Are You Aware of These Tax Changes? Part II
Last week we highlighted an upcoming change on Supplier Payments and how companies will be required to publish their payment policy and practice. This week, we will continue with this theme and look into two upcoming changes: Salary Sacrifice and New Vehicle Tax Rates.
Salary Sacrifice
Salary Sacrifice is an arrangement between an employer and an employee which reduces the employee’s entitlement to cash pay, but the sacrifice of cash entitlement is in return made in some form of non-cash benefit.
The most popular benefit claimed by staff through such arrangements are pension contributions. Over the years, benefits like childcare voucher, bicycle schemes, gym membership and mobile phones have become common. In recent years, even white goods (such as tablets and TVs) are claimed through such arrangements. What it means in practice is: employees save on tax by paying for these benefits before tax is taken, while employers save on paying National Insurance on the sacrificed wages.
On the surface, salary sacrifice arrangements are beneficial. But as companies begin to pay benefits using such arrangements to avoid national insurance payments, the government will close the loophole and gain more taxes.
From April 2017 onwards, benefits such as mobile phones, gym memberships and white goods will no longer be eligible under such arrangements. However, childcare voucher and bicycle schemes will remain.
New Vehicle Tax Rates
On the government’s website, this sounds rather straight forward – on or after 1 April, what you pay for the first 12 months is based on CO2 emissions. Then after the first year, the amount of tax you pay depends on the type of vehicle. However, if you consider the amount of tax you pay currently (prior to 1 April) and compare it to buying the same car on or after 1 April, you may be surprised to learn that it is beneficial to wait. A couple weeks ago, the consumer team at Auto Express compared the tax rates for eight different types of car, from superminis to SUVs. What they found was, buyers of smaller, more economical cars will face the biggest tax hike after 1 April, compare to what they are paying now. The result caught many by surprise. If you are considering buying a new car, check out their site to find out more.
Tax is a complex subject. Often there isn’t a straight answer, this is where we can assist you. We are chartered tax accountants focusing on businesses across London. We are here to explain and guide you through the tax system. Call us at 020 8780 2349 today. We offer the first consultation for free so you and I can discuss your situation at ease.
