The Employment Allowance tax cut will give businesses and charities up to £2’000 a year tax saving.
The planned tax cut will be introduced from April 2014 through the National Insurance Contributions Bill and is expected to benefit more than 1.2 million small businesses in UK. The aim of the Employment Allowance is to assist small businesses to grow by supporting the cost of employment. When this new regulation comes into force, it will result in approximately 450,000 businesses not needing to pay National Insurance Contributions at all.
What are the key benefits of the Employment Allowance?
The Employment Allowance will be of most benefit to small businesses, as the National Insurance Contributions will be reduced the most.
In summary, the key facts are:
- The Employment Allowance will give up to £2’000 tax cut off the National Insurance Contributions due over the course of a year’s PAYE payments.
- Small businesses with fewer than 50 employees will receive the majority of the benefit, with over 90% of the allowance allocation.
- It is expected that approximately 450,000 businesses will be taken out of paying National Insurance Contributions completely.
- Your business will be able to employ four adults (or ten 18-20 year-olds) as full-time employees on the National Minimum Wage, without paying any employer National Insurance contributions at all.
How will the Employment Allowance work?
Every business, charity and Community Amateur Sports Club in the UK will be entitled to the £2’000 Employment Allowance from April 2014, to reduce your Employers National Insurance Contributions bill each year.
The process for a business to enrol will be simple as you will just need to confirm your eligibility through your regular payroll process. The allowance will be delivered through the standard payroll software and HMRC’s Real-Time Information system.
How much can my business/charity save?
The Government has introduced a useful Employment Allowance calculator that will enable you to see how much the saving will be for your business.
For example, the calculator allows you to see the effect on your National Insurance Contributions bill in 2014 if you employ one additional employee; you can also confirm the reduction you can expect on your current National Insurance Contributions bill.
To see the tax cut you could expect to receive from 2014, use the Employment Allowance calculator.
For more information on the Employment Allowance launching in April 2014 and other tax savings available for your business, please call us on 020 8780 2349.
This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.