The rise and fall of NI rates

It is quite a while since I last took part in an audit, but I can well remember trekking around the various departments of a business carrying out the many tests and checks set out on my working papers.

I could never understand then, and still can’t now, why it is the vast majority of employers accept that operating PAYE is as much part of running a business as operating their sales ledger. It may be a good way of collecting tax, but why were they so unconcerned about how long it took them?

During the past few years, the government has finally woken up to the vast amount of employer time which is spent on making the system work.

And so it was that a fortnight ago I cheered as I read that the national insurance starting point was to be brought into line with the level of personal allowance.

I could barely contain my excitement as the prospect of the abolition of the stepped rates of employer NI – and that was nothing compared with my reaction to the news that the Contributions Agency is moving to the Inland Revenue next year. So many simplifying administrative reforms in one go.

But wait … wouldn’t all of this have a cost? I read on and, sure enough, saw that the employer rate of NI is to rise to 12.2% from April 1999.

Odd then, that so few journalists majored on this in the post-Budget frenzy of articles in the press.

This is the change employers that I have spoken to care about most. It will be particularly costly for those businesses which traditionally have high salary bills.

What choice do they have? The overall thrust of these changes seems to be to encourage employers to take people on for lower salaries. More easily said than done, I think!