Extract from IDS Executive Compensation Review 326

Budget 2008: a HR perspective

While the annual Budget is usually considered a significant event in the political calendar, the tax regime can also have major impact on the shape of employee reward and benefits. To keep personnel specialists up-to-date with developments, therefore, this article looks at the HR implications of the latest Budget.

The key focus of the Budget was said to be simplifying the tax system, sustaining economic stability and working towards a greener economy by tackling company cars. For HR specialists, however, of central importance are changes to direct taxation as these have an impact on take-home pay. There are two important income tax measures, both announced in 2007. The first is the reduction in the rate of income tax and the other is the abolition of the existing 10 per cent starting rate. The personal allowance rate will also increase, and there will be an alignment of the National Insurance (NI) upper earnings limit (UEL) with the 40 per cent income tax threshold.

Measures to tackle climate change were announced which affect company cars such as increasing the fuel benefit charge multiplier and the changes in VAT on fuel scale charges. Finally, the article looks at an announcement in the Budget which changes the tax relief on share option schemes which aims to encourage the growth of small and medium sized firms. A summary table of the latest income tax and NI rates are provided as well as the latest fuel rates for company cars.