On 16th March George Osborne stated “And we have delivered a budget for working people.” Here are some key points from the budget, keeping employee benefits in mind.
The 2016 budget did not announce any reforms to salary sacrifice, but mainly confirmed that salary sacrifice will continue for pension contributions, childcare and health-related benefits, securing the future of schemes such as Workplace Bikes .
The government have confirmed Tax-Free Childcare will be introduced throughout 2017. The existing Childcare Vouchers will continue until April 2018 to support the roll-out, ensuring parents can still make savings during the transition.
From April 2017, the tax-free personal allowance limits will increase to £11,500 for basic rate, and £45,000 for higher rate.
Savings for 18-40 year olds
From April 2017, the government will introduce Lifetime individual savings accounts (ISA). The government plans to encourage 18-40 year olds to save for a first home purchase or for retirement by contributing 25% to a maximum of £4000 a year. The government contribution will be made for any savings credited in to the account before the account holder’s 50th birthday.
Public Sector employer pension contributions
From 2019-20 the public sector employer contributions are due to increase following a review of the discount rate.
Benefit in Kind
The limit on income tax and National Insurance relief on employer arranged pension’s advice is to be extended to £500 (from £150).
Employee share holder status
Employee shareholder status arrangements entered in to from 17th March 2016 will be subject to an individual lifetime limit of £100,000 on gains eligible for capital gain tax exemption.
From April 2018 tax and National Insurance will be applied to redundancy or termination payments in excess of £30,000. Currently, the first £30,000 is paid free of tax and National Insurance, and the excess is only subject to income tax.