TaxCorporate TaxNICs holiday a boost for SME employment costs

NICs holiday a boost for SME employment costs

National insurance boost for companies setting up outside the South East could mean they gain a "free" employee

The national insurance exemption for small businesses outside the South East
could give them the equivalent of an extra member of staff, say advisers.

New businesses set up outside the capital and the South East will receive a
national insurance holiday for the first 12 months of opening.

Some businesses will now be able to afford a “free” employee from the
changes, said Colin Keane, senior director at Alvarez & Marsal.

“In most cases you’re gaining a free employee under this initiative, which
could help firms looking to set up,” said Keane.

Any new business in these areas over the next three years, starting from this
month, will be national insurance exempt on the first £5,000 it would usually
pay in NICs per employee – with an exemption cap on ten employees per business.

This is due to help up to 400,000 companies in the first three years at a
cost of approximately £890m over that period to the exchequer.

Not all advisers were so impressed with the impact of the chancellor’s
national insurance overhaul. They flagged up that the exchequer still stands to
gain approximately £1bn each year from changes to national insurance as a whole,
largely coming from businesses with higher paid individuals, such as
professional service firms.

The rate of NICs will increase as planned by the previous government for
employers and employees, to 13.8% at the start of the next tax year. The new
government had promised to reverse this, which it has only partially achieved
through raising the NI thresholds for employers. The higher threshold for
employers to pay NICs moves to approximately £131 per week from £110 per week,
costing the exchequer approximately £3.1bn in its first year. But it could also
end up costing the employer in some circumstances.

For an employee on an annual wage of £30,000 the employer would previously
have paid approximately £3,108 in NICs. They would now pay approximately £3,200.

Related Articles

Big names, little tax: Airbnb, Facebook, Kellogg’s, eBay

Corporate Tax Big names, little tax: Airbnb, Facebook, Kellogg’s, eBay

2m Alia Shoaib, Reporter
New trading allowance: simplicity, but not as we know it

Administration New trading allowance: simplicity, but not as we know it

2m Emma Rawson, ATT Technical Officer
EU divided over radical tax reforms targeting tech giants

Corporate Tax EU divided over radical tax reforms targeting tech giants

2m Alia Shoaib, Reporter
‘Improve rather than lose’ disincorporation relief, tax body urges

Administration ‘Improve rather than lose’ disincorporation relief, tax body urges

2m Austin Clark, Reporter
How to educate your clients about tax avoidance

Corporate Tax How to educate your clients about tax avoidance

2m Clear Books | Sponsored
CGT clampdown nets HMRC £124m – but could lead to increase in use of avoidance schemes

Corporate Tax CGT clampdown nets HMRC £124m – but could lead to increase in use of avoidance schemes

3m Austin Clark, Reporter
‘Google tax’ nets HMRC £281m

Corporate Tax ‘Google tax’ nets HMRC £281m

3m Emma Smith, Managing Editor
Should I incorporate my buy-to-let business?

Corporate Tax Should I incorporate my buy-to-let business?

4m Emma Rawson