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.

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.

 

Year End Tax Planning

Business man holding TAX

The end of the tax year is fast approaching, but there is still time before 5 April to save tax for 2016-17. Below are some points you may wish to consider.

MAXIMISE CAPITAL ALLOWANCES

Businesses may be able to write off the cost of capital assets by making the most of capital allowances. The Annual Investment Allowance allows businesses to claim a deduction of up to £200,000 of the year’s investment in plant and machinery (with the exception of cars). Most business structures can make use of the AIA.

UTILISE YOUR FULL ISA ALLOWANCE

Individuals may invest up to £15,240 for the current tax year. A saver may only pay into a maximum of one cash ISA, one stocks and shares ISA and one innovative finance ISA per year. Savers have until 5 April 2017 to make full use of their 2016-17 ISA investment allowance. ISAs can offer a very useful tax-free way to save.

TAX EFFICIENT RETIREMENT PLAN

Pension contributions have to be paid by 5 April 2017 for them to be relieved against 2016-17 income. Annual contributions cannot exceed the greater of £3,600 (gross) or the amount of your UK relevant earnings eligible for tax relief. However, the contributions are subject to the annual allowance, currently £40,000. This is further reduced for those with net income of over £110,000 and adjusted annual income (i.e. your income plus both your own and your employer’s pension contributions) over £150,000. For every £2 of adjusted income over this figure, a person’s annual allowance is reduced by £1 (down to a minimum of £10,000).

For further information please contact our tax team here at Green & Co.

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

 

Reductions To The Annual Pension Allowance

ID-10089001.jpg

The annual pensions allowance is set to change on 6 April 2016 if your “threshold” income exceeds £110,000 and your “adjusted” income exceeds £150,000. For most people the annual allowance is £40,000, but should your income exceed the above limits the allowance (which includes employer’s and employee’s contributions) will be reduced by £1 for every £2 of adjusted income over £150,000. The minimum annual allowance will be £10,000, which will apply to those with adjusted income of £210,000 or more. The table below gives examples of the annual allowances due.

Adjusted Income                                Annual Allowance

£150,000 or less                                £40,000

£170,000                                             £30,000

£190,000                                             £20,000

£210,000 or more                              £10,000

Should you feel that your income for 2016/17 may exceed £110,000, you need to seek independent financial advice as a matter of urgency.

For further information 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.

Image courtesy of adamr at FreeDigitalPhotos.net

 

Autumn 2014 Newsletter

Summer will soon be coming to a close, and here is our next newsletter to usher in Autumn: Green & Co Autumn 2014 Newsletter

This newsletter focuses on:

  • Tax advantages for innovative companies
  • Dealing with workplace disputes
  • Tax planning following changes to the treatment of trusts
  • Pensions – is now the time to make contributions?
  • Tougher lending rules for mortgage borrowers
  • Tax relief on your travel expenses

If you would like advice on any of these areas, please contact us today.