In an attempt to promote job creation, it was announced in the Budget 2013, that firms based in the UK would be entitled to a £2,000 allowance towards employer National Insurance Contributions (NIC). This Employment allowance will come into effect in April 2014 and is estimated to take 450,000 of the UK’s smallest businesses out of paying employer NICs.
For most employers, NIC’s are an additional levy of employment, charged at 13.8% of most pay. This allowance will diminish or reduce the burden on small businesses and hopefully encourage further employment.
George Osbourne announced that “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.”
It was described as the largest cut in the budget and the government expects only one third of all employers to have to make NIC when it comes into effect.
According to HM Revenue & Customs, the allowance will be claimed as part of the payroll process through RTI. However, a decision has not been made on how it will be implemented and legislation is expected to be introduced later on in the year.