UK News

HR Tax Update: Summary of key UK tax changes

March 2015

A new UK tax year starts on 6 April 2015 and there are some key tax changes for HR practitioners to be aware of. 

  1. Online annual share plan filings required by 6 July 2015

As previously reported, the new online annual filing regime for share plans goes live from 6 April 2015 and all returns will need to be made by 6 July 2015.  This applies to all arrangements under which UK employees may receive shares or other securities, regardless of whether they are under a tax advantaged plan. 

Companies will need to sign up for HMRC online services and then register their share plans before the filings can be made.  Therefore, any companies not already registered should do so as soon as possible.

See our previous updates here and here for further information.    

  1.  Taxation of internationally mobile employees changes from 6 April 2015

 A new tax regime will come into force on 6 April 2015 for share options and awards held by internationally mobile employees, which will be more closely aligned with the regime for other forms of employment income.  Under the new rules, an employee’s tax liability will be determined broadly in line with his/her residence status over the vesting period.  The current remittance basis rules for non-domiciled employees who are resident in the UK will continue to apply.

The new rules will apply to all share options exercised/share awards vesting after 6 April 2015, whenever they were granted.  Therefore, there may be employees who would not have expected to be subject to UK tax under the old rules (because they were non UK resident at the date of grant) who would be subject to UK tax if they exercised their options after 6 April 2015.

See our previous update here for further information.

  1.  Pensions Liberation and changes to the Lifetime Allowance

The Pensions Liberation changes first announced by the government in the 2014 Budget will come into force on 6 April 2015, so individuals in money purchase/defined contribution pension schemes will now be able to access their pension pot at any time after age 55 and will not be required to purchase an annuity. 

The Chancellor announced in the March 2015 Budget that the Pensions Lifetime Allowance of £1.25 million would be reduced to £1 million from April 2016 with the Lifetime Allowance being increased by Consumer Price Indexation Increases from 2018.  This is bad news for pension savers as more will be caught and subject to tax at 55% for exceeding the Lifetime Allowance in respect of pension funds taken out above the cap at any point before death.  It is possible that Fixed Protection 2016 will be introduced allowing taxpayers to keep the £1.25million lifetime allowance if they elect to do so before 6th April 2016 and don’t make any further pension contributions after March 2016.  We await further detail on this.

The other significant pension change introduced is to allow holders of annuities to sell their annuities after 5th April 2016 so as to benefit from Pensions Liberation in the same way as those with money purchase benefits who have not annuitised.  There is the worry here that annuity policyholders may receive poor value if they decide to sell their annuities.

A change in Government on 7th May 2015 may impact on the changes announced in the 2015 Budget and also on Pensions Liberation generally.

  1.  No trivial benefits tax exemption for 2015/16 tax year

A proposal in the 2014 Autumn Statement to provide a new tax exemption for benefits in kind provided to employees of less than £50 per employee was dropped from the Finance Act 2015 at the last minute.  Although it is expected that this exemption will be introduced at some point in the future, employers will need to continue with their current processes for the time being.

  1.  Clampdown on ‘Manco’ structures intended to benefit from CGT entrepreneur’s relief

The Finance Act 2015 includes provisions which are intended to prevent the use of so called ‘Manco’ structures in management incentive arrangements in order to benefit from entrepreneur’s relief and therefore a 10% tax rate for capital gains tax purposes.  These structures typically involve the establishment of a company in which managers each hold at least 5% of the voting shares, and that company holds at least 10% of the shares in a joint venture company which is either a trading company or the holding company of a trading group. Under the new rules, a company would need to have a significant trade of its own in order to be considered as a trading company. These changes have effect for disposals on or after 18 March 2015.

  1.  Tax rates and exemptions for 2015/16 tax year

Income tax

 

2014/15

2015/16

Personal allowance (aged under 67)

£10,000

£10,600

Basic rate

20% (£0 - £31,865)

20% (£0 - £31,785)

Higher rate

40% (£31,866 - £150,000)

40% (£31,786 - £150,000)

Additional rate

45% (over £150,000)

45% (over £150,000)

National Insurance contributions

There are no changes in National Insurance rates, but there are minor changes to the thresholds which keep National Insurance liabilities broadly in line with the income tax bands.

However, from 6 April 2015 employer’s National Insurance has been abolished for employees aged under 21 on their earnings up to the Upper Earnings Limit (which is £42,385 for the 2015/16 tax year).

Corporation tax

With effect from 1 April 2015, the corporation tax rate is now 20% for all businesses.  For larger businesses, this represents an 8% reduction in the corporation tax rate over the last 5 years.

Remittance basis charge for non-domiciled individuals

The remittance basis charge is payable by UK resident non-domiciled individuals who choose to pay tax on the remittance basis on their overseas income and gains.  From 6 April 2015, the Remittance Basis Charge (‘RBC’) paid by non-domiciled individuals who have been UK resident for more than 12 of the previous 14 tax years will be increased from £50,000 to £60,000, and a new RBC of £90,000 will be introduced for individuals who have been UK resident for 17 of the previous 20 tax years.  The RBC for individuals who have been UK resident for 7 of the previous 9 tax years will remain at £30,000.  The RBC is not payable by Individuals who have been UK resident for fewer than 7 of the previous 9 tax years.

Contact

For further information or to discuss the issues raised, please contact Guy Abbiss (guy.abbiss@abbisscadres.com), Gary Cullen (Gary.Cullen@abbisscadres.com), Bina Gayadien (Bina.Gayadien@abbisscadres.com) or Jonathan Fletcher Rogers (jonathan.fletcherrogers@abbisscadres.com) on +44 20 3051 5711.

 

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