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PBR 2008: Analysis – Employment tax and NI. By Karen Thompson, IPP

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26th Nov 2008
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Breaking opinion and analysis on the Pre-Budget Report. Karen Thompson of the Institute of Payroll Professionals examines the effects on payroll.

Company cars
Legislation will be introduced in the Finance Bill 2009 to extend the special treatment that allows disabled company car drivers with automatics to use the lower list price of an equivalent manual car when working out the benefit charge (they can already use the CO2 emissions of an equivalent manual car to calculate the benefit in kind). This will of course reduce the employer Class 1A charge, and will be effective from 6 April 2009.

A review of the interaction between Employee Car Ownership Schemes (ECOS) and Authorised Mileage Allowance Payments (AMAPs) has been published, but there are no new proposals at this stage.

Student tax
The student tax exemption rules (using the P38(S) form) will change from April 2011, presumably based on one of the three options put forward earlier this year.

Travel expenses
For the time being there will be no changes to tax relief on travel expenses for those overarching employment contracts is to take place at present, but HMRC warn that they will return to this topic if compliance does not improve!

Payrolling benefits in kind
The government “will continue to explore the scope” for introducing benfits in kind through the payroll – that’s all the report says at this stage!

Employment status in the construction industry
We are warned there will be a further push on this matter. Be extra careful about self-employed workers and contractors on your books.

Employment Related Securities (ERS)
As part of their simplification review, HMRC has announced that legislation will be introduced in Finance Act 2009 to simplify some of the rules relating to Employment Related Securities (ERS) acquired by employees for less than market value.

National Insurance
As previously announced the structure of National Insurance will change in 2009/10 with the introduction of the Upper Accrual Point leading to higher employer and employer contributions for those in contracted-out pension schemes on salaries at or above £40,040 (the UAP for 2009/10). Broadly speaking, there will be an alignment of the top-end NI threshold next year and at the bottom end later, a half percent increase, a higher rate of 45% and abated personal allowances. Some further points to bear in mind are:

  • The Upper Earnings Limit, the higher rate threshold and the Class 4 Upper Profits Limit have all been aligned at £844 per week, i.e. an increase of 9.6% on this year's UEL of £770 per week.
  • No other rates are changing until 6 April 2011 when all employee and employer NICs rates will increase by 0.5% - this will affect Class 1, 1A and 1B.
  • Following the earlier consultation, collection of Class 2 NI contributions will be simplified initially by aligning payments dates with those for self-assessment and improving the information given to the self-employed (no starting date is specified).

HMRC have provided tables and guidance for the new income tax allowances, national insurance contributions, child tax credits, working tax credits and other rates in PN02, available here.

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Pre-budget report 2008 coverage sponsored by

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