Last week, we heard the Chancellor announce his 2016 Budget. Here we summarise a few of the announcements impacting those of us working in Reward.
Lifetime ISAs
The new Lifetime ISA will be available from next April for adults under 40. Those individuals will be able to contribute up to £4,000 a year and the Government will top it up by 25%. The aim of the ISA is to encourage young people to save, and not be forced to choose between saving to buy their first home and saving for their retirement. The challenge for HR will be communication to employees, alongside the recent auto-enrolment changes. It will be interesting to see whether more employees will want to opt out of auto-enrolment in favour of the ISA.
Public sector contractors
One of Osborne’s announcements was a tightening of regulations around the use of contractors in the public sector. The move will see responsibility for paying the correct tax from the contracted company to the public sector department/organisation, from April 2017. As well as the additional administrative and payroll burden this puts on public sector HR departments, we may well see contractors re-negotiating contracts and rates. Certainly public sector organisations will need to rethink how they work with these individuals.
Termination payments
From April 2018, any additional redundancy or termination payment above £30,000 will be subject to employer’s National Insurance. It will be interesting to see whether employers absorb the additional cost or whether we start to see a reduction in the value of these payments.
Salary sacrifice
Although not acknowledged in the Budget speech, the official documents reveal government concerns about the growth of salary sacrifice schemes. It is considering limiting the range of benefits available under such schemes but we will hear more on this in the future.
Childcare vouchers
The Budget confirmed plans to close entry to the current childcare voucher system from April 2018. A new tax-free childcare scheme will begin rolling out in phases in 2017. One to watch, with potential administrative and communication actions for HR.
Finally, a word on the apprenticeship levy
Although not part of the Budget 2016 announcements, it’s worth mentioning the Government’s consultation on introducing an apprenticeship levy.
- The levy comes into effect from April 2017 and is intended to help fund new apprenticeships.
- The levy will be 0.5% of the wage bill (total earnings).
- All UK employers will be eligible to pay the levy, although an allowance of £15,000 will offset the payment, effectively meaning that only those employers with a wage bill of more than £3 million will need to pay.
- Each employer will have one allowance – even if they run multiple payrolls.
- The levy will be paid via the PAYE process.
- It applies in all sectors and will affect less than 2% of UK employers.
We’ll keep you updated with these and other legislation and regulatory changes so keep an eye out for our weekly blogs.
