The Autumn Statement was delivered by the Chancellor on 25 November 2015. An overview summarising the main changes impacting HMRC has been published and this article provides a brief summary of some of the changes which may have an impact on your payroll obligations. More detailed articles covering other announcements can be found further on.
Income Tax Allowances
It was announced that the basic personal allowance for the tax year starting 6 April 2016 will be increased to £11,000 and the tax code for emergency use will be 1100L.
As a result there will be a general uplift of tax codes with suffix ‘L’ which will be increased by 40. HMRC will also issue individual tax codes for the tax year starting 6 April 2016 for some employees and employers should receive these by the end of March 2016. Full instructions on what to do for both employees with or without a tax code can be found on form P9X. This link will be updated in February to show form P9X(2016).
Income Tax bands and rates
The income tax rates and income tax bandwidths for the tax year starting 6 April 2016 are shown below:
|Basic Rate||20%||£1 to £32,000|
|Higher Rate||40%||£32001 to £150,000|
|Additional Rate||45%||£150,001 and above|
National Insurance contributions (NICs) earnings limits and thresholds
The announcements confirmed the following National Insurance (NI) limits and thresholds for the tax year starting 6 April 2016
- Main rate of primary Class 1 NICs will remain unchanged at 12%
- Class 1 secondary rate of NICs will remain unchanged at 13.8%. This rate also applies to Class 1A and Class 1B NICs
- the additional rate of primary Class 1 NICs will remain unchanged at 2%
- the Lower Earnings Limit will be £112 per week
- the Primary Threshold (for employees) will be £155 per week
- the Secondary Threshold (for employers) will be £156 per week
- the Upper Earnings Limit (UEL) will change to £827 per week
- the Upper Secondary Threshold (for employers) will be £827 per week
- the new Apprentice Upper Secondary Threshold (for employers) will be £827 per week*
* This has been introduced to facilitate the abolition of employer NICs for apprentices under the age of 25 from 6 April 2016, when employers will no longer be required to pay Class 1 Secondary NICs on earnings paid up to the Apprentice Upper Secondary Threshold to any apprentice under the age of 25.
The Apprenticeship Levy
At the Summer Budget it was announced that three million new apprenticeships will be created by 2020, funded by a levy on large employers.
It was confirmed at Autumn Statement that the apprenticeship levy will come into effect in April 2017, at a rate of 0.5% of an employer’s pay bill. A £15,000 allowance for employers will mean that the levy will only be paid on employers’ pay bills over £3 million.
Less than 2% of UK employers will pay the levy.
Retention of diesel supplement
At Budget 2012, the government announced its intention to abolish the diesel supplement on company cars made available for private use, in anticipation of a new EU stricter air quality standard. However, it is only recently that the EU decided on a timeline to achieve expected air quality standards using the Real World Driving Emission tests (RDE). The government has now announced it is retaining the diesel supplement until 2020-21 meaning the appropriate percentage for diesel cars will continue to be 3% higher than other cars, up to a maximum appropriate percentage of 37%.
The government is concerned about the growth of salary sacrifice and flexible benefit arrangements and their fairness on the tax system and is considering what action, if any, is necessary to address these issues. Further evidence will be gathered from employers to inform its approach.
Employment Intermediaries and Tax Relief for Travel and Subsistence
Changes will be made from April 2016 to prevent certain temporary workers employed through an employment intermediary, such as a personal service company or umbrella company, from being eligible to claim tax relief or NICs disregard on their home to work travel.
The Government has responded to the final report of the OTS employment status review, published in March 2015 and is taking forward the majority of the report’s recommendations. Further information will be provided as the changes progress.