Budget 2016 – Key employment Law implications
24 March 2016
The budget, announced last week, contained some interesting employment law developments. Amongst these were the following proposals:
- Termination Payments: The £30,000 income tax exemption has been retained, however, the Government will be launching a consultation in the Summer on the taxation of termination payments and the introduction of measures to prevent ‘manipulation’ of the current tax exemption. The Government state that the current rules ‘incentivise employers’ to structure arrangements so that ordinarily taxable sums (such as notice and bonuses) fall within the exemption. Full details of the changes being proposed will be released following the conclusion of the consultation. However, the Government has already announced its proposal that from April 2018 NICs will be due on termination payments which exceed the £30,000 exemption and attract income tax.
- Shared Parental Leave: A consultation is to be launched in May this year to seek views on how to implement the Government’s existing proposal to extend Shared Parental Leave to grandparents. This will also include options for simplifying the current Shared Parental Leave requirements.
- Salary Sacrifice: The Government is considering limiting the benefits that can attract income tax/NICs relief under salary sacrifice schemes. However, it has stated that this will not apply to pension savings, childcare benefits and health-related benefits (such as cycle to work).
- Illegal working and NICs allowance: Employers who face civil penalties for employing illegal workers will have their NICs employment allowance removed for one year. This is expected to commence in 2018.
- Employee Shareholders: The Government has introduced an individual lifetime limit of £100,000 on Capital Gains Tax relief for employee shareholder shares. This applies to those entering into employee shareholder arrangements on or after 17th March 2016 and, thus, will not have retrospective effect.
- Tax thresholds: The threshold for triggering the higher income tax rate (40%) will be increased by £615 to £43,000 next month, with an expectation that this will increase to £45,000 next year. The threshold that a worker needs to meet before paying any tax is increasing by £400 to £11,000, with an expectation that this will rise to £11,500 next year.
Click here to view the Budget in full.
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