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Employer NICs rise may have unforeseen consequences

WRLO Accountants — Fri, 08 Nov 2024 10:57:03 +0000

The extra costs of the increase in employers’ NICs could cause businesses to respond in ways the government did not intend, the Chartered Institute of Taxation (CIOT) has warned. At the Autumn Budget, Chancellor Rachel Reeves announced an increase to the rate of employer NICs by 1.2 percentage points, to 15% from 6 April 2025. The CIOT says that the increase extends the differential in the burden of tax and NICs borne by those in employment compared to those engaged as self-employed. The higher employers’ NICs goes, the greater the likelihood employers may seek ways to mitigate or absorb the burden, which could include potential alternative arrangements to taking on people as employees, adds the CIOT. Alternatives could include outsourcing or offshoring services and reducing the numbers of employees. Eleanor Meredith, Chair of CIOT’s Employment Taxes Committee, said: ‘While employers must pay employer NICs on their employees’ earnings, no employer NICs is due where someone is genuinely self-employed. ‘We are concerned that the increase in employers’ NICs could lead to an increase in ‘false self-employment’, where businesses trying to save money turn to arrangements where the worker is not directly employed by them, without necessarily appreciating the rules and risks […]

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National Insurance changes ‘ease burden on strivers’

WRLO Accountants — Mon, 04 Dec 2023 12:42:34 +0000

The changes to National Insurance contributions (NICs) announced by Chancellor Jeremy Hunt in the Autumn Statement will help to ‘ease the burden on strivers up and down the country‘, according to the Federation of Small Businesses (FSB). Mr Hunt used his Autumn Statement speech to cut the main rate of employee NICs from 12% to 10% for 27 million workers across the UK. This is set to take effect from 6 January 2024. The Chancellor said that, for the average employee earning £35,400 per year, the change amounts to a £450 annual tax cut. For the self-employed, the Chancellor also abolished Class 2 NICs and cut Class 4 NICs from 9% to 8%, effective from 6 April 2024. Tina McKenzie, Policy Chair at the FSB, said: ‘The Chancellor’s decision to reduce the rate of self-employed NICs and abolish the Class 2 element is extremely welcome, easing the burden on strivers up and down the country. ‘The FSB has long campaigned for the abolition of the Class 2 element of NICs and the reduction of Class 4, and we are therefore pleased that the Chancellor has acted.’ Internet link: GOV.UK FSB website

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July 2022

WRLO Accountants — Thu, 07 Jul 2022 10:07:17 +0000

In this month’s Enews we consider the latest news on Making Tax Digital for Income Tax Self Assessment. We also update you on rising inflation and interest rates and the impact of the increase in national insurance contributions. With guidance for employers and a warning for new homeowners, there is a lot to update you on. MTD for income tax pilot extended HMRC criticised over IR35 implementation Inflation hits 40-year high of 9.1% amid cost-of-living crisis Bank of England raises UK interest rates to 13-year high of 1.25% NICs increase has immediate impact on businesses Manufacturers call for support package Latest guidance for employers New homeowners warned over tax refund claims MTD for income tax pilot extended HMRC is extending the pilot for Making Tax Digital for Income Tax Self Assessment (MTD ITSA) to more self-employed workers and landlords. From July, those taking part will be able to test MTD ITSA before April 2024, including their own internal processes for managing MTD. Agents and customers are already taking part, and HMRC wants more agents to start signing up a small number of their clients to trial the system. It is noted that clients will need to have an accounting period that aligns with […]

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