Budget 2018: Payroll, benefits and pensions
There was a personal allowance windfall, but no mention of pensions in the Chancellor’s speech. However, there is further detail in the Budget notes.
The bringing forward of the Conservative manifesto commitment to raise the personal allowance and the 40% income threshold by one year was the Chancellor’s “rabbit out of the hat” moment in this year’s Budget.
However, Philip Hammond’s announcement of the personal allowance increase to £12,500 and the 40% threshold move to £50,000 ignores the devolution complexities of three different tax regimes within the UK which will apply from 6 April 2019.
Whilst the personal allowance is not a devolved matter, the higher rate threshold is in Scotland in respect of income which is not savings or dividends. We will have to wait for the Scottish Budget announcements on 12 December 2018 to be certain what impact this will have on employers with employees who are Scottish taxpayers.
Last year, changes to the five Scottish rates and bands came as late as mid-February, putting pressure on payroll software developers close to the start of the new tax year. With a minority government in Scotland, there may well be last-minute changes again this year.
We also have to wait for the Welsh government to reflect on the Chancellor’s words before confirming Welsh income tax rates and bands for 2019/20. The Welsh income tax rates have provisionally been set at 10%, replacing exactly the 10% in each tax band, so the overall rates will be in line with those paid by taxpayers in England and Northern Ireland.
Following a consultation this summer, the government has decided not to proceed with a reform to tax relief for work-related training and will instead invest £100m in a national retraining scheme.
There was welcome news on the short-term business visitors (STBV) scheme, where the eligibility will be widened and the reporting deadlines extended from April 2020. It is perhaps surprising that this is not going to take effect in April 2019 given the impact of Brexit and the relocation of some key staff to Europe who may need to return to the UK for short periods of time.
The long-awaited reforms to PAYE penalties have also been pushed back to a later Finance Bill, so will not come in from April 2019. Is this an admission that the standard of RTI data still precludes penalty automation?
For company car drivers the announcement of the fuel benefit multiplier being set at £24,100 and the 3% increase in company car tax rates means the car fuel benefit is at its lowest £3,856 and for a gas guzzler a whopping £8,917 per year!
Pensions weren’t mentioned at all in the Chancellor’s speech, but the accompanying documents confirm that there will be another £5m spent on the pension dashboard.
There will also be a ban on cold-calling to be put in place in the next few weeks. This is an attempt to stop so many people falling victim to scams in respect to pension transfers.
The lifetime allowance will rise to £1,055m from 6 April 2019. It’s vital that employers ask all new starters if they have lifetime allowance protection, as inadvertently auto enrolling someone who then fails to opt out in time will invalidate their protection.
We are also told we will hear more about DWP’s plans for auto enrolling the self employed in the next few months.
Finally, the Chancellor has created some confusion about the apprenticeship levy. What he said was small businesses would only have to contribute 5% towards the cost of training an apprentice, rather than 10% as now.
This is nothing to do with the apprenticeship levy. That levy is only paid by businesses with pay subject to employer national insurance of £3m or more per year.
Small businesses don’t pay the apprenticeship levy, unless they are caught by the connected companies rule. Small businesses make a contribution towards apprenticeship training under what is termed co-investment and it is that percentage that is being cut.
Visit our at a glance guide for a summary of all the major measures from Budget 2018.