The 2016 UK Budget: Impact on HR and Payroll

UK’s 2016 budget has several guidelines and measures that may impact your UK payroll.  Below are some of the main highlights.


Income Tax Thresholds. In April 2017, tax-free personal allowance will increase to £11,500 (a £300 increase). The point at which higher earners will start to pay 40% tax in 2017-18 will increase to £45,000.

Apprenticeship Levy. The levy payable on annual paybills of more than £3 million will apply to all U.K. employers. Employers with lower annual paybill will continue to have access to government funding to support apprenticeships. Apprenticeship Levy is expected to be introduced in April 2017.

Expenses and Benefits in Kind (BIKs). The government’s commitment to simplifying tax administration of employee benefits and expenses continues with:

  • Proposals to simplify the process for applying for and agreeing to PAYE Settlement Agreements
  • Proposals to align the dates by which employees have to make a payment to their employers in return for a benefit-in-kind they receive to “make good”
  • Extending the voluntary payrolling framework to allow employers to account for tax on non-cash vouchers and credit tokens in real time from April 2017
  • Consulting on Legislating to ensure that if there is a specific statutory provision for calculating the tax charge on a benefit-in-kind

Financial Advice Market Review (FAMR). The existing £150 Income Tax and National Insurance relief for employer-arranged pension advice is increased to £500.

National Minimum Wage, National Living Wage. The government will set the main rate of the National Minimum Wave applicable to workers aged 21 years to 24 years at £6.95. October 2016 will bring a:

  • 7% increase in the rate for 21- to 24-year-olds (from £6.70 to £6.95 per hour)
  • 7% increase in the rate for 18- to 20-year-olds (from £5.30 to £5.55 per hour)
  • 4% increase in the rate for 16- to 17-year-olds (from £3.87 to £4.00 per hour)
  • 0% increase in the rate for apprentices (from £3.30 to £3.40 per hour)
  • 1% increase in the accommodation offset (from £5.35 to £6.00 a day)

Effective April 2017, the government will also align the National Minimum Wage and National Living Wage cycles so that both rates are amended in April each year.

Shared Parental Leave. Shared Parental Leave was introduced in April 2015 and the government has now announced a date for consultation extending Shared Parental Leave and Pay to working grandparents. The consultation will be launched in May 2016.

HMRC’s Customer Service. The government is investing £71 million to improve customer care for tax payers. Plans include:

  • A seven-day-a-week service by 2017, with extended hours and tax credits phone lines making the HMRC more accessible
  • Recruiting more than 800 new staff into HMRC call canters to lower call waiting time and improving telephone services.
  • A dedicated phone line and online forum for new businesses and self-employed individuals to get help and support about filing and paying their taxes for the first time and transitioning to using digital services.

These are general guidelines and not professional advice. For help in the UK or international expansion, contact us at or +1-408-913-9130 to speak to our experts.