Autumn Statement Review 2015
The Chancellor George Osborne has delivered his Autumn Statement and Spending Review. This sets out the Government’s plans for the nation’s finances.
Here are some of the key points that will affect employers:-
- The apprenticeship levy will be introduced in April 2017. It will be set at 0.5% of the payroll bill, but there will be a £15,000 allowance to offset against the levy payment. This means it will only be paid on bills in excess of £3m. According to the Government 98% of employers will not pay.
- The next two phases of minimum contribution increases for auto-enrolment will be aligned to the tax years. Instead of increases taking place in October, they will now occur in April of the following year. Minimum contributions increasing from 2% to 5% in October 2017 will now be delayed until April 2018. The planned increase in contributions to 8% in October 2018 will not be implemented until April 2019.
- The student loan repayment threshold for Plan 2 borrowers will be frozen until April 2021. This affects those taking out loans from 2012. The threshold was meant to rise in line with earnings.
- The removal of the 3% diesel supplement on company cars has been delayed from April 2016 until April 2021.
- The Government will apply an upper income limit per parent of £100,000, and a minimum weekly income level per parent equivalent to 16 hours (worked at the National Living Wage) to the additional 15 hours of free childcare offered to three- and four-year-olds in working families from September 2017. The same changes in Tax Free Childcare will be made.
- The Government remains concerned about the growth of salary sacrifice arrangements. It is considering what action, if any, is necessary. The Government will gather further evidence, including from employers, on salary sacrifice arrangements to inform its approach.
- The Government will invest £1.3bn with the aim of transforming HMRC into “one of the most digitally advanced tax administrations in the world”. The aim is for everyone to have digital tax accounts by 2020.
- The Government will provide the Government Digital Service with £450m to create common digital platforms with the aim of sharing platforms across Government departments to improve efficiency and reduce costs
The cost impact for large businesses can’t be ignored. For many large businesses the 0.5% payroll levy will be far higher than the costs of the number of apprenticeships they currently offer. Unless larger businesses can reap the benefits of apprenticeships in other areas, this will simply be a payroll tax for them. When taken together with the National Living Wage and auto-enrolment costs, these businesses face a significant increase in their employment costs over the next few years.
Small businesses will be largely unaffected by the apprenticeship levy as, in practice, businesses with broadly less than 100 employees will be exempt from the cost of the levy.
The delay in the increase to the default contribution rate increase for auto-enrolment will slow the momentum of the initiative and the amount in people’s pension savings pots but reduce the burden on employers.
However, for the majority of workers their workplace pension it is their main method of saving. Auto-enrolment has diverted significant sums into saving for retirement.
The delay of six months till April 2018 will mean many people will be contributing a just 2% for the next two and a half years. An increase in contributions to 8% in October 2018 will now not be implemented until 2019.
The delay will impact the full benefit of the auto-enrolment programme.
More Autumn Statement Review 2015 details can be found here.