The government will legislate to set a ceiling for the main rates of income tax, the standard and reduced rates of VAT, and employer and employee Class 1 NIC rates, ensuring that they cannot rise above their current levels. The tax lock will also ensure that the NIC Upper Earnings Limit cannot rise above the income tax higher rate threshold and will prevent the relevant statutory provisions being used to remove any items from the zero rate of VAT and reduced rate of VAT for the duration of this Parliament. This doesn’t mean they won’t create entirely new taxes such as the dividend tax of course…..
National Living Wage
The government will introduce a new National Living Wage (NLW) for workers aged 25 and above. This will be through the introduction of a premium on top of the National Minimum Wage (NMW) and from April 2016, the NLW will be set at £7.20 an hour. This rate is 70p higher than the current NMW rate, and 50p above the NMW increase coming into effect in October 2015 and will rise to £9 per hour by 2020.
From April 2016, the government will increase the NIC Employment Allowance from £2,000 to £3,000 a year. The increase will mean that businesses will be able to employ four workers full time on the new National Living Wage (NLW) without paying any NIC.
To ensure that the NIC Employment Allowance is focussed on businesses and charities that support employment, from April 2016, companies where the director is the sole employee will no longer be able to claim the Employment Allowance.
A raft of HMRC compliance initiatives are to be launched in the coming years:
‘We’re boosting HMRC’s capacity with three quarters of a billion pounds of investment to go after tax fraud, offshore trusts and the businesses of the hidden economy, tripling the number of wealthy evaders they pursue for prosecution – raising £7.2 billion in extra tax.’
Various changes to Tax Credits and Universal Credit are announced as part of the welfare reforms aimed at controlling this huge expenditure.
Key changes include:
- From April 2016 the government will reduce the level of earnings at which a household’s Tax Credits and Universal Credit award starts to be withdrawn for every extra pound earned. There will also be an increase in the taper rate which applies to any excess income further reducing the tax credit award.
- The Child Element of both Tax Credits and Universal Credit will be limited to two children so that any subsequent children born after April 2017 will not be eligible for further support although some claimants will be protected from these changes.
- Those starting a family after April 2017 will not be eligible for the Family Element in Tax Credits and the equivalent in Universal Credit.
In addition Tax Credit allowances (with the exception of disability elements) will be frozen.
Vehicle excise duty
Purchasers of cars first registered on or after 1 April 2017 will be liable to a first year rate starting at £10 for cars with emissions of 1-50 g/CO2/km to £2,000 for cars with emissions in excess of 255 g/CO2/km.
A flat standard rate of £140 will apply in all subsequent years, except for zero-emission cars, which will continue to attract a £0 rate. Cars with a list price of over £40,000 will attract a supplement of £310 per year for the first 5 years in addition to the standard rate.
From 2020/21 all of the revenue raised from vehicle excise duty in England will be invested in England on the English Strategic Road Network.
Student maintenance grants and loans
Maintenance loan support will rise for students from low and middle-income backgrounds up to £8,200 a year when studying away from home, outside London.
From the 2016/17 academic year, maintenance grants will be replaced with maintenance loans for new students from England, due to be repaid when their earnings exceed £21,000 a year.
Other key announcements
Other measures include a freeze in fuel duty for the rest of the year and a planned relaxation of Sunday trading laws for England and Wales.
That covers most things affecting our clients.