Budget Update and Other Employment Law Changes 2016

Author: Emily Kidd

As we digest the effect of today’s budget on our lives, I set out below a summary of the implications for employers:

Tax on termination payments

Historically, the first £30,000 of any non-contractual payment made on termination could be made without deduction. Payments above £30,000 would attract tax but not national insurance. There was criticism that it was unfair to apply a blanket exemption irrespective of length of service.

From 2018, payments above the threshold will also attract employer’s National Insurance as well as tax. The £30,000 exemption will remain in place.

Income tax

The personal allowance will rise to £11,000 in 2016 and will now increase further to £11,500 in April 2017.

The point at which the higher rate of Income Tax applies will increase from £42,385 to £43,000 in 2016 and to £45,000 in April 2017.

Salary Sacrifice Schemes

Although salary sacrifice schemes were in the Government’s sights to be scaled back, it is the Government's intention that pension saving, childcare and health-related benefits such as Cycle to Work, should continue to benefit from income tax and NICs relief when provided through salary sacrifice arrangements. It is likely that car schemes will be reviewed.

Here is a reminder of other key changes to employment legislation taking place next month:

National Living Wage

On 1st April 2016, the National Living Wage (NLW) is to be announced, initially to be set at £7.20 for employees over 25. This is part of the Government’s long term plan to move from a low wage, high tax, high welfare society to a higher wage, lower tax, lower welfare society. The National Minimum Wage will continue to apply to those under 25.

The penalty for non-payment of the NLW will be 200% of the amount owed, unless the arrears are paid within 14 days. The maximum fine for non-payment will be £20,000 per worker. However, employers who fail to pay will be banned from being a company director for up to 15 years.

Gender Pay Gap Reporting

Whilst reports are due at different times depending on an organisation’s financial year, the spotlight will be on April 2016 as this is the month that the report focuses on.

To recap, employers with over 250 staff will be required to provide a variety of reporting relating to the differences in pay between men and women.

If you have any queries about this article or any other employment law matter, please do not hesitate to contact Emily on 01932 588568 or e.kidd@downslaw.co.uk.