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The New National Insurance £2,000 “Employment Allowance”

One of the more welcome measures introduced by the 2013 Budget is the new National Insurance “Employment Allowance” which will enable most businesses and charities to reduce their National Insurance liability by up to £2,000 per tax year!

The new measure comes into effect on 6th April and applies to businesses, charities and community amateur sports clubs. Over 1.25 million employers will benefit with over 90% of the benefit going to small businesses i.e., those with fewer than 50 employees.

The allowance is available to most employers including partnerships and even sole traders that have employees. The £2,000 allowance is a deduction from the Class 1 NIC payments (i.e. the Employer’s National Insurance Contributions – not the employees!) and the amount of the allowance is equal to the amount of the Employers Class 1 NIC’s due or a maximum of £2,000 in each tax year. Certain employers are in fact excluded from making a claim and more details are given on the HM Revenue and Customs webpage.

The further good news is that claiming this new allowance doesn’t involve a raft of new “Red Tape”! The idea is to keep the process as simple as possible for employers and the allowance will be delivered through standard payroll software and the HM Revenue and Customs “Real Time Information” (RTI) system. You should check therefore that your payroll software is ready to deal with the new allowance from 6th April onwards. Employers simply have to signify their intention to claim the allowance by completing a simple question which most RTI compliant software will have! HM Revenue and Customs will assume that each employer will continue to claim the allowance each year until they are notified otherwise.

For those few employers that still use paper returns there will be a paper process available which will mirror the IT procedures.

If you require any further information please contact your Barnes Roffe partner.

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