Spring Budget – What does it mean for me?
The main points to be noted by employers from the Spring Budget 2017 announced by the Chancellor of the Exchequer, Philip Hammond, are:
• The personal tax allowance will increase by £500 from £11,000 to £11,500 from 6th April 2017, this is in line with the government's goal to have the personal tax allowance at £12,500 by 2020.
• The Dividend Allowance will decrease by £3,000 from £5,000 to £2,000 from 6th April 2018. This means that there is no tax payable on dividend payments up to £2,000 from April 2018 onwards. Any dividends above this allowance will be taxed at 7.5% for basic-rate taxpayers, 32.5% for higher-rate taxpayers and 38.1% for additional-rate taxpayers.
• Termination payments over £30,000 which are currently subject to income tax from April 2018 will be subject to Employer National Insurance Contributions (NICs). The first £30,000 of a termination payment will remain exempt from Income Tax and NICs. In the Finance Bill 2017, the tax treatment of termination payments will be clarified and this will include all contractual and non-contractual payments in lieu of notice taxable as earnings and requiring employers to tax the equivalent of an employee’s basic pay if a notice period has not been worked. The changes will take effect from 6 April 2018.
• The Money Purchase Annual Allowance will be reduced to £4,000 from April 2017, down from £10,000. This restricts the amount of tax relieved contributions an individual can make in a year into a money purchase pension, if they currently have flexible access to their pension savings.
• The Government is carrying out the first statutory review of the State Pension Age and the details will be published in their review by 7th May 2017.
• HMRC's compliance team are monitoring employers that are claiming the Employment Allowance as it has been reported that some employers are using avoidance schemes to avoid paying National Insurance.
As always, should you have any queries regarding any of the above and how it will specifically effect your business, give us a call or drop us an email.