15 Oct 2013
A new Employment Allowance worth up to £2,000 will benefit some 1.25 million small businesses, while 450,000 firms will be taken out of national insurance altogether, the Prime Minister David Cameron has announced.
The Government expects that more than 90% of the benefit of the allowance will go to small businesses with fewer than 50 employees.
Speaking to business leaders in the east of England, Mr Cameron said: ‘Small business and entrepreneurs are the lifeblood of our economy and this Government is firmly on their side.’
Announced in the 2013 Budget, the Employment Allowance will give businesses and charities a £2,000 tax cut off their National Insurance Contributions (NICs) bill over the course of the year’s PAYE payments.
The new allowance comes into force in April 2014 and employers will need to confirm their eligibility through their regular payroll process.
The tax cut was applauded by the Federation of Small Businesses (FSB). ‘The NICs Employment Allowance is a measure our members have warmly welcomed,’ commented FSB National Chairman, John Allan.
‘It will have a positive impact on small firms and the economy when it comes into force next spring. Our members have said they’ll spend the savings on their business, either through investing in the business, increasing wages or taking on staff.’
Draft legislation is included in the National Insurance Contributions Bill, which was introduced to the House of Commons earlier this week.
The Government has set up an online tool to allow employers to see the effect of the tax cut.