08 Dec Autumn Statement Newsletter – Employment
NIC Exemption for Young Employees
From 6 April 2015 employers will not pay class 1 employer’s NICs on the wages of employees aged under 21, where the employee earns less than the upper earnings limit (£813 per week in 2015/16). The employee will pay NICs on their wages as normal, and both employers’ and employee’s NI will be due on any wages above the upper earnings limit.
The government wants to encourage employees to become part-owners of the organisations they work for, and this apparently improves productivity and happiness in the workforce. The following tax reliefs will be introduced in 2014 to smooth transfers of businesses to employee-ownership trusts:
– No CGT will apply on shares transferred which give rise to a controlling interest in the business passing to the employee ownership trust;
– No IHT will apply on shares or assets transferred to the employee-ownership trust; and
– Bonuses of up to £3,600 per employee per year will be tax free where the business is controlled by an employee-ownership trust.
The primary (employees’) and secondary (employers’) threshold for class 1 NICs have been aligned at £153 per week from 6 April 2014.
For 2014/15 the main rates and thresholds for NI contributions are:
Employer’s class 1 above £153/week not contracted out – 13.8%
Employee’s class 1 not contracted out from £153 to £805/week – 12%
Employee’s additional class 1 above £805/week – 2%
Self-employed small earnings exemption – £5,885 per annum
Self-employed class 4 from £7,956 to £41,865 per annum – 9%
Self-employed class 4 additional rate above £41,865 per annum – 2%
Self-employed class 2 – £2.75 per week
Voluntary contributions class 3 – £13.90 per week
Currently employers can recover statutory sick pay (SSP) paid to their employees, where the total paid exceeds 13% of the class 1 NICs paid by the employer in the same tax month. This is called the percentage threshold scheme (PTS). Employers cannot reclaim SSP which does not reach the 13% threshold.
The PTS will be abolished from 6 April 2014, so SSP paid on and after that date will be an unrecoverable cost for all employers. However, employers will be able to reclaim SSP paid for periods up to 5 April 2014, if a claim is submitted by 6 April 2016.
The money saved by abolishing PTS will be invested in a new Health and Work Service, which will help sick employees get back to work by providing them with a return to work plan. Where the Heath and Work Service recommend a medical treatment for the sick employee, the employer can pay up to £500 towards this treatment with no tax charges for the employee. This tax exemption can also apply to medical treatments recommended by an occupational health service arranged by the employer.
Where a company car driver receives free fuel, the taxable benefit is calculated as the percentage of the list price for the car applied to the fuel charge multiplier set at £21,700 for 2014/15 (£21,100 for 2013/14) . The maximum taxable benefit of receiving free road fuel for private use will increase to £7,595 for 2014/15 from £7,385 for 2013/14.
From 6 April 2014 the employee will be taxed on the provision of a car as a benefit when the employer leases a car to the employee. Also from that date if the employee wishes to make payments for the private use of the company car or van to reduce the taxable benefit those payments must be made in the same tax year in which the vehicle is provided for private use.
The taxable benefit for the private use of a company van has been fixed at £3000 per year for many years, but from 6 April 2014, this increases to £3,090. The taxable benefit when fuel is provided for private use in a company van will rise from £564 for 2013/14 to £581 in 2014/15.
HMRC approved share schemes have strict limits on the value of shares which can be transferred to employees each year, and these limits have not been changed for some time. From 6 April 2014 the following limits are increased:
– monthly limit for employees who save to acquire shares through a SAYE scheme increases from £250 to £500;
– annual value of free shares given to employees in a Share Incentive Plan (SIP) increases from £3,000 to £3,600;
– annual value of partnership shares granted under a SIP increases from £1,500 to £1,800.