Employer provided cars
The scale of charges for working out the taxable benefit for an employee who has use of an employer provided car are now announced well in advance. Most cars are taxed by reference to bands of CO2 emissions. The percentage applied to each band has typically gone up by 1% each year with an overriding maximum charge of 35% of the list price of the car. From 6 April 2015 the percentage applied by each band goes up by 2% and the maximum charge is increased to 37%.
From 6 April 2016 there will be a further 2% increase in the percentage applied by each band with similar increases in 2017/18 and 2018/19. For 2019/20 the rate will increase by a further 3%. The 3% diesel supplement will be removed from 6 April 2016.
These increases may discourage businesses from retaining the same car. New cars will often have lower CO2 emissions than the equivalent model purchased by the employer, say three years earlier.
Zero emission vans
The van benefit charge exemption for zero emission vans is to be phased out from 6 April 2015. For 2015/16 a charge will apply equal to 20% of the normal van benefit charge. This will increase by a further 20% each year over the next three years up to 2018/19 and by a further 10% in 2019/20. From 6 April 2020 a normal 100% van benefit charge will apply to zero emission vans.
The charge for a zero emission van for 2015/16 will therefore be £630 (£3,150 x 20%).
Employer National Insurance contributions (NIC) for the under 21s
From 6 April 2015 employer NIC for employees under the age of 21 will be reduced from the normal rate of 13.8% to 0%. For the 0% rate to apply the employee will need to be under 21 when the earnings are paid.
This exemption will not apply to earnings above the Upper Secondary Threshold (UST) in a pay period. The weekly UST is £815 for 2015/16 which is equivalent to £42,385 per annum. Employers will be liable to 13.8% NIC beyond this limit.
The UST is a new term introduced for this new NIC exemption. It is set at the same amount as the Upper Earnings Limit, which is the amount at which employees' NIC fall from 12% to 2%.
NIC for apprentices under 25
The government will abolish employer NIC up to the UST for apprentices aged under 25. This will come into effect from 6 April 2016.
Detailed regulations will be issued on the NIC for apprentices including the definition of an apprentice.
NIC Employment Allowance
The Employment Allowance was introduced from 6 April 2014. It is an annual allowance of up to £2,000 which is available to many employers and can be offset against their employer NIC liability.
The government will extend the annual £2,000 Employment Allowance for employer NIC to householders who employ care and support workers. This will come into effect from 6 April 2015.
Review of employee benefits
In 2014 the Office of Tax Simplification published recommendations on the tax treatment of employee benefits in kind and expenses. In response the government has issued draft legislation on four areas:
- From 6 April 2015 there will be a statutory exemption for certain non-cash benefits in kind costing up to £50. An annual cap of £300 will be introduced for office holders of close companies and employees who are family members of those office holders. Those affected by this cap will be able to receive a maximum of £300 worth of trivial benefits in kind each year exempt from tax.
- From 6 April 2016 the £8,500 threshold below which employees do not pay income tax on certain benefits in kind will be removed. There will be new exemptions for carers and ministers of religion.
- From 6 April 2016 there will be no tax liability on an employee for certain reimbursed expenses. This will replace the current system where employers have to apply for a dispensation to avoid having to report non-taxable expenses (on forms P11D). Also employees will automatically get the tax relief they are due on qualifying expenses payments.
- HMRC will be able to issue Regulations to allow employers to include taxable benefits in pay and thus account for PAYE on the benefits. Employers will therefore not have to include these items on forms P11D.
Overarching contracts of employment and temporary workers
The use of overarching contracts of employment by employment intermediaries such as 'umbrella companies' can result in workers obtaining tax relief for home to work travel that would not ordinarily be available.
From April 2016 the government will change the rules to restrict travel and subsistence relief for workers engaged through an employment intermediary, such as an umbrella company or a personal service company, and under the supervision, direction and control of the end-user.