Chancellor George Osborne announced the last Budget before the general election on 18 March 2015.
Here is a round up of all the key announcements impacting employee benefits:
The personal tax allowance will be increased to £10,800 from April 2016, and to £11,000 from April 2017. The allowance, which is the amount employees can earn before they have to start paying tax, will enable the average taxpayer to save £905 a year by 2017-2018.
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Company car tax rates for ultra-low emission cars will increase more slowly from 2019/20. In addition, rates for other cars will increase by three percentage points at the same. For example, the benefit in kind rate on a car emitting 100 grams of carbon per kilometre will increase from 19% next year to 28% by 2019/20. The rising rate is aimed to push employees into greener company cars.
The fuel duty increase planned for 1 September 2015 will now be cancelled. This was due to rise by 54p per litre but Osborne announced it will remain frozen. In his Budget statement, Osborne said the government will have eased the burden on drivers by £22.4 billion by the end of 2015/16. This equates to a saving of £675 for a typical company car driver.
The Budget confirmed that the national minimum wage will rise to £6.70 in October, as first announced on 17 March. This is the largest increase to the national minimum wage in real-terms since 2008. Osborne said in his Budget statement that the national minimum wage will rise to £8 by the end of the decade.
The government’s guidance guarantee service Pension Wise is set to receive an additional £19.5 million worth of extra funding to help with the demands of the new pension freedom reforms.
The point at which higher-rate taxpayers must start to pay 40% tax will increase. It will rise by £315 in 2016-2017, and by £600 in 2017-2018. This will take the higher-rate tax threshold to £43,300 by 2017-2018.
From 6 April 2015, an income tax exemption for payments made for advice on transfers out of defined benefit (DB) schemes to defined contribution (DC) pension schemes will be introduced. The new measure will apply to any employer that provides or pays for appropriate independent advice for an employee in order to meet their obligation.
The Budget confirmed that the pension freedoms have been further extended to remove the restrictions on buying and selling existing annuities. From April 2016, pensioners with an annuity will be able to trade it in without a tax penalty. It means approximately five million people will be able to exchange their existing annuities for cash should they wish.
From April 2016, the pensions lifetime allowance (LTA) limit will reduce from £1.25 million to £1 million. The Budget also announced that from 2018, the limit will be index-linked and adjusted according to the level of inflation.
A statutory framework for voluntary payrolling and exempt certain reimbursed workplace expenses will be introduced. From April 2016, the government will also remove the £8,500 threshold below which workers do not pay income tax on certain employee benefits in kind.