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Budget 2020: Employment taxes

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Today several announcements were made in connection with the taxation of employees.

Firstly, the threshold at which employees (and the self-employed) start paying National Insurance Contributions (NICs) is to be increased from £8,632 to £9,500 from 6 April 2020. This is a significant increase and the government anticipates around 1.1 million people will be taken out of paying NICs entirely. This represents a potential saving of £104.

In addition, there is to be an increase in Employment Allowance, currently £3,000. Broadly an employer can deduct the Employment Allowance each year from its employers’ NICs liability. The employer therefore pays £3,000 a year less employers’ NICs than it would otherwise do. It has been previously announced that from 6 April 2020 only employers with a Class 1 national insurance bill of less than £100,000 in the previous tax year will be able to claim. There was no indication in the Budget that this is to change. However, it was announced that from 6 April 2020 the allowance will be increased from £3,000 to £4,000.

The Chancellor announced an employers’ NICs holiday for employers of veterans in their first year of civilian employment. The government will consult on the design of this and it is likely to come partially in force from 6 April 2021. The holiday will exempt employers from any NICs liability on the veteran’s salary up to the Upper Earnings Limit (currently £962 a week).

Currently, there is no income tax on an employee where an employer provides counselling services. The counselling service must be;

  • for welfare issues, such as bereavement, ill health or stress, problems at work, sexual abuse or personal relationship difficulties; and
  • available to all your employees.

From 6 April 2020 this is to be extended to include related medical treatment, such as cognitive behavioural therapy, when provided to an employee as part of an employer’s welfare counselling services.

The flat rate allowance payable to employees who are required to do some work from home is being increased to £6 a week from 6 April 2020 (previously £4 a week).

From 6 April 2020, fuel benefit charges and the van benefit charge will increase in line with CPI. As the level of car benefits is based on CO2 emissions this increases the relative tax advantage of electric company cars.

From April 2021, the government will apply a nil rate of tax to zero-emission vans within the van benefit charge. This presents a tax incentive for employers to operate electric vans.

Finally, anyone hoping for substantial changes to the new off-payroll working rules was to be disappointed. Apart from the minor consequential arrangements already announced it appears to be full steam ahead.

To discuss employment taxes and any questions you may have about this please contact me or a member of our team.

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