National Insurance Contributions (NI)
No changes to the rates of NI contributions were announced in the Budget.
The primary and secondary thresholds (at which employees and employers, respectively, start to pay NI) have both been increased to £153 per week.
The upper earnings (or profits for the self employed) limit is £41,865, aligned with the point at which 40% tax becomes payable.
Details of the rates of NI for 2014-15 can be found at http://www.hmrc.gov.uk/rates/nic.htm
Employer’s Employment Allowance
As announced in the 2013 budget, an allowance of £2,000 per annum will be introduced for all businesses and charities to be offset against their employer NI liability from April 2014 – this effectively takes away the first £2,000 of the employer’s NI bill of every company.
Comment: For those of you paying yourselves the National Insurance limit, this means that you should increase your pay to £7,956 per annum (£663 per month) from April.
However, if you have no other income (apart from dividends), you may want to think about paying yourself £10,000 per annum to use your tax free allowance, since, although you will pay NI at 12%, the employer’s NI will be offset by the employment allowance, and you will save corporation tax at 20%, saving you £163 per annum .
Exemption threshold for employer provided beneficial loans
The threshold for employment-related taxable cheap loans to be treated as earnings of the employment will increase from the current threshold of £5,000 to £10,000 from 6 April 2014. As long as the total outstanding balances on all such loans do not exceed the threshold at any time in a tax year, there is no tax charge.
Abolition of employers National Insurance contributions for the under 21s
From 6 April 2015 every employer with employees under the age of 21 will no longer be required to pay Class 1 secondary National Insurance contributions (NICs) on earnings up to the upper earning limit (UEL), for those employees.
Changes to Statutory Sick Pay (SSP) recovery
A not very well publicised change announced in January 2013 is that, from 6 April 2014, businesses will no longer be able to recover any SSP that they have to pay to their employees.
At the moment, employers can recover any SSP in excess of 13% of their total national insurance bill for each tax month.
Tax exemption for employer expenditure on recommended medical treatment
Currently, when an employer pays for employee medical treatment, the payment is chargeable to tax and NI.
From Autumn 2014 (an exact date has yet to be announced), where an employer meets the cost of ‘recommended’ medical treatment for an employee, that payment will be exempt from income tax and national insurance, up to an annual cap of £500 per employee.
Medical treatment will be ‘recommended’ where it is provided in accordance with a recommendation from an occupational health service in order to help an employee return to work after a period of absence due to ill-health or injury.
Other forthcoming changes
The government is consulting on a package of four simplifications of employee benefits and expenses with a view to bringing them in in 2015-16:
- abolishing the small earnings threshold of £8,500 that exists for benefits in kind (Note: This limit does not apply for directors, so those paying themselves the lower NI limit, which is less than £8,500, still have to report and pay tax on any benefits)
- introducing a statutory exemption for trivial benefits
- introducing a system of voluntary payrolling of benefits in kind
- replacing the expenses dispensation regime with e reimbursed expenses exemption.