The following employee tax issues from the Pre Budget report are highlighted by CMS Cameron McKenna who were quick off the mark to share this information with Re:locate readers.
Bankers’ Bonuses The Government will impose a temporary levy of 50% on any discretionary bonus paid by a bank or building society (including branches of foreign banks) in excess of £25,000 between now and April 2010. The £25,000 cap would appear to include all loans and share awards, other than those made under an approved Share Incentive Plan or options granted under an approved SAYE scheme.
In addition, any affected bonus will not be corporation tax deductible and will be subject to income tax and NICs in the normal way – in effect, creating treble taxation.
Although draft legislation has been published, this will inevitably be supplemented by further anti-avoidance legislation.
National Insurance Contributions (NICs) Rates
- Having previously announced at PBR 2008 that the NICs rate for the tax year 2011/12 was due to rise by 0.5%, the Chancellor has now announced that there will be a further 0.5% increase to those rates, making a 1% increase in total from 6 April 2011. The new rates will therefore be:
- 12% for employees NICs up to approximately £44,000 with the additional rate for earnings above that amount increasing from 1% to 2%; and
- 13.8% for employer’s NICs.
Tax Bands For the tax year 2010/11, all tax allowances and thresholds will be the same as for the current year.
Pensions Contributions
The special rules which were introduced in the 2009 Budget, preventing people from making large additional contributions to their pensions before 6 April 2011 (the date from which the Governement are planning to restrict higher rate relief for payments into pensions) have been extended to those with incomes of £130,000 or over.
Employee Share Plans Despite the recent increase in employee share plans designed to produce capital gains in order to benefit from the current capital gains tax rate of 18% rather than an income tax rate of potentially 50%, no measures have been introduced to clamp down on such plans. Nor have there been any announcements or indications that the Government is considering aligning the capital gains tax rate with the income tax rate. So for the next few months at least, it would at least appear to be full steam ahead with capital gains schemes.
This first appeared in Law-Now, CMS Cameron McKenna's free online information service, and has been reproduced with their permission. For more information please go to www.law-now.com
