Tax rates and thresholds
Income tax
The tax-free personal allowance will increase in April 2017 to £11,500, £300 more than was announced previously, which accelerates progression towards the £12,500 target for April 2020. It will mean 1.3 million people will have been taken out of the tax regime altogether since the start of this parliament. To ensure the benefits of the personal allowance increase is passed on to higher rate taxpayers, and to encourage individuals to progress, the point at which higher earners start to pay 40% tax will increase to £45,000 in 2017-18. This is much higher than the £43,600 level announced in the Summer Budget 2015.
Company cars, vans and fuel
The Budget confirmed previous announcements that the appropriate percentage list price subject to tax will increase by 3% for cars with CO 2 emissions greater than 75 grams per kilometre in 2019-20, with a 3% differential between the lower emissions bands. The maximum company car tax (CCT) will remain at 37% into the 2019-20 tax year and the 3% diesel supplement remains in place until April 2021.
The government also confirmed that it will continue to use CO 2 emissions as the basis for the CCT from 2020-21 onwards and will consult on reform of the lower bands to refocus initiatives in the car market on the cleanest cars.
Vehicle excise duty (VED) rates and bands on cars, vans, motorcycles and motorcycle trade licences will increase by RPI from 1 April 2016. HGV VED, Road User Levy rates and other rates linked to the basic goods rate are frozen from 1 April 2016.
CIPP comment Little was said about National Insurance contributions, which may be a welcome relief after recent structural changes introduced new thresholds and rates first for under-21s, then for apprentices under 25 years old, and not forgetting the impact of the end of contracting-out. The period of calm may be short-lived, however: potential future reforms are mentioned below under tax administration and simplification. There was mention of the Employment Allowance - those employers who hire an illegal worker face civil penalties from the Home Office and the government will build on this deterrent by removing a year’s employment allowance from those receiving civil penalties, starting in 2018.
Apprenticeships
As announced at the Autumn Statement 2015, an apprenticeship levy will be introduced in April 2017, and employers that are committed to training will be able to get out more than they put in. From April 2017, employers will receive a 10% top-up to their monthly levy contributions in England and this will be available for them to spend on apprenticeship training through their digital account. The government will set out further details on the operating model in April 2016 and draft funding rates will be published in June 2016.
Expenses and benefits
The government will introduce a package of measures to further simplify the tax administration of employee benefits and expenses by:
extending the voluntary payrolling framework to allow employers to account for tax on non-cash vouchers and credit tokens in real time from April 2017 consulting on proposals to simplify the process for applying for and agreeing PAYE Settlement Agreements consulting on proposals to align the dates by which an employee has to make a payment to their employer in return for a benefit-in-kind they receive to ‘make good’ legislating to ensure that if there is a specific statutory provision for calculating the tax charge on a benefit-in-kind this must be used (Finance Bill 2016 and Finance Bill 2017).
Fuel Duty
For the 6th successive year, the government will freeze the main rate of fuel duty at 57.95 pence per litre for 2016-17. This marks the longest fuel duty freeze in over 40 years. Since Budget 2011, fuel duty has been kept at
CIPP Policy News Journal
25/04/2016, Page 176 of 453
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