Better late than never
Back in March, the Chancellor announced that employers would receive a £2k reduction in their NICs bills. This was one of the main highlights from the Budget and it was welcomed by all sides of the political debate. However, it was not all good news: the reduction would not apply until April 2014. Fortunately, time moves quickly when you are busy and now April doesn't seem that far ahead. Plus, the Government has recently published draft legislation and so now we have a much better idea of how the reduction (in technical terms, the "employment allowance") will work.
The employment allowance will be available to all businesses in the UK; small or large, corporate or otherwise, and it will also extend to charities. Each business claiming the allowance (more on this below) will benefit from a reduction of up to £2k in the amount it pays to HMRC in respect of secondary class 1 NICs (being the NICs employers owe to HMRC; not the NICs owed by employees which are deducted from the employees' pay and paid over by the employer). If the business has a NICs liability in excess of £2k then it will receive a reduction of £2k; if the NICs liability is lower than £2k then the liability will be reduced to £nil.
The employment allowance will be claimed through the payroll system. At the start of the year, the employer will claim the allowance by ticking a box and then the allowance will be set against the employer's NICs liabilities automatically, reducing the monthly payment until it is used up. For example, if the employer has a NICs liability of £500 each month then the employer will have no NICs to pay over to HMRC for the first four months of the year.
Around 1.25m businesses are expected to benefit from the employment allowance with over a third paying no employer's NICs at all as a result. Roll on April!