that it is being primarily used for tax-planning purposes by high-earning individuals. Shares received under an arrangement made before 1 December 2016 will not be affected.
Following the recent consultation, the announcement to changes to salary sacrificed arrangements did not come as a surprise. A salary sacrifice arrangement allows an employee to give-up some of their salary in return for a specified non-cash benefit in kind. This could provide savings to both the employer and the employee if the benefit was either not taxable, or taxed at a lower rate than the equivalent amount of salary.
With effect from April 2017, most salary sacrifice arrangements will be subject to the same tax as the ‘sacrificed’ income. There are specific exemptions from these new rules for pensions, childcare, ultra-low emission cars and cycle to work schemes. In addition, all arrangements that were in place before April 2017 will be protected for up to a year and arrangements relating to cars, accommodation or school fees will be protected for up to four years.
Q. I have recently set up my own business after having been employed for many years. Although I am hopeful that I will eventually make a profit, I anticipate that I am likely to make a small loss in each of my first three years of trading. What is the best way for me to utilise these losses for tax purposes?
Q. My wife and I are both directors of a company and we are soon to relocate to another part of the country to set up a new branch. The existing branch will continue to be run by the two other company directors. Will we both be entitled to the £8,000 relocation expense exemption?
Q. I use the Flat Rate Scheme for VAT purposes. Can I claim back the VAT I have recently paid on some new equipment I have bought for the business?
In October 2012 Automatic Enrolment was introduced in the UK. The pension system had begun to ‘burst at the seams’ with many people living way beyond their retirement age and therefore drawing on the government pension funds for a longer period of time. With less people contributing through national Insurance payments into the government pension funds, something had to be done. Auto enrolment was seen as a way to get workers and employers to contribute into a pension fund.
The largest businesses went first and there has been a steady introduction for the rest of the UK businesses until 2016, when the majority of smaller businesses , including charities, are now reaching their appointed staging dates and are about to embark on their duties.
When the staging date is reached businesses must group their workforce into the following categories:
Eligible jobholders Workers who are aged between 22 and the state pension age (SPA), work in the UK and have earnings which exceed the earnings trigger for auto-enrolment which is currently (2016-17) £10,000 a year. When an eligible jobholder is automatically enrolled the employer must contribute into the pension.
Non-eligible Jobholders Workers who are not eligible to be automatically enrolled, although they have a right to opt into the pension scheme. They are aged between 16 and 74, work in the UK and have earnings below the current £10,000 trigger for auto enrolment. They can also be workers who have earnings above the £10,000 trigger but are excluded from automatic enrolment because they are outside the age scope being aged between 16 to 21 and SPA to 74. When a non-eligible jobholder opts into the scheme the employer must also contribute.
Entitled workers Aged between 16 and 74, work in the UK and have earnings below the current Lower earnings threshold (2016-17 £5824) Entitled workers are able to Join a pension scheme but the employer does not have to contribute as well.
In some cases the charity sector have a more onerous task ahead because of the higher than average number of volunteers, casual and temporary staff working in this sector. When considering whether your workforce should be included for auto enrolment you will have to decide whether they are classed as a ‘worker’. To do this you will need to consider the contractual relationship you have with the individual.
If you would like to discuss your Auto Enrolment situation in more detail, please contact Carolyn Cunningham, Payroll Manager at Wright Vigar, or a member of the payroll team by emailing email@example.com or call 01522 531341 – we would be delighted to be able to help and advise you.