PAYE changes from 6 April 2018

A couple of important changes to Pay as you Earn (PAYE), which were announced last year, come into force from 6 April 2018.

PAYE changes

Termination Payments

From 6 April all payments in lieu of notice ("PILONs") will be treated as taxable income and so be subject to income tax and Class 1 NIC's. Previously, only PILON's that were made as a result of a specific contractual obligation were subject to tax and NIC's.

Therefore all employees will pay tax and Class 1 NIC's on the amount of basic pay they would have received if they had worked their notice in full.

In addition, all termination payments which exceed the £30,000 threshold will be subject to secondary National Insurance contributions (i.e. Employer's contributions). However, they will continue to be exempt from Employee's contributions. At present termination payments are not subject to any National Insurance deductions.

From 6 April the £30,000 exemption remains for loss of office, provided the payment is not a contractual right.

Salary Sacrifice schemes

An announcement was made in November 2016 that the tax benefits for most salary sacrifice schemes would be removed from 6 April 2017 for new schemes commencing after 6 April 2017.

Schemes for the following benefits were excluded from the rules :

• childcare, including childcare vouchers
• cycles
• pensions
• retraining courses

Additionally, schemes in place for the following benefits at 5 April 2017 will continue to enjoy the advantages until 5 April 2021 (although any changes to the scheme would result in a tax disadvantage) :

• company cars not fulfilling the ultra low emission definition
• accommodation
• school fees

For all other salary sacrifice schemes, the tax position changes from 6 April 2018. Popular benefits include such things as health screening, gym memberships. From April 2018, any of these types of benefits will have to be reported on the form P11D based upon the higher of :

• the cash foregone ; and
• the current taxable value of the benefit in kind

If you are looking for an accountant in Yorkshire, or if we can help with any other PAYE or tax advice, simply call me on 0113 398 1136 or email ptwhitehead@hwca.com

Recent tax blogs

Read more : The tax year end is approaching! – actions to consider

Read more : Making Tax Digital for VAT – are you ready?

Read more : Accounting Roundup : Business news, updates and advice – March 2018