As part of this year’s budget, chancellor George Osborne has announced a new scheme aimed at small businesses called the ‘employment allowance’, which is designed to cut £2,000 from every company’s NIC payments.
Major tax cut will benefit small businesses
Starting in April 2014, the allowance will affect every business, charity or amateur sports club with paid workers. The government believes it will have a positive impact by benefitting up to 1.25 million employers and around 450,000 small employers who will not need to make any NIC payments in 2014/15.
Talking about the scheme George Osborne said, “For the person who"s set up their own business, and is thinking about taking on their first employee - a huge barrier will be removed. They can hire someone on £22,000, or four people on the minimum wage, and pay no jobs tax.”
To keep the process as simple as possible, the employment allowance will be delivered through standard payroll software and HMRC’s Real Time Information (RTI) system. For it to work, the employer will have to signify their intention to claim by completing a yes/no indicator.
The employer will then offset the allowance against each Employer’s National Insurance payment, which is due to be made to HMRC until the allowance is fully claimed or the tax year ends. It will apply per employer, regardless of how many PAYE schemes they have in operation, so each employer can only claim for one allowance.
John Longworth, director general of the British Chambers of Commerce (BCC), also welcomed the announcement. He said, “The chancellor"s move to help our smallest companies take on staff by cutting their employers" national insurance bills by £2,000 will give many businesses an important boost of confidence.”
This move by the government is just one of the latest schemes launched in this year’s autumn budget designed to help the progress of small and start-up companies, and give them an incentive to start taking on more staff.
Accountancy Services From Harris & Co Northampton
For many small businesses, it may be worth revisiting their remuneration package to take advantage of this new relief. Harris & Co Chartered Accountants can offer you help and advice with this or any other accountancy issues you have through their accountancy services.
If you want more information then please get in touch with one of our highly trained and experienced chartered accountants at Harris & Co. We will call on our many years of experience as small business accountants to advise you on the best way forward. Please email email@example.com or phone 01604 660661.