Government ‘concerned’ at growth of salary sacrifice – November 2015 Autumn Statement

The November 2015 Autumn Statement revealed that the government remains ‘concerned’ at the growth in salary sacrifice schemes, typically used by employers to reduce an organisation’s national insurance liability. It is considering what action, if any, is necessary to curb potential misuse and will gather evidence from employers to inform its next steps.

  • The Chancellor also announced a number of technical changes designed to ‘streamline and simplify’ aspects of the tax rules for tax-advantaged and non-tax advantaged employee share schemes.
  • The government is also retaining the diesel supplement in company car tax until 2021, when EU-wide testing procedures will ensure new diesel cars meet air quality standards even under strict real world driving conditions.
  • George Osborne also confirmed that the previously announced apprenticeship levy will be introduced in April 2017 at a rate of 0.5% of an employer’s paybill, with the aim of delivering three million apprenticeship starts by 2020. Each employer will receive an allowance of £15,000 to offset against their levy payment, so that the levy will only be paid on a paybill in excess of £3 million (less than 2% of UK employers will, therefore, pay it).
  • Citing figures from the Office for Budget Responsibility, the Chancellor forecast that up to six million lower-paid people could see a pay rise as the new National Living Wage creates a ripple effect further up the earnings distribution.
  • Public sector workers came under the spotlight, as the Autumn Statement announced that the government will continue to ‘modernise’ the terms and conditions of public sector workers by targeting reforms in areas where the public sector ‘still has far more generous rights than the private sector’. This examination will include a consultation on exit payment terms, which totalled around £2 billion a year over the last Parliament. Public sector sickness absence will be the subject of yet another review in advance of ‘legislation where necessary’ in order to cut its impact on the delivery of services.
  • Average pay awards in the public sector will be pegged at 1% for the four years from 2016/17.

‘Spending review and autumn statement 2015’, HM Treasury, 25 November 2015. The speech, key announcements and documents are available here: