Budget: £2k NI allowance

[Contreras]

From April 2014, all businesses and charities will be eligible for a new £2,000 Employment Allowance. This will reduce their employer NICs bill.
...
The scale of the allowance means that 450,000 of the UK’s small businesses will no longer pay any employer NICs.
...
The Employment Allowance will be introduced from April 2014, delivered through standard payroll software and HMRC’s Real Time Information system. To ensure maximum take-up, it will be simple to administer: employers will only need to confirm their eligibility through their regular payroll processes. This confirmation will ensure that up to £2,000 will be deducted from their employer NICs liability over the course of the year’s PAYE payments.

This should mean the maximum salary that can be paid without incurring NI will increase to £15,472*. Edit: WRONG!

That means an additional £320 in take home after tax, compared to taking salary at the NI threshold as most people do currently.

<cynic> I do wonder what they mean by "eligibility" though, and how this might relate to RTI. </cynic>

* Assuming that the NI thresholds and rates remain unchanged for 2014-15.

Budget Linky here --> http://cdn.hm-treasury.gov.uk/budget2013_complete.pdf

[TheFaQQer]

This should mean the maximum salary that can be paid without incurring NI will increase to £15,472*.

That means an additional £320 in take home after tax, compared to taking salary at the NI threshold as most people do currently.

That's not what Nixon Williams said in the budget thread (my emphasis):

Anyone paying a salary above the NIC threshold will benefit in that the employer NIC payable will effectively be refunded upto £2,000.

This will only apply from April 2014.

Although any tax cut is a help, it will still be marginally more tax efficient to remain on a salary of £7,696 (2013/14) than pay more due to the employee NIC that will still be payable.

That said, if you do pay more than the £7,696 as a salary, then you will benefit but it is not enough to suggest a change in our advice.

Alan

[stek]

Budget: £2k NI allowance

Wot about employees NI?

[Nixon Williams]

This should mean the maximum salary that can be paid without incurring NI will increase to £15,472*.

That means an additional £320 in take home after tax, compared to taking salary at the NI threshold as most people do currently.

The reason why you will not be better off is because you will still be liable to pay employees NIC.

This will benefit people who already pay above the commonly suggested rate of £7,696 (2013/14) but it is not sufficient to justify changing your salary above £7,696!

Alan

[Contreras]

That's not what Nixon Williams said in the budget thread (my emphasis):

Oh bother.

So basically it just means people can now pay up to the Primary Threshold without the "hassle" of NI payments, and so overall about £5/yr better off. woo hoo.

[LisaContractorUmbrella]

Not sure this will apply to single person limited companies BBC News - Budget 2013: National Insurance cut 'to boost jobs'

[northernladuk]

Oh bother.

So basically it just means people can now pay up to the Primary Threshold without the "hassle" of NI payments, and so overall about £5/yr better off. woo hoo.

A little knowledge is a dangerous thing.......

[Nixon Williams]

Not sure this will apply to single person limited companies BBC News - Budget 2013: National Insurance cut 'to boost jobs'

Not sure what in the article made you doubt?

From the Budget papers:

"1.19 National Insurance: £2,000 employment allowance – The Government will introduce an allowance of £2,000 per year for all businesses and charities to be offset against their employer Class 1 secondary NICs bill from April 2014. The allowance will be claimed as part of the normal payroll process through RTI.

The Government will engage with stakeholders on the implementation of the measure after Budget 2013 and is seeking to introduce legislation later in the year."

I appreciate this is probably not relevant to most contractors.

[northernladuk]

Not sure what in the article made you doubt?

From the Budget papers:

"1.19 National Insurance: £2,000 employment allowance – The Government will introduce an allowance of £2,000 per year for all businesses and charities to be offset against their employer Class 1 secondary NICs bill from April 2014. The allowance will be claimed as part of the normal payroll process through RTI.

The Government will engage with stakeholders on the implementation of the measure after Budget 2013 and is seeking to introduce legislation later in the year."

I appreciate this is probably not relevant to most contractors.

What you saying huh? You saying we are not proper businesses therefore not relevant? Come outside and say that accountant boy!

Bad enough HMRC trying to say we are not proper businesses without our accountants rounding on us as well!

[Nixon Williams]

What you saying huh? You saying we are not proper businesses therefore not relevant? Come outside and say that accountant boy!

Bad enough HMRC trying to say we are not proper businesses without our accountants rounding on us as well!

My view is that it will not apply to most contractors due to the fact that they tend to pay a salary where no NIC (both employers and employees) is payable, hence there will be nothing to rebate!