Employers’ National Insurance: are you claiming everything you can?

Saving money is key for most businesses, so it makes sense to make sure you’re taking advantage of everything that’s available. Staff costs can be one of the biggest overheads for businesses but changes in National Insurance can help. Sage One Payroll has everything you need to take advantage of these cost savings and reduce your employers’ National Insurance bill.

The two main changes are the introduction of the Employment Allowance and the removal of employers’ National Insurance contribution for employees under 21.

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The Employment Allowance: claiming back up to £2000 in National Insurance

The Employment Allowance allows businesses to reduce the National Insurance Contributions (NICs) they pay for their employees by up to £2000 a year. It was introduced in April 2014.

Your organisation is likely to be eligible for the Employment Allowance as it applies to nearly all employers who pay Class 1 NIC on employees’ or directors’ earnings. In addition to businesses, the Employment Allowance is available to charities and amateur sports clubs as well.

How to make a claim

To avail of the Employment Allowance, you’ll need to make a claim to HMRC. To make things easier and more manageable for you, you can make your claim directly through Sage One Payroll. We’ve integrated it into your normal HMRC payment process as part of your RTI submissions.

All you need to do is tell HMRC that you’re eligible for the NI Employment Allowance. Sage One Payroll will automatically reduce your employers’ NIC liability accordingly.

Your records will be updated so you can see how much you’re now paying for each tax month or quarter. And you can also see how much Employment Allowance is still available.

It is as easy as that.

No National Insurance for under 21s: how to manage the changes

There’s more good news. From 6 April 2015, you also won’t need to pay employers’ NIC for employees who are under 21 years of age. The idea is to encourage employers to recruit more younger people. You’ll be exempt from Class 1 secondary NICs for under 21s earning up to £42,285 or £813 a week. This could save your business:

  • £500 for an employee under 21 on £12,000 a year
  • £1,000 for an employee under 21 on £16,000 a year

Please note that the zero rate doesn’t apply to Class 1A or Class 1B National Insurance contributions. So if your employee receives taxable benefits that attract Class 1A, such as private health insurance, you’ll still be liable to pay Class 1A NICs on those benefits only. Employees still pay the standard rate of National Insurance contributions through their salary. The exemption only applies to business owners.

How to ensure you’re not paying National Insurance for under 21s

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There are two things you’ll need to do to make sure you can apply the right data for your employees.

1. Identify which staff are under 21 and know when they will reach that age

2. Apply new National Insurance categories for eligible staff

With Sage One Payroll, the process is simple. Because the software is in the cloud, you don’t have to install any updates when the legislation changes, as you’re always up to date.

From March, the software will include two new NI codes (M and Z) which will automatically calculate an employee’s NI contribution based on the new legislation. To make things simple, you can only apply these codes to employees who are under 21. And, to keep things simple, the software will let you know when an employee who is on M or Z code reaches their 21st birthday, so you don’t have to remember to swap them to a new code.