A summary of the key changes affecting your remuneration strategy (these include a number of measures announced in the Summer Budget 2015 and reiterated in the Chancellor's Autumn Statement).
The government has committed to raise the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of this Parliament. In the Summer Budget the government announced an increase in the personal allowance from £10,600 in 2015-16 to £11,000 in April 2016 and a raise in the higher rate threshold from £42,385 in 2015-16 to £43,000 in April 2016. The government also legislated to ensure that once the personal allowance has reached £12,500, it will always be set at least at the equivalent of 30 hours a week on the NMW.
National Living Wage (NLW)
The government announced a new mandatory NLW from April 2016 for workers aged 25 and above in the Summer Budget 2015. The introduction of the NLW at £7.20 from April 2016 will lead to a £900 cash increase in earnings for a full-time worker on the current National Minimum Wage (NMW) next year. The government has now asked the Low Pay Commission to set out how the new NLW will reach 60% of median earnings by 2020. Based on the Office for Budget Responsibility's earnings forecasts, this means that the NLW will be over £9 by 2020.
Employee benefits & expenses
Employee share schemes
The government will introduce a number of technical changes to streamline and simplify aspects of the tax rules for tax-advantaged and non-tax-advantaged employee share schemes. These changes will provide more consistency, including putting beyond doubt the tax treatment for internationally mobile employees of certain employment-related securities (ERS) and ERS options. Any charge to tax will arise under the rules that deal with ERS options, rather than earnings.
The government intends to take action against those who have used or continue to use disguised remuneration schemes and who, according to the government, have not yet paid their fair share of tax. The government will also consider legislating in a future Finance Bill to close down any further new schemes intended to avoid tax on earned income, where necessary, with effect from 25 November 2015.
The government remains concerned about the growth of salary sacrifice arrangements and is considering what action, if any, is necessary. The government will gather further evidence, including from employers, on salary sacrifice arrangements to inform its approach.
Taxation of asset manager’s performance based rewards
The government will introduce legislation to determine when performance awards received by asset managers will be taxed as income or capital gains. An award will be subject to income tax, unless the underlying fund undertakes long term investment activity.
Employment intermediaries and tax relief for travel and subsistence
As confirmed in the Summer Budget 2015, the government will legislate to restrict tax relief for travel and subsistence expenses for workers engaged through an employment intermediary, such as an umbrella company or a personal service company. Following consultation, relief will be restricted for individuals working through personal service companies where the intermediaries legislation applies. This change will take effect from 6 April 2016.
Taxation of accommodation benefits
Following recommendations from the 2014 Office of Tax Simplification report on simplifying the administration of employee benefits and expenses, the government will publish a call for evidence on the current tax treatment of employer provided living accommodation.
Proposals on pensions tax relief postponed to Budget 2016
In the Summer Budget, the government launched a consultation on the system of pensions tax relief, to gather evidence and views on whether the current system incentivises pension saving. The government received several hundred responses to that consultation, and is considering the options for reform carefully. The government will publish its response at Budget 2016.