Employers are required to make secondary Class 1 national insurance contributions (NICs) for their employees. From April 2014 every UK business will be allowed an annual employment allowance of £2,000 to offset against their employer NIC liability.
This allowance will be mainly beneficial to small businesses as it will reduce the financial burden of employer NICs, in the aim to support growth and employment.
How it works?
Eligibility for the allowance will be confirmed through the company’s regular payroll processes, and the £2,000 allowance will be offset against employer NIC over the year’s PAYE payments. This will be done via the employer’s payroll systems.
Will this benefit you?
This new allowance will particularly benefit smaller businesses that are looking to hire additional employees, as it will lower the costs of employing staff. However, it is not beneficial for the self-employed who do not have any employees.
In simple terms, this may also benefit the small owner-managed business to the tune of £150 p.a. but this is dependent on the 2014/15 personal allowance and Employees NIC threshold.
The Government estimates that “up to 1.25m employers will beneﬁt – with over 90% of the benefit going to small businesses with less than 50 employees”. The Government also expects that around 450,000 of small businesses in the UK will not pay any employer NICs at all. Employers with less than 10 employees over the year will, on average, see an 80% reduction in their employer NIC liability.
For example: According to the HM Treasury, every business can pay one employee a salary of up to £22,400, or four employees on the national minimum wage without any employer NICs liability.
To see the effect of the Employment Allowance on your employer NICs from April 2014, click the link below to the quick and easy to use ‘allowance calculator’:
- See the effect on your employer NIC of employing an additional employee.
- See the effect on your employer NIC for all current employees.