The Chancellor announced in the March 2013 Budget the introduction of a new “Employment Allowance”. HMRC has recently issued more details of the new measure. Worth up to £2,000 the allowance will be able to be set-off against employers’ National Insurance Contributions (NIC) bills from April 2014. The press release from HMRC makes it clear that this will apply to all businesses, charities and Community Association Sports Clubs who employ people.
HMRC gave reassurances that it will be simple to administer to ensure maximum take up. It will be delivered through standard payroll software and the Real Time Information (RTI) system. Employers will only need to confirm their eligibility through their regular payroll processes, and then the allowance of up to £2,000 will be deducted from their employer NICs liability over the course of the year’s PAYE payments.
The employer, once opted in, will then offset the allowance against each monthly Employer’s NIC payment that is due to be made to HMRC. The deduction continues until either the allowance is fully claimed or the tax year ends. HMRC estimate 450,000 small employers will pay NO Employers’ NIC at all in the hope that these small businesses employ an extra person to boost the economy. By reducing the unemployment numbers they hope that the Employment Allowance will be neutral to the public purse.