NIC Employment Allowance

Small businesses able to reduce NIC bill by £2,000

Earlier this year the Chancellor announced at the Budget the plan to introduce a NIC Employment Allowance.

The allowance will be available to every business and charity in the UK, regardless of age, size or location, and will entitle them to reduce their NIC bill by £2,000 as from April of next year. Up to 1.25 million businesses are expected to benefit from the allowance, 98% of which will be small and medium sized businesses who have fewer than 250 employees.

It is anticipated that the Employment Allowance will wipe out the NIC bill of 450,000 small employers. One third of employers will pay no employers NIC at all.

It is promised that the allowance will be simple to claim and will be delivered through standard payroll software and HMRC’s Real Time Information system. Employers will only need to confirm their eligibility through their regular payroll processes. HMRC will then deduct up to £2,000 from their employers NIC liability throughout the course of the year.

Small businesses are the lifeblood of the UK economy and the Government hopes that the introduction of the Employment Allowance will support and encourage those enterprises who wish to grow their businesses through expansion of their workforce.

Every business would be able to employ someone on a salary of £22,400 without attracting employers NIC. Alternatively, four adults could be taken on at the national minimum wage without incurring employers NIC.

The National Insurance Contributions Bill, which contains the Employment Allowance legislation, received its first reading in the House of Commons this Monday.

More details on how to claim the Employment Allowance will be available in the New Year so there is no need to contact HMRC or do anything to claim the Employment Allowance at this moment in time.

To give businesses a flavour and understanding of how the Employment Allowance might work, an online tool has been developed which illustrates the effect of the allowance on their NIC bill. This can be accessed by visiting www.employmentallowance.com.