Income tax and National Insurance Contributions (NICs)
20 March 2013
This page provides information relating to the Government’s plans relating to future reform of income tax and National Insurance contributions (NICs).
NICs Employment Allowance
From April 2014 every business and charity in the UK will be entitled to a £2,000 Employment Allowance to reduce their employer National Insurance contributions (NICs) bill each year.
The Employment Allowance will reduce the barriers faced by small businesses which aspire to grow by supporting businesses with the costs of employment. Up to 1.25 million employers will benefit, with 98 per cent of the benefit going to small businesses with fewer than 250 employees. As a result, 450,000 small employers will pay no NICs at all in 2014-15.
The Government’s ambition is for the UK to be the best place in Europe to start, finance and grow a business. The Employment Allowance forms part of this, and builds on lessons learnt from the current Regional Employer NICs Holiday for new businesses (NICs Holiday), which ends on 5 September 2013. The NICs Holiday was designed specifically for start ups, providing a NICs relief for businesses taking on new staff in their first year of trading.
The Employment Allowance goes further; it is permanent, and open to all businesses and charities in the UK. It will also be simple to administer, to ensure maximum take up. From April 2014, it will be delivered through standard payroll software and HMRC’s Real-Time Information system. Employers will only need to confirm their eligibility through their regular payroll processes. This confirmation will ensure that up to £2,000 will be deducted from their employer NICs liability over the course of the year’s PAYE payments.
The Government will engage with business representative bodies on the details the new allowance, to ensure the system is as simple and effective as possible.
Simplification of NICs for the Self-Employed
The Government will consult on options to simplify the administrative process for the self-employed by using Self Assessment to collect Class 2 NICs alongside income tax and Class 4 NICs.
Autumn Statement 2012 announced that the Government will wait for further progress on planned operational changes to the tax system before formally consulting on integrating the operation of income tax and National Insurance contributions. For more information see:
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