A number of key changes to tax legislation have now come into effect, following the start of the new 2016/17 tax year.
The changes include reforms to the rules on national insurance, with employers no longer required to pay Class 1 secondary (employer) national insurance contributions (NICs) on earnings paid to qualifying apprentices under the age of 25. This comes as a result of the new ‘zero rate’ for ‘relevant’ apprentices on weekly earnings up to the Upper Secondary Threshold (UST), which is set at £827 in 2016/17.
The Employment Allowance for employer NICs has also increased from £2,000 to £3,000. However, companies where the director is the sole employee will no longer be able to claim this allowance.
Commenting on the changes to national insurance, Dr Adam Marshall, British Chambers of Commerce (BCC) Acting Director General, stated: ‘Abolishing employer contributions will encourage more businesses to hire young apprentices, at a time when the UK is faced with a growing skills shortage’.
Moreover, the new ‘flat rate’, or ‘single tier’, State Pension also came into effect on 6 April. This will affect those reaching State Pension age on or after 6 April 2016. The rate has been set at £155.65 per week – however, this may vary in accordance with an individual’s national insurance record.
Another change sees the pensions annual allowance reduced by £1 for every £2 for individuals with adjusted income over £150,000, down to a minimum of £10,000.
Other significant changes include the introduction of new rules on the taxation of dividends. The 10% dividend tax credit has been abolished from the 2016/17 tax year onwards, and a new Dividend Tax Allowance of £5,000 a year has been introduced. Dividend tax headline rates have also been altered: the new rates of tax on dividend income exceeding the allowance will be set at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.
Additionally, the Government’s new National Living Wage (NLW) took effect from 1 April, applying to those workers aged 25 and over. The rate has been initially set at £7.20 an hour, and could potentially rise to over £9 an hour by 2020.