December 11, 2009

Pre Budget Report 2009 – Employment Taxes Summary

National Insurance Contributions

There will be an additional rise of 0.5% in employer’s and employees’ NICs with effect from April 2011. This increase is in addition to the 0.5% increase to employer’s and employees’ NICs announced in the 2008 Pre-Budget Report.

Therefore, from April 2011:

§ The standard rate of Class 1 NICs for employees will be 12% up to the upper earnings limit (currently £844 per week or £43,888 pa).

§ The additional rate of Class 1 for those with earnings above the upper earnings limit will be 2%.

§ Class 1 employer’s NICs will be 13.8%. The increased rate will also apply to Class 1A contributions (charged on benefits in kind) and Class1B contributions (on PAYE settlement agreements).

Income Tax

For the tax year 2010/11 all tax allowances and thresholds will be the same as for 2009/2010. As had already been announced a 50% tax rate will apply to income over £150,000 from April 2010.

For the tax year 2012/13, the higher rate threshold when individuals begin topay higher rate tax will be frozen at the 2011-12 level. The personal allowance will be increased in line with inflation for that year..

Tax reliefs for electric vehicles

From April 2010 electric cars and vans will be exempt from company car tax for a period of five years.

Scale rates for company car benefits

From April 2012, the lowest emissions threshold will be reduced to 99g/km (currently 120g/km), which means that cars with emissions below that level will have a scale rate of 10%. The other existing thresholds in the banded table will be reduced by 5g/km.

Fuel benefit tax

The figures used as the basis for calculating the benefit of fuel provided for private use of a company car or van are being increased to £18,000 (currently £16,900) and £550 (currently £550) from April 2010, respectively.

Workplace canteens

From April 2011, the income tax exemption for providing free or subsidised meals in a canteen or on business premises will be removed when provided via salary sacrifice schemes; that is, employees are deemed to be using a designated amount of their gross remuneration to fund the purchase of food and drink at work

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