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Tax cut on National Insurance Contributions for Employers in 2014

Have you heard of the National Insurance Contributions Bill?  How about the Employment Allowance?

Not everyone has heard of this legislation but what this Bill says is that from April this year (2014), an Employment Allowance has been introduced which will give businesses and charities a £2,000 tax cut on National Insurance Contributions for employers in 2014.

Yes, you did read that correctly.  A tax cut of £2,000.  The Government say that:

  • 1.25 million businesses and charities will be entitled to the cut and that the benefit will be freeing up money for small businesses aspiring to grow;
  • this Employment Allowance will mean that a business employing 5 adults full time on the national minimum wage (currently £6.31 per hour) would get a tax cut of over 80% from £2,430 to £430;
  • 450,000 businesses will be taken out of paying employer NICs altogether in 2014/15 which equates to one third of all employers;
  • Around 35,000 charities are expected to benefit to the tune of £45 million in total;
  • 90% of the benefits will go to businesses employing fewer than 50 people.

Smaller businesses are set to benefit most which is music to the ears of any small business owner.  How best to spend the savings?  You could decide to invest in the business, increase wages or take on new staff.   You could also be organised and think about putting the savings towards a pension scheme which will have to be in place by the time your staging date for auto-enrolment comes round.

So, what do you need to know?  The key facts are:

  • It will be introduced from April 2014;
  • It will be delivered through standard payroll software and HMRC’s real-time information system;
  • It will be simple to administer – employers only need to confirm their eligibility through their usual payroll processes;
  • Confirmation of eligibility will ensure that you will have £2000 deducted from your NICs liability over the course of the year’s PAYE payments.

There’s also an Employment Allowance calculator allowing you to see the effect of the Employment Allowance from April 2014.

For more information on how to use this saving to best effect in your business, give us a call today on 01487 81570 – we’d love to hear from you.

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