November 28, 2017

Autumn Budget 2017: Key points for employers

The Chancellor announced a number of measures which will be of interest to employers in the Autumn Budget 2017, including:

  • Employment status consultation – there will be a consultation on the case and options for reform to make the employment status tests for both employment rights and tax clearer.  The consultation is part of the government's response to the Taylor Review published in July, which made a number of proposals for reform on employment status and workers' rights.  

This follows the recent publication of a joint report of the Work and Pensions and Business, Energy and Industrial Strategy (BEIS) Committees recommending legislation which aims to provide clarity on employment status and take forward what they believe to be "the best" of the recommendations in the Taylor Review.  We anticipate that this will be factored into the consultation when it is launched.

  • Off-payroll working in the private sector consultation – the government reformed the off-payroll working rules (known as IR35) for engagements in the public sector in April 2017.  Following this, it has identified that a possible next step would be to extend the reforms to the private sector, to ensure individuals who effectively work as employees are taxed as employees even if they choose to structure their work through a company.  The government has announced that there will be a consultation on this, which will draw on the experience of the public sector reforms and external research already commissioned by the government and due to be published in 2018.
  • The national living wage (applying to workers aged 25+) will increase at the rate of 4.4% from £7.50 to £7.83 in April 2018; the national minimum wage will also increase in April 2018 as follows:

-21 to 24 year olds from £7.05 to £7.38 per hour

-18 to 20 year olds from £5.60 to £5.90 per hour

-16 to 17 year olds from £4.05 to £4.20 per hour

-apprentices from £3.50 to £3.70 per hour

  • The Personal allowance will rise to £11,850 in April 2018.It was a Conservative manifesto pledge to increase the personal allowance to £12,500 by 2020/21. The higher rate threshold will rise to £46,350. The government has already pledged to increase this to £50,000 by 2020/21.
  • National Insurance Contributions (NICs) – as previously announced, the government will delay implementing some NICs changes by one year. This includes the abolition of Class 2 NICs and charging employers' NICs on termination payments over £30,000.  These changes will now be introduced in April 2019.

However, there is still a significant change in the tax treatment of termination payments that will be introduced in April 2018, which is that from then, all pay in lieu of notice payments will be treated as taxable earnings and subject to income tax and employer's NICs (even where there is no pay in lieu of notice clause).

  • Save As You Earn scheme – employees on maternity and parental leave will be able to take up to a 12 month pause from saving into their Save As You Earn employee share scheme, increased from 6 months currently. The change will take effect from 6 April 2018.
  • Benefits in kind: electric vehicles – from April 2018, there will be no benefit in kind charge on electricity that employers provide to charge employees’ electric vehicles.