A rise in Employers’ National Insurance Contributions (NICs) was one of the key revenue generators in the Autumn Budget, with the announcement expected to raise a huge £23.77 billion from the first year of enactment.
A significant increase in the secondary Class 1 NICs rate from 13.8% to 15%, a reduction of the secondary threshold from £9,100 to £5,000 per annum, and an increase to the National Minimum Wage and National Living Wage all combine to have a considerable impact on the cost of employment for many businesses.
To support small businesses with these changes, the government outlined its intention to increase the Employment Allowance from £5,000 to £10,500 a year on employer secondary Class 1 NICs liabilities. To further supplement this, a recent measure has been published to expand the Employment Allowance to all eligible employers.
Recent update to Employment Allowance
The government has announced that Employment Allowance will be available to any eligible business or charity and the restriction whereby only employers who have incurred a secondary Class 1 NICs liability of less than £100,000 will be removed.
This means all eligible businesses and charities will be able to claim a reduction on their secondary Class 1 NICs liability, irrespective of what their secondary Class 1 NICs liabilities were in the tax year prior to the year of the claim.
This measure will have effect from 6 April 2025.
How M+A Partners can help
Removing the £100,000 secondary Class 1 NICs threshold changes the nature of Employment Allowance, from a relief aimed specifically at small businesses to an integral feature of the NICs system available to all eligible businesses. However, other restrictions remain and should be noted before claiming employer allowance.
Our experienced tax team provide advice on the most appropriate reliefs for your business and the current restrictions in place – ensuring you remain compliant whilst optimising your tax position.
For any assistance on this matter, please get in touch with your normal contact at M+A Partners or myself via my contact details below.
