From April 2014 many business employers will benefit from the new Employment Allowance. This allowance will cut up to a £2,000 a year from businesses and charities National Insurance contributions bill.
It is believed 1.25 million businesses and charities will be entitled to this tax break with up to 450,000 businesses being taken out of paying Employers NIC altogether in 2014/15.
If you are a small business at the point of taking on your first employee and with this allowance being available you will be able to pay your employee a salary of up to £22,400 without having to pay any Employers Class 1 NIC at all.
The Employment Allowance will be delivered through standard payroll software and HMRC’s Real Time Information (RTI) system, thus making it simple to claim the allowance. HMRC will add a facility to the RTI Employer Payment Summary (EPS) referring to the employment allowance in the form of a ‘yes/no’ indicator and payroll software providers will do the same.
To claim the allowance, the employer will have to signify their intention to claim by completing the yes/no indicator just once. The employer will then offset the allowance against each monthly Employer’s National Insurance payment that is due to be made to HMRC until the allowance is fully claimed or the tax year ends.
The employment allowance will apply per employer, regardless of how many PAYE schemes an employer has in operation, so each employer can only claim one allowance.