On 16 March, Chancellor George Osborne delivered his Budget 2016 speech. Below is a round-up of the key announcements with a bearing on employee benefits:
- The government plans to limit the range of benefits that can be offered under a salary sacrifice arrangement. This will not apply to pensions, childcare and health-related benefits, such as bikes-for-work schemes, which will still attract relief on tax and national insurance contributions.
- From April 2017 individuals aged 18-40 will be able to open a Lifetime individual savings account (Isa). The government will add a 25% contribution to a maximum of £4,000 a year to any savings placed into the account before the individual’s 50th birthday. The savings and government bonus can be used in retirement or to buy a first home. Savings can be withdrawn for other purposes at any time but will be subject to a 5% charge and will not benefit from the 25% bonus.
- The government’s new tax-free childcare scheme will be rolled out in phases in 2017. Parents of the youngest children will enter the scheme first, and all eligible parents will be brought into the scheme by the end of 2017. Existing childcare voucher schemes will remain open until April 2018 to support the transition to the new scheme.
- The government is to consult on extending shared parental leave and pay to grandparents. The consultation will launch in May 2016.
- The tax-free personal allowance limit will rise to £11,500 from April 2017, and the higher-rate tax threshold will increase from the current £42,385 to £45,000 in 2017-18.
- The standard rate of insurance premium tax (IPT) will increase by 0.5% to 10%. This will come into effect from October 2016.
- The government will continue to freeze fuel duty at the current rate of 57.95p a litre.
- Public sector employer pension contributions are to increase from 2019-20 following a review of the discount rate used to set employer contributions to unfunded public service pension schemes.
- The government is to restructure the Money Advice Service, The Pensions Advisory Service and Pension Wise to form two new guidance bodies. This will take the form of a pensions guidance body and a new-slimmed down money guidance body that will be responsible for identifying gaps in the financial guidance market.
- The limit on income tax and national insurance (NI) relief on employer-arranged pensions advice is to be extended from £150 to £500. The government also plans to consult on the introduction of a pensions advice allowance and on the introduction of a single, clear definition of financial advice.
- The government has committed to ensuring that the pensions industry designs, funds and launches a pensions dashboard by 2019.
- The government is imposing an individual lifetime limit of £100,000 on gains eligible for capital gains tax exemption through employee shareholder status. This will apply to employee shareholder status arrangements entered into from 17 March 2016.
