Tax rates and thresholds
Income tax
The tax-free personal allowance will increase in April 2017 to £11,500 as previously announced, continuing its progression towards the government’s target of £12,500 in 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 are 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, again as previously announced.
CIPP comment The former Chancellor made a point of announcing personal allowance levels and higher rate thresholds several years in advance, although (or perhaps so that) he was obliged to revise them positively in subsequent statements. Unusually, there were no announcements about 2018-19 allowances or thresholds today.
Company cars, vans and fuel
There were no announcements concerning company car and van charges or fuel charges.
Childcare
Tax-Free Childcare
The Chancellor confirmed that the government will shortly be rolling out Tax-Free Childcare for working families with children under 12, providing up to £2,000 a year for each child to help with childcare costs. Parents of younger children will be able to apply first and all eligible parents will be able to benefit by the end of this year. Parents will be able to apply for all of their children at the same time, when their youngest child qualifies. Parents can now sign up to receive an email update which will notify them when they are able to apply.
Free childcare
From September 2017, the free childcare offer will double, from 15 to 30 hours a week for working families with 3 and 4 year olds in England, in total worth up to £5,000 for each child.
Dividend Allowance
Introduced in April 2016, the dividend allowance means that there is no tax payable on dividend payments up to the limit of the allowance, currently £5,000. From April 2018 the allowance will be reduced from £5,000 to £2,000. Any dividends received above this allowance will be taxed at 7.5% for basic-rate taxpayers, 32.5% for higher-rate tax payers and 38.1% for additional-rate taxpayers. The Chancellor stated that this would reduce the tax differential between the employed and self-employed on the one hand and those working through a company on the other. A £2,000 dividend allowance will continue to mean that 80% of general investors pay no dividend tax, including those with sizeable investments (typically, up to £50,000).
Expenses and benefits
Off-payroll working in the public sector - expenses
As confirmed at Autumn Statement 2016, from 6 April 2017 responsibility for determining whether the ‘IR35’ rules apply, and the subsequent responsibility for applying those rules, transfers from the worker’s intermediary to the fee- payer where the end client is a public sector body. The worker’s intermediary may be an individual, a partnership, a personal service company (PSC) or a managed service company (MSC). The fee-payer is the public sector employer or a third party such as an agency.
In documents published alongside Spring Budget 2017, the government confirmed that, following responses to the technical consultation, it will be optional for the fee-payer to take into account the worker’s expenses when calculating
The Chartered Institute of Payroll Professionals
Policy News Journal
cipp.org.uk
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