From 6 April 2014, if you’re an employer who pays Employer NIC then you will save money. Here’s how it works:
Poppy, is employed by Brighton Planet Savers Ltd (BPS).
At the end of each month BPS’s accountant runs the payroll and tells them how much to pay Poppy and how much to pay HMRC.
The amount to pay Poppy is her Net Pay. Net pay is worked out as her Gross Pay, less, Income Tax and Employee NIC deductions.
The amount to pay HMRC consists of:
- Deductions made to Poppy’s gross pay of Income Tax and Employee’s NIC, and;
- BPS’s Employer NIC (aka Employer Class 1 NIC).
The Employment Allowance entitles an employer to save up to £2,000 of Employers NIC from 6 April 2014 to 5 April 2015.
Its important to remember its only the Employers NIC which is saved not the Employees NIC.
If you pay an employee over £7,956 gross per year then you’ll be paying Employers NIC – so you can save.
HMRC has published new guidance on how the scheme will work.
The £2,000 allowance is set against the Employers NIC liability each month until the £2,000 is used up. HMRC are notified of this during the normal payroll reporting to HMRC (often monthly for most employers).
All businesses can claim the allowance, with the exception of a few excluded organisations, such as NHS trusts, public authorities etc. There is one more exception which may impact some employers. The allowance is not available for Employers of individuals for personal, household or domestic work, such as a nanny, au pair, chauffeur or gardener or care support worker. Those on an IR35 scheme are also unlikely to gain from the allowance.
So for many businesses with employees they will save money.