Autumn Statement: key employment announcements

Autumn Statement: key employment announcements

The Chancellor presented his Autumn statement to Parliament on 23 November 2016. The key points relevant to employment law are:

Personal allowance: Committing to raise the Personal Allowance to £12,500 and the Higher Rate Threshold to £50,000 by 2020-21

The Personal Allowance is the amount of income that can be earned before income tax is paid. It is currently £11,000 this year, and will rise to £11,500 in 2017-18. The point at which the higher rate of income tax is paid will increase from £43,000 this year, to £45,000 in 2017-18.
Once the Personal Allowance reaches £12,500, it will increase in line with inflation.
National Living Wage and National Minimum Wage: The National Living Wage and the National Minimum Wage will increase from April 2017
The National Living Wage for those aged 25 and over will increase from £7.20 per hour to £7.50 per hour. That means over £1,400 a year more for a full-time worker previously on the National Minimum Wage.
The National Minimum Wage will also increase:
•    for 21 to 24 year olds – from £6.95 per hour to £7.05
•    for 18 to 20 year olds – from £5.55 per hour to £5.60
•    for 16 to 17 year olds – from £4.00 per hour to £4.05
•    for apprentices – from £3.40 per hour to £3.50

And £4.3 million will be spent on:

  • helping small businesses to understand the rules
  • cracking down on employers who are breaking the law by not paying the minimum wage

Salary sacrifice schemes: Some Salary sacrifice schemes will lose tax efficiency

From April 2017, most salary sacrifice schemes will be subject to the same tax as cash income.
In salary sacrifice schemes, employees exchange some of their salary for a non-cash benefit in kind (such as a mobile phone). Both the employer and employee make a tax saving, because the benefit is taxed less than a salary or not taxed at all.
The changes will affect types of salary sacrifice schemes differently:
•    pensions, pensions advice, childcare, Cycle to Work and ultra-low emission cars will be exempt
•    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 4 years.

Employee Shareholder status: Tax position changing

The government is introducing legislation to remove the Capital Gains Tax exemption and Income Tax reliefs associated with shares awarded under Employee Shareholder status. This is in response to evidence suggesting that the status is primarily being used for tax planning. The legislation will have effect in relation to Employee Shareholder agreements entered into on or after 1 December 2016 in order to prevent forestalling, whilst allowing outstanding agreements to be finalised. Due to the requirement that 7 days must pass between an employee receiving independent advice on an offer and becoming an employee shareholder, this will allow any individual who has received advice before 23 November 2016 the opportunity to finalise the outstanding arrangement. The effective date is to be 2 December where advice is received on 23 November prior to 1.30pm. Existing Employee Shareholder agreements will not be affected.
Further details on the measures listed above are contained in the draft legislation, explanatory notes and tax information and impact notes published on the website.