Budget Highlights for Employment Specialists 2017

Traditionally, the budget is announced in Spring but last year it was announced that the budget would move to the autumn. This year the Chancellor Philip Hammond presented the budget on 22 November. We set out the employment highlights below.

National Minimum Wage and National Living Wage

The National Living Wage for those aged 25 and over will increase from £7.50 per hour to £7.83 per hour from April 2018.

The National Minimum Wage will also increase:

·         For 21 to 24 year olds - £7.38 per hour

·         18 to 20 year olds - £5.90 per hour

·         16 and 17 year olds - £4.20 per hour

·         apprentices - £3.70 per hour

Along with the budget papers, the government published its response to the Low Pay Commission’s recommendations on National Living Wage and National Minimum Wage rates.

Employment status

The government will publish a discussion paper as part of the response to Matthew Taylor’s review of employment practices in the modern economy, exploring the case and options for longer-term reform to make the employment status tests for both employment rights and tax clearer.

IR35

IR35 targets individuals who effectively work as employees even if they choose to structure their work through a company .The budget falls short of extending to the private sector the reforms that were introduced in the public sector in April 2017 (see Emplaw Online article IR35Reform – public sector) but describes this as ‘a possible next step’ and announces plans to consult on how to tackle non-compliance with IR 35 (off-payroll working rules) in the private sector. The government has already commissioned external research which will be published in 2018.

Income tax

The government has stated that it will raise the personal allowance for income tax to £12,500 and the higher rate threshold to £50,000 by 2020. In 2018-19 the personal allowance and higher rate threshold will increase to £11,850 and £46,350 respectively.

NICs

The chancellor confirmed that the abolition of Class 2 NICs, reforms to the NICs treatment of termination payments, and changes to the NICs treatment of sporting testimonials will now take effect from April 2019 (one year later than anticipated).

It was also confirmed that the the main rate of Class 4 NICs would be maintained at 9% and not increase to 10% in April 2018 and 11% in April 2019, as previously anticipated

Taxation of employee business expenses

  • Self-funded training – the government will consult in 2018 on extending the scope of tax relief currently available to employees and the self-employed for work-related training costs
  • Subsistence benchmark scale rates – from April 2019 employers will no longer be required to check receipts when reimbursing employees for subsistence using benchmark scale rates. The existing concessionary accommodation and subsistence overseas scale rates will be placed on a statutory basis.
  • From April 2018 there will be no benefit in kind charges on electricity that employers provide to charge employees’ electric vehicles.
  • Guidance and claims process for employee expenses – HMRC will work with external stakeholders to improve the guidance on employee expenses, particularly on travel and subsistence and the process for claiming tax relief on non-reimbursed employment expenses.

VAT

Despite media reports to the contrary, the VAT registration threshold will be maintained at the current level of £85,000 for two years from April 2018.