We take look at some key announcements made by the Chancellor this week in the Autumn Statement, and how they will affect you.
- Salary sacrifice schemes: The schemes, where employees exchange some of their salary for a non-cash benefit in kind (such as a mobile phone), to allow both employer and employee to make a tax saving, have been terminated in line with suggestions made by the Office of Tax Simplification (OTS). The tax and NI advantages will continue on pensions (including pensions advice), childcare and ultra-low emission cars (emitting less than 5% CO2) and Cycle to Work. All arrangements in place before April 2017 will be protected for up to a year, and arrangements in place before April 2017 for cars, accommodation and school fees will be protected for up to four years.
- Employee shareholder scheme: From 1 December 2016, all tax relief will be withdrawn for employees who sign an employee shareholder agreement and receive ESS shares (involving surrender of a number of employment rights).
- Employee legal expenses: From April 2017 employees no longer pay tax on legal support from their employer.
- National Living Wage and National Minimum Wage: Rates go up from £7.20 to £7.50 from April 2017. As before, these thresholds do not take into account salary sacrifice arrangements.
- New Van benefit rates will be announced.
- Class 1 National Insurance: The higher employer threshold for National Insurance and the primary (employee) threshold will be aligned from April 2017 – at £157 a week. This will mean that employers and employees will start paying NI on earnings above £157 a week. Employer’s will incur a slightly lower NI bill.
- The tax-free personal allowance will be increased to £11,500 from April 2017
- Threshold for higher rate of income tax will rise to £45,000 in 2017
- ISA limit will increase to £20,000 in April 2017
- VAT flat rate scheme: From 1 April 2017 a business will be required to use a FRS percentage of 16.5% if it is a “low cost trader”. This likely to adversely affect many businesses, as 16.5% of the gross turnover is equivalent to 19.8% of the net, leaving almost no credit for VAT incurred on purchases. A Low cost trader is a business whose expenditure on goods (not services) is less than 2% of its gross turnover, or if more than 2% of its turnover, the amount spent on goods is less than £1,000 per year. This emphasis on ‘goods’ will discriminate against businesses who incur VAT on services such as: rent, software licences, IT support, digital journals, sub-contractors, telecoms etc.
- Class 2 National Insurance: The Budget in March announced that Class 2 National Insurance would be abolished from 2018 for self-employed people. The Autumn Statement confirms that to get contributory benefits, you’ll need to pay Class 3 or 4 National Insurance. You only pay Class 4 if you make profits above a certain level. It says that ALL self-employed women will be able to get Maternity Allowance at the standard rate. The government says self-employed people who don’t make much profit will be able to get contributory Employment and Support Allowance by paying Class 3 National Insurance (voluntary contribution).
- Corporation tax rates: The rate will fall to 17% by 2020 as per previous annoucements.
- Productivity fund: The Chancellor pledged £400m into venture capital funds through the British Business Bank to unlock £1bn in finance. The funds will be invested in innovative small businesses with potential for growth, to provide the finance that they need to expand.
- A ban on letting agents’ fees: Letting agents in England and Wales won’t be able to charge tenants for things like credit checks, inventories or drawing up a contract.
- Insurance premium tax (IPT): The rate of insurance premium tax will rise from 10% to 12% from June 2017. This change doesn’t affect all insurance – but will affect home, pet, car and private medical insurance