Personnel Today
  • Home
    • All PT content
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • Brightmine
    • Learn more
    • Products
    • Free trial
    • Request a quote
  • Webinars
  • Advertise
  • OHW+

Personnel Today

Register
Log in
Personnel Today
  • Home
    • All PT content
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • Brightmine
    • Learn more
    • Products
    • Free trial
    • Request a quote
  • Webinars
  • Advertise
  • OHW+

Employee-shareholdersEconomics, government & business

Budget 2016: NI payable on termination payments, tax threshold rises

by Jo Faragher 16 Mar 2016
by Jo Faragher 16 Mar 2016 REX/Shutterstock
REX/Shutterstock

Chancellor George Osborne revealed few surprises in today’s Budget – on the one hand bullish about jobs growth and on the other cautiously revising down the UK’s growth prospects for this year.

The key announcements for employers were the introduction of compulsory national insurance contributions (NICs) on termination payments over £30,000, and an increase in the threshold for personal tax contributions.

XpertHR pay award forecasts and analysis

Pay trends March 2016: analysis of current level of pay awards

Pay forecasts for the private sector

Gender pay gap reporting survey: employer plans

Latest pay settlements: March 2017

Osborne announced that 150,000 more jobs have been created during this Parliament than the Office for Budget Responsibility (OBR) predicted, with 90% of those in skilled jobs, and three-quarters full time.

In addition, the OBR predicted another 1 million jobs will be created this Parliament, Osborne said.

Figures from the Office for National Statistics released today revealed that employment, at a rate of 74.1%, was at its joint-highest level since records began in 1971.

The Chancellor claimed this was “a budget for working people” and announced that from April 2017, the tax threshold will rise to £11,500 – on target to reach the £12,500 threshold promised in the Conservative manifesto before the party came to power.

The threshold for employees paying the 40% tax rate will also be increased, to £45,000, and self-employed people will no longer have to pay Class 2 National Insurance contributions from 2018.

A further key announcement was that, from 2018, termination payments over £30,000 will be subject to employer national insurance contributions – anything under £30,000 is currently given tax-free.

The Government will continue to clamp down on tax evasion and avoidance schemes, Osborne added, by toughening the rules on the use of umbrella or personal service companies.

This means that public-sector organisations will have a new duty to tighten their rules on the use of contractors. From April 2017, where they engage an off-payroll worker through their own limited company, that body (or a recruitment agency if used) will become responsible for determining whether or not the rules should apply, and for paying the right tax.

In its budget documentation, the Government outlined vague plans for changes to salary sacrifice – an area that observers suggested might be up for review.

It said: “The Government is considering limiting the range of benefits that attract income tax and NICs advantages when they are provided as part of salary-sacrifice schemes.

“However, the Government’s intention is that pension saving, childcare and health-related benefits such as Cycle to Work should continue to benefit from income tax and NICs relief when provided through salary-sacrifice arrangements.”

Separately, XpertHR’s latest survey of pay forecasts reveals that on average, employers expect to give their staff a pay rise of 2% in 2016.

More than a quarter (28.5%) of private-sector pay awards due to take effect between 1 March 2016 and 28 February 2017 are expected to be at this level, XpertHR found.

Its analysis of employers’ projected pay awards is in line with data collected from the latest round of pay settlements, which found a median pay award of 2% in the three months to the end of February.

Some employees are set to receive pay rises of more than 2%, notably those paid at national minimum wage level, who will receive a 3.7% boost after the Government announced an increase to £6.95 an hour for 21- to 24-year-olds.

Employees in the public sector are still subject to the Government’s pay cap of 1%.

XpertHR pay and benefits editor Sheila Attwood said: “The labour market is creating pinch points around particular skills, which employers are having to address through additional pay in order to recruit and retain the candidates they need.

“Additional pressure from an above-inflation increase to the national minimum wage in October only serves to reinforce our view that the headline pay award will not rise above 2% this year.”

The Treasury also announced a lifetime limit of £100,000 on gains that are exempt from Capital Gains Tax that a person can make on the disposal of shares acquired under an employee shareholder agreements entered into after 16 March 2016.

“The employee shareholder shares regime has proved very popular over the last few years among high-earners,” commented Nicholas Stretch, a partner with law firm CMS.

Sign up to our weekly round-up of HR news and guidance

Receive the Personnel Today Direct e-newsletter every Wednesday

OptOut
This field is for validation purposes and should be left unchanged.

“It is therefore no surprise that a cap on the amount of capital gains that can be made tax-free has been set. A cap of £100,000 is perhaps on the low side of what would have been expected, but it is certainly good news that gains on existing arrangements remain uncapped.”

 

Jo Faragher

Jo Faragher has been an employment and business journalist for 20 years. She regularly contributes to Personnel Today and writes features for a number of national business and membership magazines. Jo is also the author of 'Good Work, Great Technology', published in 2022 by Clink Street Publishing, charting the relationship between effective workplace technology and productive and happy employees. She won the Willis Towers Watson HR journalist of the year award in 2015 and has been highly commended twice.

previous post
Are Tier 2 migrants no longer welcome in Britain?
next post
Six interesting facts about employment law in Ireland

You may also like

MPs demand Home Office tighten visas to protect...

4 Jul 2025

Government publishes ‘roadmap’ for Employment Rights Bill

2 Jul 2025

Fall in entry-level jobs linked to rise of...

30 Jun 2025

Bank of England says NIC rise is dampening...

27 Jun 2025

Bioethanol plant closure could lead to 4,000 job...

26 Jun 2025

When will the Employment Rights Bill become law?

26 Jun 2025

Employee ownership rockets in past decade

25 Jun 2025

Skills receive £1.2bn boost in new industrial strategy

23 Jun 2025

Employees want more upskilling and apprenticeships to narrow...

20 Jun 2025

UK job market shows signs of resilience

20 Jun 2025

  • Empowering working parents and productivity during the summer holidays SPONSORED | Businesses play a...Read more
  • AI is here. Your workforce should be ready. SPONSORED | From content creation...Read more

Personnel Today Jobs
 

Search Jobs

PERSONNEL TODAY

About us
Contact us
Browse all HR topics
Email newsletters
Content feeds
Cookies policy
Privacy policy
Terms and conditions

JOBS

Personnel Today Jobs
Post a job
Why advertise with us?

EVENTS & PRODUCTS

The Personnel Today Awards
The RAD Awards
Employee Benefits
Forum for Expatriate Management
OHW+
Whatmedia

ADVERTISING & PR

Advertising opportunities
Features list 2025

  • Facebook
  • Twitter
  • Instagram
  • Linkedin


© 2011 - 2025 DVV Media International Ltd

Personnel Today
  • Home
    • All PT content
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • Brightmine
    • Learn more
    • Products
    • Free trial
    • Request a quote
  • Webinars
  • Advertise
  • OHW+