Running a Business? – Save £2000 on Employee Costs (Employment Allowance)

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If you’re currently in business as a Sole Trader, Partnership or Limited Company and you have an employee or more then you could be entitled to £2,000 off of your employee costs!  Just think what you could do with a saving of £2,000 every year?

In April 2014 the Government offered a new reduction in National Insurance costs for all employers – this is the Employment Allowance.

All employers who are subject to Class 1 National Insurance contributions for their employees are eligible to reduce up to £2,000 off of their (Secondary) Employers National Insurance costs.  For some smaller businesses with few employees this could mean wiping out their Employers National Insurance costs all together.

Note however you still have to deduct Employees National Insurance and PAYE from your employees (where applicable) and pass this on to HMRC.  The allowance only relates to the Employers element of National Insurance.

Basically if you have employees earning over £7,956 a year (at current rates) you need to pay Employers National Insurance on those employees wages for the element of their wages that are greater than £7,956.  The rate of Employers National Insurance is currently 13.8% so this cost can quickly mount up.

At current rates you could have one employee earning up to £22,449 who you would normally accrue an expense of £2,000 in Employers National Insurance contributions, but with the Employment Allowance you could avoid this cost altogether.  You could of course have a number of employees each earning less than £22,449 and still totally avoid the Employers National Insurance payment with the Employment Allowance.

The best part is that the allowance is available year after year so you will continue to benefit.

Ensure you ask your Accountant about claiming this benefit!

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