In 2013’s Budget, George Osborne made “the largest tax cut in the budget” when he announced a £2,000 employment allowance which removed the first £2,000 of employers’ National Insurance contributions. This tax cut is estimated to benefit 1.25 million businesses and 35,000 charities. It is also predicted that 450,000 businesses will drop out of paying employers’ National Insurance completely.
Who can claim the employment allowance?
- Self-employed individuals who have a NI liability on earnings
- Service companies that pay salaries
- Community Amateur Sports Clubs.
Who can not claim the employment allowance?
- Suppliers of personal, household and domestic workers
- Public authorities
- Companies who carry out work which is mainly of a ‘public’ nature ie where 50% of their work is for the public sector,
- If you are caught by IR35 and make a deemed payment.
How can this benefit YOUR business?
The employment allowance is intended to help businesses to invest in jobs by allowing them to expand their workforce by minimising the financial strain of such an investment. For example:
- You could employ four adults or ten aged 18-20 on national minimum wage without paying any employers’ NI
- A business can pay one employee a salary up to £22,449 without paying any employers’ NI on that individual
- A business employing five full time adults on adult minimum wage would get a tax cut of over 80%…from £2,430 to £430
- A business employing 10 adults full time on adult minimum wage would get a tax cut of over 40%…from £4,870 to £2,870