Here I have laid out the key points from the chancellor’s Autumn statement as they relate to Payroll. There may be some changes to this when the final bill is passed but I shall write a blog for them if there is anything significant.
NIC Exemption for Young Employees
From 6 April 2015 employers will not pay class 1 employer's NICs on the wages of employees aged under 21, where the employee earns less than the upper earnings limit (£813 per week in 2015/16). The employee will pay NICs on their wages as normal, and both employers' and employee's NI will be due on any wages above the upper earnings limit.
The government wants to encourage employees to become part-owners of the organisations they work for, and this apparently improves productivity and happiness in the workforce. The following tax reliefs will be introduced in 2014 to smooth transfers of businesses to employee-ownership trusts:
- No CGT will apply on shares transferred which give rise to a controlling interest in the business passing to the employee ownership trust;
- No IHT will apply on shares or assets transferred to the employee-ownership trust; and
- Bonuses of up to £3,600 per employee per year will be tax free where the business is controlled by an employee-ownership trust.
The primary (employees') and secondary (employers') threshold for class 1 NICs have been aligned at £153 per week from 6 April 2014.
For 2014/15 the main rates and thresholds for NI contributions are:
Employer's class 1 above £153/week not contracted out - 13.8%
Employee's class 1 not contracted out from £153 to £805/week - 12%
Employee's additional class 1 above £805/week - 2%
Currently employers can recover statutory sick pay (SSP) paid to their employees, where the total paid exceeds 13% of the class 1 NICs paid by the employer in the same tax month. This is called the percentage threshold scheme (PTS). Employers cannot reclaim SSP which does not reach the 13% threshold.
The PTS will be abolished from 6 April 2014, so SSP paid on and after that date will be an unrecoverable cost for all employers. However, employers will be able to reclaim SSP paid for periods up to 5 April 2014, if a claim is submitted by 6 April 2016.
Where a company car driver receives free fuel, the taxable benefit is calculated as the percentage of the list price for the car applied to the fuel charge multiplier set at £21,700 for 2014/15 (£21,100 for 2013/14) . The maximum taxable benefit of receiving free road fuel for private use will increase to £7,595 for 2014/15 from £7,385 for 2013/14.
From 6 April 2014 the employee will be taxed on the provision of a car as a benefit when the employer leases a car to the employee. Also from that date if the employee wishes to make payments for the private use of the company car or van to reduce the taxable benefit those payments must be made in the same tax year in which the vehicle is provided for private use.
The taxable benefit for the private use of a company van from 6 April 2014 increases to £3,090. The taxable benefit when fuel is provided for private use in a company van will rise from £564 for 2013/14 to £581 in 2014/15.
HMRC approved share schemes have strict limits on the value of shares which can be transferred to employees each year, and these limits have not been changed for some time. From 6 April 2014 the following limits are increased:
- monthly limit for employees who save to acquire shares through a SAYE scheme increases from £250 to £500;
- annual value of free shares given to employees in a Share Incentive Plan (SIP) increases from £3,000 to £3,600;
- annual value of partnership shares granted under a SIP increases from £1,500 to £1,800.
Income Tax Allowances
The standard personal allowance will increase to £10,000 from 6 April 2014, but the age allowances for those born before 6 April 1948 are frozen.
Allowances for 2014/15 are...
Personal allowance (born after 5 April 1948): £10,000
Personal allowance (born between 6 April 1938 and 5 April 1948): £10,500
Personal allowance (born before 6 April 1938): £10,660
Minimum married couples allowance*: £3,140
Maximum married couples allowance*: £8,165
Blind person's allowance: £2,230
Income limit for allowances for age related allowances: £27,000
Income limit for standard allowances: £100,000
* given where one partner was born before 6 /4/1935, as 10% reduction in tax due.
Tax Rates and Thresholds
The income tax bands for 2014/15 are:
Savings rate* (10%) - 0 to £2,880
Basic rate (20%) - 0 to £31,865
Higher rate (40%) - £31,866 to £150,000
Additional rate (45%) - over £150,000
*The savings rate of 10% only applies if the individual's net non-savings income does not exceed the savings rate limit. The higher rate and basic rate thresholds can be increased by paying personal pension contributions or gift aid donations.
State Pension Age
The State Pension Age (SPA) is currently being aligned at 65 for men and women who are reaching that age in the next few years. The SPA will then rise for both men and women to 66, and increase to 67 for those that reach that age between 2034 and 2036. The government is reviewing how quickly the state pension age should be changed. It is likely to accelerate the SPA to age 67, 68 and then to 69 for people who are currently in their early 30's.
Dual Employment Contracts
Where a person has an overseas domicile (usually because he was not born in the UK), and works overseas for part of their employment, it has been common practice to set up two parallel employment contracts for that person (dual contracts). One contract would deal with earnings taxable in the UK, the other contract would deal with overseas earnings. From 6 April 2014 HMRC will apply UK tax on earnings under both contracts, unless a higher amount of tax has been paid on the overseas earnings than would be paid in the UK.
Don’t forget that if you would like to use our payroll service you can call me on 020 8361 5500