Details of new NIC break announced
Which Tax Break are we Talking About?
In the Chancellors 2014 budget it was well publicised that there was to be a new National Insurance (NIC) break for employers, called the Employment Allowance. That exempted the first £2,000 of employers NIC for all employers. Less well publicised was a NIC break which was announced at the same time but not to be introduced until April 2015. Sketchy details were given for this new NIC break (i.e. it would apply to younger workers) but the fine print was not published. Well, eight months later, I'm glad to say that we finally have the fine print.
Who is eligible for the NIC break?
Any of your employees aged 20 or under on any payday after 5 April 2015 will be eligible. That means that if you have an employee under the age of 21, you will not have to pay employers NIC on any part of their earnings, assuming they are earning less than £41,860/year. If they earn more than that then you will be liable to 13.8% on the excess.
The measure is clearly an incentive to employers to employ younger workers and while the break sounds generous, bear in mind that employers NIC does not kick in until the employee is earning over £7,696/annum, and under 21's are likely to earning at lower rates of pay or are at university and therefore unaffected. So the cost to the Exchequer is likely to be minimal. Nevertheless, all assistance is well received.
Action to take for eligibility to NIC break:-
Tax Tip 1: The only thing you have to do to ensure the NIC break is make sure that you have a record of your employees’ correct dates of birth. So, make sure you keep a copy of their birth certificate/driving licence/passport on file.
Tax Tip 2: Your payroll software suppliers are working with the Taxman to make sure the new NIC break is automatically applied to your payroll once you enter in your employee's age into the software. However you need to make sure that you are using one of the new NI category letters for you employees who are eligible for the break (see here for a summary).
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