The Finance Act 2017 is now law, in substantially shorter form than announced at the Autumn Statement and Spring Budget, due to the election.
Key measures in the Finance Act 2017 for employers include:
- Income tax and national insurance contribution rates remain unchanged for 2017. There will however be required changes to payroll systems to reflect new personal allowances and associated tax codes, along with the apprenticeship levy for larger employers.
- Public sector bodies, including quasi-state bodies like GP surgeries, the BBC and NHS dentists, are obliged to consider whether any contractors working through their own companies would, if engaged directly, be employees. Tax must then be deducted at source. There is an HMRC online test to assist. See our regular updates on the changes in employment status law.
- Salary sacrifice schemes, other than for childcare vouchers, pension, Cycle to Work and low emission vehicles also now lose their tax and national insurance contribution advantages, as do schemes where employee benefits can be exchanged for cash (e.g. a company car scheme with cash alternative).
- The tax advantages of the employee shareholder status have been withdrawn, with retrospective effect back to the announcement in December 2016. The employment status still exists, though it is questionable whether anyone would wish to pursue it with an upfront tax charge on shares received. Share option schemes, such as Enterprise Management Incentives, are likely more effective for motivating executive teams.
Some expected changes, dropped for now include:
- Termination payments: Restrictions on the exemption of the first £30,000 paid from tax.
- The ability for employers to pay for individual staff pension advice without being a taxable perk.
- Further restrictions on the annual allowance for pension contributions for high earners, which would have brought tax-exemption down to £4,000.
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