A reduction in employers’ NICs for businesses and charities
At the end of his speech today, the Chancellor announced what he described as the largest tax cut in the Budget: an employment allowance for businesses and charities.
From April 2014, all business and charity employers will be able to offset an annual allowance of £2,000 against their Class 1 National Insurance contributions (NICs) liability.
The employment allowance is intended to be simple to administer, to encourage maximum take-up. It will be delivered through standard payroll software and HMRC’s real time information (RTI) system. It is envisaged that employers will confirm their eligibility through their regular payroll processes, and the £2,000 allowance will be deducted from each month’s employer NIC liability until the allowance is used up.
Government estimates that up to 1.25 million employers will benefit, with over 90% of the benefit going to small businesses. The scale of the allowance means that 450,000 of the UK’s small businesses will no longer pay any employer NICs. On average, employers with fewer than 10 employees over the course of the year will see their employer NICs bill reduced by 80%.
We welcome this measure, but, as ever, the devil will be in the detail, so we are pleased that Government has undertaken to engage with business representative bodies on the details of the design and operation of the new allowance.