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The taxable value of benefits in kind where cash has been forgone will be fixed at the higher of the current taxable value or the value of the cash forgone.
The new rules will not affect employer-provided pension saving, employer-provided pensions advice, childcare vouchers, workplace nurseries, or Cycle to Work. Following consultation, the government has also decided to exempt Ultra-Low Emission Vehicles,
with emissions under 75 grams of CO2 per kilometre.
This change will take effect from 6 April 2017. Those already in salary sacrifice contracts at that date will become subject to the new rules in respect of those contracts at the earlier of:
• an end, change, modification or renewal of the contract
• 6 April 2018, except for cars, accommodation and school fees, when the last date is 6 April 2021.
Changes to termination payments
Changes from 6 April 2018 will align the rules for tax and employer NICs by making an employer liable to pay NICs on any part of a termination payment that exceeds the £30,000 threshold. It is anticipated that this will be collected in ‘real-time’.
In addition, all payments in lieu of notice (PILONs) will be both taxable and subject to Class 1 NICs. This will be done by requiring the employer to identify the amount of basic pay that the employee would have received if
they had worked their notice period, even
if the employee leaves the employment
part way through their notice period.
This amount will be treated as
earnings and will not be subject to the £30,000 exemption.
Finally, the exemption known as foreign service relief will be removed and a clarification made to ensure that the exemption for injury does not apply in cases of injured feelings.
National Minimum Wage and National Living Wage increases
The Chancellor confirmed that the National Living Wage (NLW) rate will be increased from 1 April 2017. Increases are also being made to the National Minimum Wage (NMW) rates. The NLW applies to workers aged 25 and over. The NMW applies to other workers provided they are at least school leaving age.
Rate from:
1 October 2016
1 April 2017
NLW for workers aged 25 and over
£7.20*
£7.50
NMW main rate for workers aged 21-24
£6.95
£7.05
NMW 18-20 rate
£5.55
£5.60
NMW 16-17 rate
£4.00
£4.05
NMW apprentice rate**
£3.40
£3.50
Comment
Employers and employees may wish to review their flexible remuneration packages prior to 6 April 2017.
* introduced and applies from 1 April 2016
**the apprentice rate applies to apprentices under 19 or 19 and over and in the first year of
their apprenticeship.
Budget Summary 2017
Employment Taxes 11