Budget 2021: Reward and Employee Benefits
We’re still digesting the information set out in the budget announcement yesterday. Here are our initial thoughts around what this means for benefits, reward, businesses and the overall impact on employee finances.
- Salary sacrifice
It is positive news that salary sacrifice appears to be unchanged allowing an increasing number of businesses and employees to accrue NI savings on benefits as diverse as pension contributions and electric cars. We continue to recommend to all of clients to speak to us regarding implementing salary sacrifice in their businesses. Right now, we believe these are meaningful savings to both employer and employee,
- Pension annual allowance & Pension lifetime allowance
On the surface it is positive news that annual and lifetime allowances remain unchanged. That said, in previous years they have risen in line with inflation. A hold on these will mean a ‘real world’ decrease because of underlying inflation. Our recommendation to our clients is to explore the use of other workplace savings vehicles such as ISAs, to allow higher earners to continue to save once they reach those thresholds.
- Insurance premium tax
We welcome IPT remaining unchanged during these unpredictable times. A rise here would have been problematic for many businesses funding insurances such as Private Medical Insurance for their colleagues.
- Personal income tax allowance to be frozen at £12,570 from 2021 to 2026
- Higher rate income tax threshold to be frozen at £50,270 from 2021 to 2026
- National Insurance Contributions – No change
- The stamp duty holiday on properties worth up to £500,000 will be extended from the end of March until the end of June and after that there will still be no duty on homes worth up to £250,000 for another three months. After that the threshold returns to the usual level of £125,000 from October.
- Corporation tax on company profits to rise from 19% to 25% in April 2023
- Rate to be kept at 19% for about 1.5 million smaller companies
- Furlough scheme has been extended until the end of September 2021. Employers will be expected to pay 10% towards the hours their people do not work in July, increasing to 20% in August and September.
For now income tax rates are unchanged however, as the dust settles, it is becoming clearer that the chancellor is keeping the option open for increases over the coming years.
We will update this article as further information becomes available.