How to reduce your Employer's

National Insurance Contribution

by £2k through the Employment Allowance

If you are an employer operating as a business or a

charity, then as of 6 April 2014 you are likely to be

eligible for Employment Allowance writes Ercan Demiralay.

This legislation could reduce your Employer’s Class 1 National Insurance Contributions (NICs) by

up to £2,000 a year and almost every employer who is a business or charity (including Community

Amateur Sports Clubs) that pay this on their employee’s or director’s earnings will be eligible.

Why are the government doing this?

The initiative was launched by the government in March 2013 and comes into force at the start of

the new tax year. It is designed to remove what has been described as the "jobs tax" on

businesses. The idea being that it will incentivise small organisations to take on their first

employee or recruit more staff. So you could employ a new member of staff on £22,000 a year

and not have to pay any NICs or, the equivalent would be 4 jobs with each paid the minimum

wage. Previously National Insurance was charged at 13.8% of most pay, making it a significant tax

on employment for businesses.

The government hope that this will help tackle youth unemployment which has become a

significant issue in recent years. As the graph below courtesy of the Office for National

Statistics demonstrates, employment among the 16-24 year olds declined from 2005-2012 in stark

contrast to the over 65s. On the surface a reduction in employers NICs might appear to not make

much sense during times of austerity and when the treasury is trying to boost tax revenues while

cutting public spending in order to reduce the annual deficit. However, should this initiative work

then it will improve the private sector's profitability and the tax the government will then generate

through corporation tax. Furthermore it will bring more people into paid jobs and therefore

hopefully employment long term. This should also improve the income tax take with these people

then spending their earnings across the economy.

How you can claim this tax cut

To claim all you need to do is use your 14-15 payroll software. This depends on the package you

use but will probably be a box you have to tick. HM Revenue & Customs report that up to 1.25

million businesses and charities will benefit from the Employment Allowance and around 450,000

will not have to pay any Class 1 NICs at all in 2014-15.

What you need to check

The key is to make sure that your payroll software is ready and capable of doing this. If this is not

the case then you should seek help from a professional advisor.

Visit www.wellersaccountants.co.uk/blog/

Media contact at Wellers:

Jo Love

T: 07887 775271

E: jo@lovecommunication.co.uk

About Wellers

Wellers is one of the most successful medium size accountants in the South East. Established 70

years ago, Wellers has four offices covering London and the Thames Valley with around 80 loyal

and experienced employees. Wellers provide a comprehensive range of accountancy services

whilst retaining a partner-led approach. Partners work integrally with each client to achieve their

business objectives. Clients benefit from tangible savings and sustainable business growth,

branded by Wellers as ‘Business Oxygen’.