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Employee Benefits, Pensions and the Autumn Statement: What This Means for Hospitality Businesses

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Employee Benefits, Pensions and the Autumn Statement: What This Means for Hospitality Businesses

Employee Benefits, Pensions and the Autumn Statement: What This Means for Hospitality Businesses
November 25
11:12 2016


Davidson Asset Management’s Response to the Government’s Autumn Statement

In what will be the last Autumn statement, Chancellor Phillip Hammond announced some grim news for workers receiving employee benefits. Here is a brief summary of the upsides and downsides:

First, the bad news…

Salary sacrifice schemes
Employees can currently make tax savings by paying for employee benefits prior to tax deduction, while employers save on National Insurance Contributions on these sacrificed wages. In yesterday’s statement Mr Hammond deemed the salary sacrifice scheme to be ‘unfair’ and from this coming April, the tax benefits of using such schemes will be scrapped. This means that millions of workers will lose tax perks associated with certain types of employee benefits including health checks, gym memberships, private medical insurance and mobile phone contracts.

However, benefits such as childcare, ultra-low emission cars and cycling to work will not be affected by the Chancellor’s plans.

debbieSpeaking about the announcement, Debi O’ Donovan (pictured left), director at The Reward and Employee Benefits Association (REBA), which represents HR workers for some of the UK’s largest firms, said the move would affect lower paid earners: ‘It will be the ‘just-about-managing’ employees who will be most affected,’ she comments. ‘While we agree that the Government did need to clamp down on the increasing misuse of salary sacrifice for the more ‘luxury’ perks, we are disappointed that so many essential employee benefits have been caught up in this change.’

Mr Hammond explained: ‘The government is committed to tackling tax evasion, avoidance and aggressive tax planning, and the UK tax gap is now one of the lowest in the world. That said, we must constantly be alert to new threats to our tax base and be willing to move swiftly to counter them.’

The announcement may have the desired tax-raising effect for the government but what will be the impact on business productivity and keeping employees engaged and motivated? Only time will tell on that one.

Money-Purchase Annual Allowance
The Chancellor has reduced the money-purchase annual allowance to those who have accessed their pension savings through pensions flexibilities. It is currently set at £10,000 and will lower to £4,000 to prevent ‘inappropriate double tax relief’.


Increase in Insurance Premium Tax
The standard rate of IPT is to increase to 12% from 10% from June 2017, affecting employee benefits such as private medical insurance and dental insurance.

Tax relief for business expenses
The government will also publish a call for evidence at Budget 2017 on the use of the income tax relief for employees’ business expenses, including those that are not reimbursed by their employer.

The good news (there is some…)

Employees may still use salary-sacrifice schemes to boost their pensions. Pension tax relief means that employees are entitled to a rebate on any National Insurance (NI) contributions that are taken from employee pension contributions. Suddenly, pensions have become considerably more attractive to middle income workers, since low-paid workers don’t pay NI, and NI is reduced for higher earners above a certain level.

Arrangements in place before next April will be protected until April 2018. The more expensive agreements for cars, accommodation and school fees will be protected until April 2021, according to Treasury sources.

Triple Lock
The Chancellor has confirmed the Goovernment will keep the state pension triple lock, which guarantees that the state pension will rise by whichever is the higher of average earnings: the Consumer Price Index, or 2.5%. He has, however, hinted that it could be cut in the future.

Tax-free Personal Allowance
The tax-free personal allowance will increase to £11,500 in April 2017 and to £12,500 by the end of the current Parliament’s term in 2020.The higher-rate threshold will rise to £45,000 in 2017 and to £50,000 by 2020.

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