Budget 2021 – Employment Issues

National Insurance Contributions (NI)

No changes to the rates of income based NI contributions on employment were announced in the Budget.

Class 2 NI will remain at £3.05 for 2021-22.

The primary and secondary thresholds (at which employees and employers, respectively, start to pay NI) will increase to £184 and £170 per week, respectively.  This means that the lower national insurance threshold for employees and the self employed will be £9,568 per annum, and the threshold for employers will be £8,840.

This means that company directors paying themselves the national insurance threshold can have an increase in pay from April 2021 to £736.67 per month (from £732.33).  It may be beneficial for some to increase their pay to £9,568, or even £12,570, depending on their circumstances.

The upper earnings (or profits for the self employed) limit will be £50,270 (£967 per week), aligned with the point at which 40% tax becomes payable.

Details of the rates of NI can be found here.

Employer’s Employment Allowance

The employment allowance will remain at £4,000 per annum for 2021-22.

A reminder that it was announced in Budget 2018 that, from 2020-21, the allowance will be restricted to companies with employer national insurance bills of less than £100,000.

Statutory Sick Pay

Small and medium sized businesses (with under 250 employees) can still reclaim SSP for up to two weeks for employees who have been off work with COVID-19.

Minimum wage

The Minimum Wage rates from 1 April 2020 will be:

  • 25+ (National Living Wage) – increases from £8.72 to £8.791 per hour
  • 21 to 24 year olds increases from £8.20 to £8.36 per hour
  • 18 to 20 year olds increases from £6.45 to £6.56 per hour
  • 16 to 17 year olds increases from £4.55 to £4.62 per hour
  • apprentices increases from £3.15 to £4.30 per hour

Home working allowance

The maximum flat rate Income Tax deduction available to employees to cover additional household expenses will remain at £6 per week where they work at home under homeworking arrangements from 6 April 2021.

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