Budget 2016 – 5 Key Points

  1. Termination payments - From April 2018, whilst the first £30,000 of a termination payment remains exempt from income tax and national insurance contributions, amounts in excess of £30,000 will be subject to income tax (as is currently the case) and compulsory employer NICs. The whole termination payment (whether above or below £30,000) will be outside the scope of employee NICs contributions. The Government is due to undertake a consultation on tightening the scope of the income tax exemption to prevent ‘manipulation’ and to clamp down on tax evasion and avoidance schemes.
  2. Loss of National Insurance Contributions (NICs) allowance for employers of illegal workers - From April 2017 employers can lose their employment NICs allowance for a period of one year should they be subject to a civil penalty for employing illegal workers. It is thought that the loss of a year’s employment allowance would be capped at £3,000.
  3. Salary sacrifice -  the Government is considering restricting the range of benefits that attract income tax and NICs advantages that may be offered through salary sacrifice schemes.  It is believed that the Government is concerned about the growth of salary sacrifice schemes. However, it has confirmed that salary sacrifice for enhanced employer pension contributions, childcare benefits and health-related benefits, such as the cycle to work scheme, would be unaffected and would continue to benefit from income tax and NICs relief when provided through salary sacrifice arrangements.  However, childcare voucher schemes will be closed to new entrants from 2018.
  4. Extension of Shared Parental Leave and Pay to working grandparents – The Government will launch a consultation in May 2016 on how to implement its commitment to extend Shared Parental Leave and Pay to working grandparents. The consultation will also cover options for streamlining the Shared Parental Leave and Pay system, including simplifying the eligibility requirements and notification system.
  5. Apprenticeship Levy - From April 2017, employers will receive a 10% top-up from the Government to their monthly levy contributions to spend on apprenticeship training in England. Government is due to set out further details on the operating model in April 2016 and draft funding rates will be published in June 2016.

If you have any questions arising from this article or would like further information on the employment related updates in the March 2016 Budget, please get in touch with a member of our Employment team.