As an employer, you can get up to £2,000 a year off your National Insurance bill with the Employment Allowance. This allowance has been available since April 2014 and targets support at small business. It was designed to offset the costs of National Insurance Contributions when employing four full-time staff on the National Minimum Wage.
Businesses have been able to use this allowance to cut the National Insurance Contributions they pay on employee’s wages by up to £2,000.
From April 2016 Employment Allowance will be £3,000
In this summer’s budget, the Chancellor, George Osborne, announced that the Employment Allowance will rise to £3,000 from April 2016. This is to offset the additional costs that small businesses will incur when the National Living Wage is introduced. In effect, a business will be able to employ four full-time staff on the National Living Wage without incurring any employer’s National Insurance Contributions.
Caution: If director is the only employee, no more allowance
There are some exclusions. The allowance will be withdrawn from companies where the director is the only employee. The reason for this is because the Employment Allowance is meant to support recruitment, rather than to help people offset their current tax liabilities.
90,000 businesses to enjoy zero National Insurance Contributions
The new National Living Wage of £7.20 per hour will be compulsory for workers aged 25 from April 2016 and the government plans to increase the rate to reach £9 per hour by 2020.
By providing the new £3,000 Employment Allowance limit, it’s calculated by the Treasury that up to 90,000 employers will benefit with their employer National Insurance Contributions liability reduced to zero.
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