Autumn Statement 2016 – Personal Taxation
November 29th, 2016
Personal allowance and higher rate threshold
The personal allowance will rise to £11,500 and the higher rate threshold to £45,000 for 2017/18. The higher rate threshold is likely to be lower for Scottish taxpayers because the Scottish government has said that it intends to increase it by no more than the rate of inflation.
The Chancellor re-confirmed the goal of a £12,500 personal allowance and £50,000 higher rate tax threshold by 2020. After that date the personal allowance will rise in line with the CPI rather than the national minimum wage, as previously proposed.
National insurance contributions (NICs)
The primary and secondary NIC thresholds for employees and employers will be aligned at £157 a week in 2017/18.
Class 2 NICs will be abolished from April 2018. For 2018/19 onwards, benefit entitlement for the self-employed will be based on their Class 3 and Class 4 NIC records.
From April 2018 termination payments to employees of over £30,000 (that are subject to income tax) will also be subject to employer NICs. This has been previously announced. Tax will only be applied to the equivalent of an employee’s basic pay if they have not worked their notice. The first £30,000 of a termination payment will normally remain exempt from income tax and NICs.
Off-payroll working rules
The ‘off-payroll working’ rules will change in the public sector from April 2017, with the responsibility for operating them and paying the correct tax moving to the body paying the worker’s company. As a consequence, the 5% tax-free allowance will be removed for those working in the public sector who are paid through companies.
From April 2017, employees called to give evidence in court will no longer need to pay tax on the legal support from their employer.
Taxation of remuneration
Three measures have been announced on the treatment of remuneration other than in the form of a cash salary:
- Salary sacrifice The tax and NIC advantages of salary sacrifice schemes will be removed from April 2017, except for arrangements relating to pensions (including advice), childcare, cycle to work schemes and ultra-low emission cars. Arrangements in place before April 2017 will be protected until April 2018, and arrangements for cars, accommodation and school fees will be protected until April 2021.
- Valuation of benefits in kind The government will publish a consultation on employer-provided living accommodation and will also ask for evidence on the valuation of all other benefits in kind in the 2017 Budget.
- Employee business expenses There will also be a call for evidence on tax relief for employees’ business expenses, including those that employers do not reimburse.
New tax allowances for property and trading income
From April 2017 two new income tax allowances of £1,000 each will cover trading income and property income, as announced in Budget 2016. Individuals with trading or property income below the allowance will not need to declare or pay tax on that income. The trading income allowance will now be extended to apply to certain miscellaneous income from providing assets or services.
From April 2017, non-domiciled individuals will be deemed to be UK-domiciled for tax purposes if they have been UK resident for 15 of the past 20 years, or if they were born in the UK with a UK domicile of origin. Non-domiciled individuals who have a non-UK resident trust set up before they become deemed-domiciled in the UK will not be taxed on income and gains arising outside the UK and retained in the trust.
Also from April 2017, inheritance tax will be charged on UK residential property when it is held indirectly by a non-domiciled individual through an offshore structure, such as a company or a trust. The new rules were announced previously.
Inheritance tax reliefs
Inheritance tax relief for donations to political parties will be extended to parties with representatives in the devolved legislatures. This change will take effect from Royal Assent of the Finance Bill 2017/18.
Company car tax
For 2020/21, lower bands will be introduced for the lowest emitting cars. The appropriate percentage for cars emitting over 90g CO2/km will rise by 1%.