New workplace pension limits from 6 April 2019

workplace pension, limits

The amounts that employers and workers will be required to pay into workplace pensions are due to increase from 6 April unless the worker opts out. The new limits will be 5% from the worker and 3% from the employer. The total minimum contribution will, therefore, increase from the current 5% overall to 8%.

In some schemes, your employer has the option to pay in more than the legal minimum. In these schemes, you can pay in less as long as your employer puts in enough to meet the total minimum contribution of 8%.

Don’t Lose Your Personal Allowance!

pension contributions, git aid, tax

For every £2 that your adjusted net income exceeds £100,000 the £11,850 personal allowance is reduced by £1. Pension contributions and Gift Aid can help to reduce adjusted net income and save tax at an effective rate of 60%.

The restriction applies between £100,000 and £123,700 adjusted net income. Another way that you could avoid this trap would be to agree with your employer to sacrifice some of your salary in exchange for a tax free benefit in kind. These rules changed from 6 April 2017 but employer pension contributions, bicycles, and employer provided childcare would continue to be tax effective.

HMRC publish updated benchmark scale rates for employees worldwide travel expenses from 6 April 2019

Benchmark, travel reimbursement

Employers can reimburse employees who travel abroad for business purposes for their accommodation and subsistence expenses by making scale rate payments.

The tables cover a wide range of countries and regions within countries.  These were last updated in 2014

What the tables contain

For most countries, there are benchmark rates for the larger cities as well as an “elsewhere” rate. Employers wishing to use the published rates must ensure that they refer to the table entry for the city where the employee stayed, or the elsewhere rate, as appropriate. Rates are quoted in the relevant foreign currency, US$ or Euros.

The tables provide:

  • a “room rate” per night
  • a “total residual rate” and individual rates for breakfast where it is not included in the room rate, lunch, dinner etc. The “total residual rate” figure is intended to cover the total cost of meals in a period of 24 hours, plus the cost of daily travel between the employee’s hotel and office
  • a “24-hour rate” – this is the sum of the “room rate” and the “total residual rate”
  • an “over 10-hour rate”, which is intended to cover subsistence expenses for any period of more than 10 but less than 24 hours
  • an “over 5-hour rate”, which is intended to cover subsistence expenses for any period of more than 5 but less than 10 hours
  • separate amounts for individual meals and other expenses incurred during the day – employers who wish to do so may use these rates instead of the “over 5”, “over 10” and “24-hour” rates

For some destinations, the table simply shows “ACTUALS + £4 PER DAY”. These are destinations for which no benchmark information is available. In such cases, employers may reimburse their employees’ actual accommodation and subsistence expenses, plus £4 per day to cover hotel-to-office travelling expenses.

Employers cannot choose to use rates from destinations to which their employees have not travelled as a substitute for destinations for which no benchmark rate is available. The rates can only be used as published.

What is not covered

The benchmark rates do not cover incidental, allowable expenses that employees may incur en-route – for example, the cost of a taxi to the airport in the UK, or necessary refreshments taken at the airport. Employers who wish to use the benchmark rates may reimburse those other expenses separately, in addition to paying the benchmark rates.

Optional Remuneration Arrangements – (OpRA)

benefits, employees

The optional remuneration arrangement (OpRA) legislation was introduced on 6 April 2017 and replaces salary sacrifice. The new rules apply to any employee that is offered either cash or the alternative of a benefit in kind in their contract of employment.  Under these new rules, the taxable benefit is the greater of the cash amount sacrificed or the amount of the actual benefit in kind.

Most existing arrangements set up before 6 April 2017 will automatically be subject to the new rules. However, the following arrangements will not be subject to the new rules until 6 April 2021 unless they are varied, renewed or modified:-

  • cars with CO2 emissions of more than 75g/km
  • accommodation
  • school fees (even if varied, renewed or modified as long as the arrangement relates to the same child and school)

The only benefits that don’t need valuing for a salary sacrifice arrangement, as you don’t have to report them to HMRC, are:

  • payments into pension schemes
  • employer-provided pensions advice
  • childcare vouchers, workplace nurseries and directly contracted employer-provided childcare
  • bicycles and cycling safety equipment (including cycle to work)

If an employer’s benefit scheme provides any other type of benefit then the new rules will apply and these benefits must be reported on the P11D form.

How OpRA works for cars

Cars over 75g/km

For a car over 75g/km you must compare the salary sacrifice relating solely to the car (not including any other car-related benefits such as insurance) and the normal car benefit charge for the car (ie. List price x CO2 emissions percentage). The higher of these two figures is the taxable benefit to be shown on the form P11D and which the employer must pay Class 1A NIC. Any employee payments for private use and/or capital contributions will continue to reduce the value of the taxable benefit.

If the cash option is taken then the amount is simply added to the payroll and dealt with accordingly.

Cars less than 75g/km

The new rules do not apply to cars with emissions of 75g/km or less. Cars with CO2 emissions of 75g/km or less continue to be taxed on the cash equivalent of the benefit without having to make a comparison with the salary foregone.