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Feb 2014


2014 NIC Employment Allowance

The Chancellor announced the creation of a NICs Employment Allowance in the 2013 Budget. The implementation date for this is planned for 06th April 2014.

Businesses, Charities and Community Amateur Sports Clubs will be able to reduce their NICs bill by up to £2,000 per year. The Employment Allowance is to be set against an employer’s liability for secondary Class 1 National Insurance Contributions (NICs) only, not against other NICs such as primary (employee’s) Class 1, Class 1A or Class 1B contributions.

The greatest benefit of this allowance goes to small businesses, as it will reduce their National Insurance Contributions bill the most. Over 90% of the benefit of this allowance will go to small businesses with fewer than 50 employees.

This will also mean that businesses will be able to employ four adults or ten 18-20 year-olds full-time on the National Minimum Wage without paying any employer National Insurance contributions at all.

The claim process for eligible employers is very straightforward and is administered through the payroll;

  • Employers will include a flag, within their Employer Payment Summary (EPS) submission via RTI, notifying HMRC that they are claiming the employment allowance.
  • The employer then reduces their employers NIC liability until the £2,000 allowance is exhausted (up to a limit of their NI liability, i.e. without resulting in a refund position) on the actual EPS.

The Employment Allowance calculator allows you to see the effect of the Employment Allowance in 2014. For example, you can see the effect on your National Insurance Contributions bill of employing one additional person or you can look at the reduction to your current National Insurance Contributions payments. Simply follow the link to access the calculator;


Posted byKaren McDarbyinNICPayroll Software