A £1,000 increase in the Employment Allowance, the amount smaller firms can claim to reduce National Insurance Contributions (NICs), has come into effect from 6th April.
The Employment Allowance has risen from £4,000 to £5,000, as announced in the Chancellor’s Spring Statement. The increase is set to benefit around 495,000 small- and microbusinesses in the UK, representing 30% of all companies. The change means that 670,000 businesses will not have to pay the Health and Social Care Levy or NICs, reducing the costs of employing staff.
Chancellor Rishi Sunak said:
“This tax cut for half a million businesses will help them thrive and grow to help drive our economic recovery.
“It comes on top of a suite of wider tax cuts available to firms, including 50% business rates relief, a record fuel duty cut and the super-deduction, the largest two-year business tax cut in our history.”
The increase in the Employment Allowance is the third since the measure was introduced in 2014 to help reduce employment costs on the smallest businesses. Firms will now be able to employ four full-time workers on the National Living Wage without paying employer NICs at all.
Martin McTague, National Chair of the Federation of Small Businesses, said:
“The increase in the Employment Allowance helps small firms do what they do best, creating and sustaining jobs.
“This was FSB’s ‘hero ask’ at the Spring Statement, and we have hugely valued the time taken by Treasury officials to work with us on the positive impact this will have not just on work opportunities, but also training and investment. The Chancellor has now raised the Allowance twice since his appointment, stepping up for small businesses.”