If
you have been considering taking on your first employee, now would be a good
time to do it. This is because you could take advantage of the new national
insurance contributions rules that came into force on 6th April
2014.
You
could pay someone up to £22,400 without having to pay any employers’ NIC for
them. Or you could employ up to four adults full time on the minimum wage and
still not pay employers’ contributions. If you wanted to have young people aged
18 to 20 on your payroll full time, you could have up to ten of them on their
minimum wage and still not pay NICs.
The Benefit for
Current Employers
If
you already have employees, you will find that your NIC bill will go down. In
his March budget, the Chancellor of the Exchequer, George Osborne, confirmed
that the first £2000 of annual contributions from employers in businesses and
charities would be waived. If you normally pay less than £2000, you could be
one of the 450,000 businesses in the country that won’t be expected to
contribute anything.
Benefit for Small
Businesses
Called
the Employment Allowance, it is, of course, part of the government’s strategy
to get more unemployed people back into work. However, all hard pressed small
business owners and their bookeepers
recognise it as a godsend for anyone who is cash strapped or wanting to expand
and recruit, but held back by finances.
This
Employment Allowance is a new strategy because it covers the whole of the country,
rather than being introduced in a few deprived areas which have been given
certain tax breaks in the past. The government believes it will benefit around
1.25 million organisations in all.
How Will it Work?
Most
people really welcome this move, but Patrick Stevens, President of the
Chartered Institute of Taxation, offers a word of warning, when he said in
response to the budget announcement, "There are mechanics to sort out such
as whether a small business withholds up to £2,000 of NICs or has to pay first
and reclaim later. We will be doing our best in discussions with HMRC to make
sure this new scheme really helps employers and doesn’t tangle them in more red
tape."
Businesses
do have to apply, but government information stresses that this can be achieved
by ticking a box on your PAYE return, which sounds simple enough. Your outsourced bookkeepers will do this
for you, and will be carefully following the news on how this is all working
out.
