Can you remember what you were doing a year ago? Does it seem like it was only yesterday? If you are like me, then the answer to both of these questions will be “yes”. With this in mind, next April will be upon us before we know it. But, for a change, the new tax year commencing 6 April 2015 could bring some good news to you and your business.
From this date, every employer with employees under the age of 21 will no longer be required to pay Employer’s National Insurance up to the upper earnings limit for those employees. The upper earnings limit is expected to be £42,285 which is an irrelevant number for most under 21s. Therefore, it seems all the more likely that you will no longer need to suffer National Insurance on your young team members.
Based on the 2013-14 tax rates, an employee earning £12,000 costs the employer £594 per year in National Insurance. An employee earning £18,000 costs the employer £1,422. These costs will be removed from 6 April 2015. So, if you are looking to invest in the future of your business, you could think about employing someone now, training them accordingly, and rewarding them with a pay rise this time next year using this saving. So, your employee earns more at no extra cost to you. Alternatively, you could choose to reinvest this saving elsewhere in your business. Either way, it is certainly a nicer way to start a new tax year in comparison to years gone by. Of course, I’m not encouraging you to employ under 21s over those older than 21, but I’m sure this gives you some food for thought…
HM Revenue and Customs have also released the following information which you may also find useful.
Policy objective
The removal of the requirement for employers to pay Class 1 secondary NICs aims to encourage them to employ individuals under the age of 21.
Equalities impacts
The policy discriminates in favour of those aged under 21 in order to improve their prospects on the employment market. There is a strong policy rationale for focusing help on reducing youth unemployment, and this measure aims to help those at the youngest end of the employment scale where unemployment levels are at their most acute. Accordingly, the scope of the measure represents a proportionate response to the issue of youth unemployment.
If you would like to discuss this further with me, please do not hesitate to give me a call on 01733 370856 or email me nathan@greenstones.co.uk