Linda Pullan outlines the implications of the Budget for the payroll and employee benefits industry.
Chancellor George Osborne delivered his second Budget on 21 March 2012. Although it contained several items affecting payroll and employee benefits, the main proposals are from 2013/14 and beyond (subject to Parliamentary approval).
There is one particular exception, however – the multiplier used to calculate the fuel benefit charge for the company car is increasing from £18,800 to £20,200 from 6 April 2012, which will be reported on 2012/13 P11Ds due 6 July 2013.
Starting with Pay As You Earn (PAYE), the personal allowances for those under the age of 65 will increase from £8,105 (2012/13) to £9,205 with effect from 6 April 2013. This will remove 840,000 individuals from Income Tax completely.
The new emergency tax code for 2013/14 will be 920L. However, age-related allowances for those born prior to 6 April 1948 will be frozen until they equal the standard personal allowance. The Government’s aim is to have one personal allowance for everyone, regardless of age. It will start restricting those born from 6 April 1948 with the basic personal allowance of £9,205 for 2013/14.
The impact of the increase to the personal allowances for those up to the age of 65 is that the tax bands will be reduced accordingly. This is to ensure that higher and additional rate taxpayers do not benefit more than basic rate taxpayers. Furthermore, from 2013/14, the 50 per cent additional rate of Income Tax will be reduced to 45 per cent.
Class 1 NICs
Due to the reduction in the tax bands, the Upper Earnings Limit for 2013/14 will be brought in line with the basic rate tax band to £41,450 per annum (£32,245 plus £9,205).
Personal Tax Statements
From 2014/15, taxpayers who file their self-assessment return online and some taxpayers in PAYE will receive a Personal Tax Statement from HM Revenue & Customs (HMRC). It will detail the amount of tax and National Insurance they have paid, and confirm how those deductions contribute to public spending.
Integration of PAYE and NIC
Last year, the Treasury issued a call for evidence on the integration of PAYE and National Insurance contributions (NICs). It sought feedback on how to streamline the system and abolish some of the anomalies in order to make it easier.
The response was positive, so a consultation document will be issued shortly outlining options for the operation of employee and employer NICs. A proposal which was previously outlined is to make the calculation of NIC cumulative instead of on an earnings period.
Employees who drive company vehicles will be encouraged to drive more fuel-efficient vehicles from 2014/15.
The Finance Bill 2012 will increase the percentage used to calculate the company car benefit for cars that emit more than 75g of CO² by one per cent, up to a maximum of 35 per cent in 2014/15.
Furthermore in 2015–16 and 2016–17, the percentages applied to the list price of the company car to calculate the company car benefit will rise by two per cent, and extend the maximum percentage from 35 to 37.
Effective from April 2016, the three percentage supplement applied to diesel engines will be removed so that diesel cars will be subject to the same level of tax as petrol cars.
|Changes to personal allowances|
|Allowances||2012/13||Age restrictions for 2013/14||2013/14|
|Personal allowance under age 65||£8,105||Age restrictions for 2013/14||£9,205|
|Personal allowance aged 65 to 74||£10,500||Born on or before 5 April 1948||£10,500|
|Personal allowance aged 75 and above||£10,660||Born on or before 5 April 1938||£10,660|
|Tax band||2012/13 % rate||2012/13 taxable earnings||2013/14 % rate||2013/14 taxable earnings|
|Basic||20%||0 to £34,370||20%||£0 to £32,245|
|Higher||40%||£34,371 to £150,000||40%||£32,246 to £150,000|
|Additional||50%||More than £150,000||45%||More than £150,000|
From April 2015, the five-year exemption for zero-carbon cars and the lower rate for low-emission cars will come to an end. The percentage to calculate the company car benefit for cars emitting less than 95g CO² will be 13 per cent in 2015/16, increasing by a further two per cent in 2016/17.
HMRC is paying close attention to company van drivers who are not taxed on the provision because the private use is “insignificant”. It feels this rule is being abused. Some employers have been sent questionnaires or asked to produce company policies regarding these vans and whether or not the van has been fitted with a tracking device to monitor usage.
The van fuel benefit charge multiplier will remain at £550 for 2012/13 but will rise in line with inflation in 2013–14.