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Budget 2020: Helping employers support wellbeing, environmentally friendly behaviour and the lower paid

Caroline Harwood, Partner, Head of Share Plans and Employment Tax
business people walking up steps

The Chancellor has announced a number of measures which aim to help to encourage:

  • employers to offer benefits to employees which underpin wellbeing, good mental health, and environmentally friendly behaviour
  • the employment of forces veterans in civilian roles
  • support the lower paid.

Health, wellbeing and the environment

The tax relief on counselling services provided to employees has been extended to include related medical treatment, such as cognitive behavioural therapy, when provided to an employee as part of an employer’s welfare counselling services. The change will take effect from April 2020 and is welcome news with more and more employers recognising the importance of mental health as part of the wellbeing of their workers.

In a welcome announcement there will be a NICs holiday for employers of veterans in their first year of civilian employment. There will be a phased introduction of the provisions with a full digital service available to employers from April 2022, with transitional arrangements effectively introducing the relief from April 2021. The result means a veteran’s salary is NIC exempt up to the Upper Earnings Limit for the first year of civilian employment. The government will consult on the design of this relief.

Under the provisions announced in the Autumn Budget 2017, for the purposes of calculating company car tax and related charges, the CO2 emission figure produced under Worldwide Harmonised Light Vehicle Test Procedure (WLTP) will be used for all new cars registered from 6 April 2020. Additionally, the New European Driving Cycle (NEDC) figures should be used to calculate company car benefits, where more than one emissions figure is recorded, until April 2020.

The effect will be a small reduction in the taxable benefits for most drivers with company cars registered from 6 April 2020. However this will be clawed back with rates returning to previously planned levels over the following two years, increasing by 1% in 2021-22 and 1% in 2022-23. Rates will then be frozen for one year until 2024-25. So this represents a small short term benefit for company car drivers.

As expected, from 6 April 2020, fuel benefit charges and the van benefit charge will increase in line with the consumer prices index (CPI).

However those driving zero emission vehicles will not suffer taxable benefit on their cars in 2020-21. Given that employees can still exchange taxed salaries for a tax-free zero emission vehicle, this presents an opportunity for companies to offer environmentally friendly vehicles in a very cost effective manner.

Increasing take home pay

The Chancellor has announced plans to increase the National Living Wage to an amount equal to two-thirds of median earnings and to extend it to workers aged 21 and over by 2024. However, this comes subject to the caveat that it will only happen if economic conditions allow which will provide some comfort to small, low-margin businesses reliant on a low-cost labour base.

A number of changes to National Insurance were announced but they will not have a substantial impact on most businesses. The increase in the Employment Allowance from £3,000 to £4,000 will be welcome but will have limited application given that the Employment Allowance itself will be restricted from 6 April 2020 to organisations with a National Insurance bill of not more than £100,000 in the previous tax year.

There will also be an increase in the National Insurance Contributions (NICs) Primary Threshold and Lower Profits Limit, for employees and the self-employed respectively, to £9,500 from 6 April 2020. This saves the typical employee around £104 and a typical self-employed person around £78 in 2020-21, which will be welcomed by both employees and the self-employed.

For more information on how Crowe can help, contact Caroline Harwood or your usual Crowe contact.

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Caroline Harwood
Caroline Harwood
Partner, Head of Share Plans and Employment Tax