Here is our summary of some of the key issues from the
Chancellor's 2016 Autumn Statement announced on 23 November
Under the current law, termination
payments up to £30,000 are free from income tax and National
Insurance Contributions ("NICs") and all
termination payments (even above £30,000) are free from
employer's National Insurance Contributions.
From April 2018 this will change.
Termination payments over £30,000, which are subject to
income tax, will also be subject to employer's NICs.
Payments in Lieu of Notice ("PILONs")
Under the current law, a payment on
termination of employment made in lieu of a notice period is
subject to income tax and NICs if the employee's contract of
employment contains a clause permitting the employer to make such a
payment (a PILON clause). If there is no such PILON clause, then in
some cases the payment can be paid as damages for breach of
contract and is not subject to income tax or NICs if it falls
within the £30,000 threshold.
From April 2018, income tax and NICs
will need to be paid on any termination payment in respect of the
employee's basic salary that would have been received during
any unworked notice period, regardless of whether there is a PILON
clause in the employee's contract.
This is a departure from the
government's original intention that payments in respect of
salary or benefits which the employee would have received
during their notice period would be subject to income tax and
The tax and NICs advantages of salary
sacrifice schemes will be removed from April 2017 (i.e. the
sacrificed pay will be subject to tax and NICs).
However, this is subject to some
fairly major exemptions relating to:
pensions (including advice);
ultra-low emission cars.
All arrangements in place before
April 2017 will be protected until April 2018 and arrangements in
place before April 2017 for cars, accommodation and school fees
will be protected until April 2021.
PERSONAL ALLOWANCE AND HIGHER RATE THRESHOLD
For 2017/18, the Personal Allowance
will increase from £11,000 to £11,500.
The Higher Rate Threshold (above
which 40% income tax is payable) will increase from £43,000
From April 2017 the NIC secondary
threshold (above which employer NICs are payable) and the
NIC primary threshold (above which employee NICs are
payable) will be aligned.
As a result, both employees and
employers will start paying NICs on weekly earnings above
£157. This will mean that employers will start paying NICs at
a lower level of remuneration.
National Minimum Wage ("NMW")
The government has confirmed that
from April 2017 the NMW will increase
For those aged 25 and over from
£7.20 per hour to £7.50.
For 21 to 24 year olds from
£6.95 per hour to £7.05
For 18 to 20 year olds from
£5.55 per hour to £5.60
For 16 to 17 year olds from
£4.00 per hour to £4.05
For apprentices from £3.40 per
hour to £3.50
The government has also announced
further investment of £4.3 million per year to strengthen
enforcement of the NMW.
Employee Shareholder Status ("ESS")
ESS was introduced in 2013 to give
employees income tax and capital gains tax and NIC reliefs in
respect of shares acquired by reason of their employment in return
for which they gave up certain employment rights. Take up on the
scheme was reportedly very low.
The advantages of using ESS schemes
will be removed for new agreements entered into on or after 1
December 2016. This effectively means that no further issues of ESS
shares will be possible.
The tax relief applying to ESS shares
that have already been issued will remain unaffected.
Originally published 01 December 2016
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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