9th December 2016
Employers can save money on their National Insurance bill thanks to changes to the regime. The employment Allowance allows most businesses and many other organisations to reduce their employers' Class 1 NIC liability. In a move to mitigate the impact of the National Living Wage, the allowance has been raised from £2,000 to £3,000. Once you have made a claim for the allowance it will automatically apply to subsequent years until you tell HMRC otherwise. Claiming the allowance can be done through payroll software or with HMRC's Basic PAYE Tools. However, from April this year companies where the director is the sole employee cannot claim the allowance.
There are a number of other ways to reduce NIC liability. Companies taking on someone under 25 years of age in a Government-recognised apprenticeship will pay no Class 1 employer NICs on earnings below £827 a week. Furthermore, the normal NIC rate of 13.8% is reduced to zero for any staff under the age of 21 as long as, again, they earn less than £827 per week which is the Upper Secondary Threshold. The 0% rate only applies to earnings paid while the worker is under 21 and they will still be liable to pay employee NICs.
Salary sacrifice schemes - in which an employee gives up part of their cash pay in return for some sort of non-cash benefit - can also mean a lower tax and NIC bill for both employee and employer. However, such schemes need careful consideration and planning.