Some Employee Perks Are Being Lost and It Could Be Costly

Green & Co

Green & Co feature in the South Wales Argus discussing the tax changes for employee perks.

The new tax year has seen a raft of changes, with more legislative reform scheduled to come into effect over the next few years.

From changes in dividends, stamp duty, and national insurance (with a U-turn thrown in for good measure) the way that people are taxed is an ever-evolving landscape. However, it’s not just directors, landlords and the self-employed who have been targeted with new legislation.

Barrie Kenyon, partner at Green & Co Accountants and Tax Advisors said: “From 6th April, the tax and employer national insurance advantages of a salary sacrifice or salary exchange scheme was removed. This means that any employees who have swapped their salary for benefits, which typically include additional holiday days, will now pay the same tax as if they were buying them out of their post-tax income. The Chancellor, Philip Hammond, announced the changes in the autumn statement believing the previous schemes were unfair. From earlier this month, they have started to come into effect.

“However, these changes do not affect those employees who have reduced their salary for pension contributions, childcare purposes such as vouchers, workplace nurseries or directly contracted childcare, the cycle to work scheme and ultra-low emission company cars with co2 emissions of or less than 75g/km.

“The schemes were seen as attractive to both employees and employers, with reduced tax liabilities benefiting both parties.”

Mr Kenyon stressed that there were some caveats that accompany the changes: “If any arrangements which were in place before April 2017 relate to cars with co2 emissions over 75g/km, accommodation or school fees: these arrangements will be protected until April 2021. Also, other arrangements agreed prior to April 2017 that do not fall into the aforementioned categories will be protected until the end of the current tax year in April 2018.”

It is estimated that millions of workers from across the UK will pay more tax due to these changes, with the Treasury believing that these schemes are costing too much in lost tax receipts and national insurance contributions. It is estimated that the reform will cost employers in the UK around £85M this tax year, whilst increasing another £260M by April 2021 when the full changes will come into effect.

If you are worried about any of these forthcoming changes, please contact us at Green & Co for further help and guidance.

Green & Co Accountants and Tax Advisors specialise in business growth and tax minimisation for businesses across Wales and the South West of England.

For proactive advice, contact Green & Co Accountants and Tax Advisors on 01633 871 122, follow @Green_and_Co on Twitter or email barrie@greenandco.com.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Tax Free Childcare

Tax Free Childcare.jpg

The Government’s new Tax-Free Childcare scheme will be phased in across the UK from 28 April 2017, and will replace the current Childcare Voucher Scheme.

For the first time, the scheme will not only cover full time employees but also those who are part time, on maternity, paternity or adoption leave and people who are self-employed, subject to meeting HMRC’s eligibility criteria.  Initially, the scheme will only be available to parents of children under 2 years old, but by the end of the year this will be extended to all working parents across the UK with children under 12, or under 17 if disabled.

How the scheme works

The Government offers working families 20% support towards qualifying childcare costs.  Through the childcare service, parents must apply to open an online childcare account provided by NS&I, which payments can be paid into by the families and out of directly to the childcare provider.  For every £8 that is paid in to the account, the Government will make a top up payment of an additional £2, up to a maximum of £2,000 per child per year (£4,000 for disabled children).

Once this scheme has been implemented, any Employer Supported Childcare (ESC) schemes will be closed.  However, if you are already in an ESC prior to the launch you will have a choice of which scheme you would like to stay with, and the same scheme must be used for each child.

You can find a Childcare Calculator on the HMRC website which will help you compare the schemes available to you and check which works best for your family.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Some employee perks are losing their tax breaks.

Salary sacrifice.jpg

From 6 April 2017 the tax and employer national insurance advantages of a salary sacrifice or salary exchange will be removed, with the exception of:

  • Pensions
  • Childcare (Vouchers, workplace nurseries or directly contracted childcare)
  • Cycle to work
  • Ultra-low emission cars with co2 emissions of or less than 75g/km.

Any employees who have swapped their salary for benefits, for example, additional holiday days, will now pay the same tax as if they were buying them out of their post-tax income.

If any arrangements which were in place before April 2017 relate to cars with co2 emissions over 75g/km, accommodation or school fees, they will be protected until April 2021. All other arrangements (arranged before April 2017) that are not detailed above will be protected until April 2018.

If you are worried about any of these forthcoming changes, please contact us at Green & Co for further help and guidance.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

 

Update on Tax Free Childcare

Childcare.jpg

Further detail has been released on the new tax free childcare scheme that HMRC are set to debut in early 2017.

Under the scheme eligible parents open an online account, which they can use to pay a registered childcare provider. HMRC top up the account with £2 for every £8 paid in, up to a limit of £2,000 per child per year, or £4,000 for disabled children.

Parents will have to be in work to qualify with each earning around £115 a week. However, they will be ineligible if they earn in excess of £100,000 a year.

Parents who are enrolled in an employer operated childcare voucher scheme can continue in that scheme or switch to the new scheme. They are advised to consider which scheme is more beneficial to them before making a decision. Childcare voucher schemes will be open to new entrants until April 2018.

If you’d like to discuss this further please contact Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Tax-Free Childcare

The Government is proposing a new Tax-Free Childcare scheme which will help around 2.5 million working families, which was one of the major announcements in the 2013 budget.

HOW MUCH HELP CAN I GET?

Eligible families will get 20% of their annual childcare costs up to £6,000 per child, paid for by the Government. This is a potential saving of £1,200 per child, per year.

WHEN DOES IT START?

The scheme will be phased in from Autumn 2015 and will replace the existing childcare vouchers programme, which is currently offered by fewer than 5% of employers.

WHO QUALIFIES?

In order to eligible for the scheme both parents must be working, or one parent works in single parent families.

The scheme is open to employed and self-employed parents.

Initially, it will cover children up to 5 years old, but will build up over time to include all children under 12.

ARE THERE ANY RESTRICTIONS?

Yes, each parent must earn less than £150,000 a year.

The scheme will be unavailable to those who receive tax credits (or Universal credit when it comes into force).

HOW WILL IT BE ADMINISTERED?

Full details of the Tax-Free Childcare will be set out following consultation but it is expected that parents will have an online account and their payments will be topped up by the Government.