Running a business can be a financial minefield, so it pays to have an expert to turn to in the form of an accountant to ensure you are not paying too much, or missing out on any potential allowances.
One of the latest allowances aimed at those running small businesses kicked in from 6 April 2014 allowing employers to reduce the amount of employer Class 1 National Insurance contributions (NICs) they pay. Employers’ Class 1 contributions are paid on the earnings of employees and directors and can be an additional financial stumbling block to start-up businesses looking to take on new staff or to pay a market value for staff. The new NICs Employment Allowance enables employers to reduce employer Class 1 NICs by up to £2,000 per tax year as a business. There are a few limited exceptions – detailed here – but for most that’s £2,000 of savings every year in terms of employment costs.
Claiming the allowance is straight forward too. Most will already be signed up for HMRC’s Real Time Information service and using payroll software. You can use that to claim the Employment Allowance. If you use a third-party to make your payroll submissions and calculations then make sure you contact them and check they are claiming the allowance for you.
It is a one-of application for the allowance, so once claimed, HMRC will automatically carry your claim forward each tax year. The allowance is used immediately when payments are due, so if your first payment is £2,000 or more it can be used in one lump or, if less than £2,000, it will be used up as and when payments fall due. If you are signed up for HMRCs Business Tax Dashboard you can see how much of your allowance you have used at any time.